Recap: Week Ending August 22, 2014
Markets across the board marched higher this past week, with the S&P 500 posting a new time high as the NASDAQ climbed to fresh yearly highs. Equities continued to rebound from lows seen in August after falling over 4%. Every day last week excluding Friday was positive for US stocks as the market continues to show that buyers remain in control. The push higher comes as the economic calendar was loaded with key figures for release including the Jackson Hole Symposium, which attracts the top minds in economics and central banking from across the globe.
Market strength was especially seen in the Toronto Stock Exchange Composite Index, TSX, which was able to print multi-year highs last week. Like US markets, the TSX climbed higher, however, the rally lost its legs during the latter portion of the week, closing down both Thursday and Friday. However, like in the US, many key Canadian economic figures were released last week.
Monday was the strongest day for equities last week with the Dow Jones Industrial Average closing up over 1% that amounted to a gain of just over 170 points. The one-day push higher is the strongest markets have seen in weeks. The climb higher comes as little key economic data was released. With this being said, the NAHB Housing Market Index for Aug was released with both a previous reading and consensus of 53. The figure came in above expectations at 55 which did provide some lift for the markets. Monday provided smaller gains for the TSX as both the Foreign portfolio investment in Canadian securities for June and the Canadian portfolio investment in foreign securities also for the month of June was released. These figures had minimal impact on the market.
Tuesday was the strongest day for the TSX with the index rallying over 130 points for the day. The large push higher can be attributed both strong and aggressive buying activity as no economic news for Canada was released which could have moved the market. Tuesday was also a positive day for US stocks as the Dow Jones broke above its 50 day simple moving average, an indicator that has provided both support on the downside and resistance on the upside in the past. Tuesday saw the release of the Consumer price index for July. Year over year the index came in at 2% which matches analyst’s expectations, however, is worse than the prior reading of 2.1%. The figure shows that inflation is still growing at an uneven pace; however, and growth remains.
Like Tuesday, markets climbed higher on Wednesday as better economic data than expected was released. Wednesday saw the release of the US FOMC meeting minutes. Jim Reid of Deutsche Bank is quoted saying, “As the minutes went on they noted how, ‘most participants indicated that any change in their expectations for the appropriate timing of the first increase in the federal funds rate would depend on further information on the trajectories of economic activity, the labour market and inflation’.” From this statement, it is clear that the Fed is still and will continue to be data dependent. The TSX was also able to close higher Tuesday and was even able to make new multi-year highs.
Thursday markets traded in a very narrow range. The Dow Jones was able to close once again higher, and, however, the TSX chopped around and closed lower. No economic figures were released in Canada; however, the US Philadelphia Fed Manufacturing Survey for July was published. The survey came in at 28 vs. the previous reading of 23.9 and beat the consensus of 19.2.
Friday was the Annual Jackson Hole Symposium, which is one of the most sought after economic events of the year. Two of the heavier hitters in the world of central banking both spoke Friday, Janet Yellen of the US and Mario Draghi of the Euro. One of the key quotes from Mr. Draghi regarding the actions policymakers can do in the presence of high unemployment is, “So what conclusions can we draw from this as policymakers? The only conclusion we can safely draw, in my view, is that we need action on both sides of the economy: aggregate demand policies have to be accompanied by national structural policies.” It appears the European economy was at the center fold of the meeting as the US took a back seat at this years conference with little unexpected news out of the Fed.