Recap: Week Ending September 19, 2014

September 21, 2014

US equities soared to new levels last week as equities in Canada saw one of the worst weeks in over a month. Both the Dow Jones Industrial Average and the Standard and Poor’s 500 indices made new all time highs Friday to cap off a strong week. The NASDAQ 100 index, which is predominately tech-based, reached levels that have not been seen since the early 2000’s. The strength in US markets did not extend to the Canadian border with the TSX falling 265 points for the week, pushing the index farther way from its recent multi-year highs it made a few weeks ago.

This was a busy week on both the economic calendar and trading floors across the US and Canada. Friday marked the rollover of US equity futures products. Rollover is when holders of contracts must rollover their positions to the next expiration in order to avoid getting delivery of the underlying asset. Rollover can cause quiet in the markets as there is illogical market activity; however; this did not appear to be the case this past week. The rollover appeared to be positive, which means that the holders of the contracts bought the December delivery instead of selling it short. This is a positive sign for markets as many of these contracts are longer term plays.

This past week investors heard from the head of the US Federal Reserve Janet Yellen. As expected, the Fed tapered their bond buying program known as Quantitative Easing from a purchase of $25B worth of bonds a month to $15B. It is expected that the program should end at the next Federal Open Market Committee meeting announcement in October. Yellen is quoted saying, “Fed will continue promoting asset building, the US needs a greater diversification of assets.” She went on to further state that the US economy is improving, although recession effects persist. An official announcement on an increase in interest rates has not yet been made, however, the rating agency Fitch is looking at mid-2015 for the first hike. This sent US markets higher.

Tuesday the Governor of the Bank of Canada, Boc, Stephen Poloz hosted a press conference. At the press conference Poloz is quoted saying, “A floating loonie is a thing of beauty, and so is a floating loonie, at least from this economist’s perspective.” From this statement it appears that despite many rumors, the BoC has no intention of influencing the CAD. The announcement did not have much of an impact on the TSX. With this being said, it did shoot the CAD much higher on the day against the USD. The major market moving news was the release of the Canadian Consumer Price Index month over month for August. The figure came in at 0%, matching expectations and beating the prior months reading of –0.2%. The figures were all not too bad; however, equities were pushed lower on the fact of lower energy and metal prices. Both energy and metal companies makeup a large portion of the TSX and lower prices for the products they sell result in lower quarterly profits.

This past week saw the biggest IPO in history. Alibaba, a Chinese e-commerce company, listed successfully on the New York Stock Exchange, NYSE, with symbol BABA. Alibaba is the largest e-commerce website in the world, and is one of the few to service both the Chinese and American markets. The IPO went smooth despite many expectations. The previous largest IPO was Facebook, which listed on the NASDAQ. This IPO was pegged by computer glitches on the end of the NASDAQ. Such was not the case at the NYSE with the first trades occurring on the physical trading floor at $92.70. BABA ran all the way up to $99.70 before closing up slightly at $93.39.

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