Recap: Week Ending January 2, 2014

January 4, 2015

Markets around the globe started the first week of the 2015 calendar year on a bad note with many major indexes closing lower on the week. In the United States, the NASDAQ 100 index was the worst off losing over 1.9% on the week while the Dow Jones Industrial Average faired much better only closing the week down 1.2%. On the flipside, the Toronto Stock Exchange Composite Index, TSX, was able to close the week up 1%. Volume was light again last week as it has been over the holidays. Despite Friday being the first day of the New Year, it volumes were still on the lighter side. Volumes are expected to pick up this week as many who took time off return to their jobs. As many return to their jobs one can expect many firms to take on positions for the upcoming year ahead, this can result in heavy volumes and dramatic swings in the market.

2014 was a year to remember for most almost every investor and trader as the markets were rocked by fundamental news from numerous countries. Last year the S&P 500 made 53 new record highs, this comes as the Dow Jones Industrial Averaged trade above 18,000 for the first time ever. Wall St analysts predicted that the S&P would rally 6% last year; however, the index outperformed almost all expectations rallying almost 13%. Energy news had a large impact across major markets as the price of oil tumbled from the mid-90s in January 2014 to close in the low 50s last week. The push lower comes as the US is producing at a historic rate and demand is weakening. On top of this, Saudi Arabia appears to be pushing the price lower in the intention of attracting more buyers for their oil. As oil is one of the major exports of Saudi and many buying from the US instead, Saudi has become unhappy with the market conditions and is trying to move their in their favor. The selloff in oil had a major impact on the TSX where many of the listed stocks are involved with energy. As the price of energy falls, the profits of these producers fall as well. For the 2014 year, the TSX was able to gain over 8.5%.

By far the largest news out this year was the announcement by the United Sates Federal Reserve that they would be raising rates in the near future. This statement sent markets into a shock, moving the yield curve dramatically. With this being said, there still is no definite date on which rates will move, leaving markets in limbo. This also sent shock waves through the equity markets. At first equities did not know how to react to such news, however, caught a bid after it was noted that higher interest rates signal a stronger economy. On the other hand, the European Central Bank, ECB, announced that they would indeed be introducing a stimulus plan similar to the United States Quantitative Easing bond buying program. On this announcement, the Euro sold off causing an extremely strong USD. The USD appears to have been strong across all major crosses, even pushing the CAD to new multi-year lows.

 

Best of luck in the New Year!

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