Recap: Week Ending January 30, 2015

January 31, 2015

North American markets traded lower last week as investors flocked once again to safe haven assets. The NASDAQ 100 index was the weakest last week, falling 3.03%. The push lower in the NAS comes as Apple reported an increase in earnings. The S&P 500 was the strongest index in the US, falling 2.77% last week. The Toronto Stock Exchange Composite Index fared much better, only falling 0.72% on the week. The US 30-year Treasury bond was the real winner on the week, closing up 1.21% to close the week at 161.81. The 30 year has been on a rip to the upside, gaining about 5.5% since the New Year started. Since the beginning of 2014, the long bond is up about 27%! The move higher comes in bonds as investors are looking for safe haven investments as the global economy continues to look weaker. The move to safe assets is also seen in the US dollar which is up almost 5% since the start of the New Year. The strength of the dollar can also be related to notes from the US Federal Reserve that they will be increasing their targeted interest rate in the near future. At the moment, it appears that many are forecasting the rate hike to occur in the later portion of this year.

Last week saw a report of mixed economic data. Tuesday the US reported a major increase in the Consumer Confidence for the month of January. The reading came in at 102.9 vs a prior reading of 93.1. The reading also beats the consensus reading of 95.1 by a mile. The beat caused selling in equities with the Dow falling about 1.3% on the day. With the decline in the Dow, the US Dollar Index caught a bid and closed higher on the day. The move lower in stocks and higher in the Dollar is due to the notion that better economic data will cause a rate hike sooner than later. Many believe that the low-interest rate environment causing the current bid in the equity markets and once this cheap money is cut off the buying will cease to exist.

The United States Federal Reserve also announced that they will keep their interest rate targeted at 0-0.25% until the next meeting. In reaction to the release, Stephen Massocca, Chief Investment Officer of Wedbush Equity Management LLC in San Francisco is quoted saying, “It was more hawkish than people thought. But you are counting grains of sand coming through the hourglass so I don’t think you will see it resonate much longer than what we’ve seen in the last hour or so.” The more hawkish statement by the Fed also sent markets lower on the notion that a rise in rates will be seen sooner rather than later. This tone will guide the markets forward until the next meeting when a change in wording could occur.

Last week Apple also reported earnings, earning $18 billion in profits on $74.6 billion in revenues. These results are record breaking as they are more than a single company has earned, ever. The extremely positive earnings set Apple shares higher Wednesday following their earnings report Tuesday. Apple trade up 3.7% on the week to close Friday at 117.16. The close Friday is only dollars off of it all time high price of $119.75 which Apple hit back at the end of November of 2014.

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