Recap: Week Ending February 20, 2015
US equities closed the week on a high note as both the Dow Jones Industrial Average and the S&P 500 finished Friday at all time highs. The move to all-time highs comes after a relatively quiet week that saw equities trading in a narrow range with the expectation of Friday. The NASDAQ 100 was the strongest on the week closing up 1.35% while the S&P was the weakest only gaining 0.63%. US markets faired much better than Canadian ones as the Toronto Stock Exchange Composite Index, TSX, closed the week down 0.61%. The move lower in the TSX comes as the price of North American Crude fell on the week, closing the week down $1.92 or -3.65%. The move lower last week in crude was the first weekly loss the energy has seen in three weeks. A weak Canadian Dollar provided more reason for downside in the TSX as the Canadian currency fell 0.64%.
Despite the markets trading in fairly narrow range on the week, the economic calendar was somewhat busy. The biggest news of the week was the United States Federal Reserve Federal Open Market Committee minutes release. The minutes were released Wednesday and despite big expectations as usual, the market traded in one of the narrowest ranges it has seen in recent memory. The minutes showed that the members of the committee are hesitant to raise rates despite recent improvements in the economy. Some of the risks the committee sees in regards to a rate hike include, weak inflation caused by a strong dollar as well as the risk of overseas economies, in particular, the European Union and Greece. Overall it the market took the minutes in a dovish manner which was represented by a bid entering the US bond market. The price of the 30 year US Treasury fell 1.26% last week to form a yield of 2.735%. Yields for the 30 year are sitting virtually unchanged for the year so far. Despite the dovish news, the US Dollar Index traded up on the week to close at 94.43. The move higher was equivalent to a 0.22% gain which is the first up week the index has seen in three weeks. The next FOMC meeting will be held March 17 and 18. It still appears that the market concession about a rate hike is that it will occur in either September or December of this year.
This week is expected to see more volatility than last week. Tuesday will be a busy day as the ECB President Draghi will speak. Tuesday will also see the Fed’s Chairwomen Yellen testify. Yellen is also scheduled to testify Wednesday as well. Tuesday will also see the release of US consumer confidence. The previous reading on consumer confidence is 102.9 and economists are expecting a reading of 100. Thursday will see the release of US durable goods orders for the month of January. The December reading came in at -3.4%. To close the week off the US will report its GDP annualized for the fourth quarter. The previous reading came in at 2.6%, and there is yet to be a consensus reading.