Recap: Week Ending April 3, 2015

April 5, 2015

North American equity markets traded in a relatively narrow range last week as stocks continue to chop sideways. Last week was a shortened trading week with many exchanges around the world being closed Friday for Easter. As one would expect, trading volumes were relatively light, indicating that many were sitting on the sidelines. Last week saw both the Dow Jones Industrial Average as well as the S&P 500 close 0.29% higher. On the flip side, the NASDAQ 100 was unable to produce such gains and fell 0.39% on the week. The lack of correlation among the indexes with a doubt can be attributed to the lack of movement in either direction. The Toronto Stock Exchange Composite Index, TSX, faired much better, closing the week up 1.45%. The bid seen in the TSX can be attributed to a variety of things including bullish activity in both gold as well as crude oil. Last week gold saw a small rally of $4.20 or 0.35% which undoubtedly helped the TSX. On a more powerful note, crude oil surged $1.12 on the week, which was good enough for a 2.31% gain in the energy. To provide even more backing for the TSX, the Canadian currency looked healthy last week rallying 0.43% again the US Dollar. Currently, the Canadian Dollar appears to be attempting to break out of its recent sideways action that it has established at muli year lows.

Despite markets being closed Friday for a holiday, the United States unemployment rate for the month of March was released. The figure came in unchanged at 5.5% which was expected by economists. Some positive news out the release was that average hourly earnings on a month over month basis rose from a previous report of 0.1% to 0.3%. At recent press conferences, US Federal Reserve Chairwomen Janet Yellen was quoted saying that she would like to see a raise in wages before she would increase interest rates. A rise in earnings indicates there is less slack in the labor market and that their employers can pay higher wages which is a positive sign for the company and economy as a whole. Even though stock exchanges were closed Friday, the futures market was open until 9:30AM, so the market was able to react somewhat to the newly released figures. As a result, US stock index futures sold off. To the surprise of many, the US Dollar was also weak, as it fell across a list of all major currencies. In recent times an inverse correlation has been at play between the US currency and US stock indexes, however, it appears that that relationship may be coming to an end. The Treasury complex also saw a bid enter prices. Currently, the long 30 year US Treasury bond is trading just below recent multi-year highs. It must be noted that if equity markets were open on Friday, the downward movement created by unemployment report would have erased all gains seen during the week. Keeping this in mind, it will be important to see how the market opens Monday as stocks and options must adjust to the already released data.

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