Recap: Week Ending May 8, 2015

May 10, 2015

Markets closed the first trading week of May mixed as both the NASDAQ 100 and TSX closed lower. The biggest gainer on the week was the Dow Jones Industrial Index, which closed the week up 0.93%. As mentioned, the NASDAQ 100 was weak, closing the down 0.46%. Recently upside activity has been led by the NASDAQ, however, this relationship appears to be slowly fading, signaling a possible shift in the direction of the market. From its close Friday, the Dow is roughly 0.5% away from its 2015 highs that it established in March. Currently, the index is sitting 1.3% above its 50-week simple moving average. In contrast, the NASDAQ is roughly 2.30% below its 2015 years and 1.15% above its 50-week simple moving average. With the lack of correlation on a daily basis among indexes, a lack of direction will be seen. Like in equities, a lack of correlated energy was seen across the commodity space with gold pushing higher and crude oil lagging. Last week crude traded higher, however, closed the week off relatively flat, trading up $0.21 or 0.35% higher. From its bottom this year; crude has rallied most 40%! Gold saw a much stronger bid enter its market as the active contract closed the week up 0.85% or $10. Despite the bid activity in both gold and oil, the Toronto Stock Exchange Composite Index, TSX, was unable to close the week higher. The Canadian equity benchmark index closed the week lower by 1.11% or 169 points. It must be noted that, even though, this selloff was significant, the index traded much lower before bouncing off of its lows. At its lows, the TSX was down almost 3% last week before pushing higher to close the week out at 15,170.02.

The biggest and most anticipated news last week was both the Canadian and US unemployment rates which were released prior to market open on Friday. The US rate ticked down from a previous reading of 5.5% to 5.4%. 5.4% was also the consensus among economists. Even though the number did beat the prior reading for March, the nonfarm payrolls for April did not meet consensus expectations of 225K. Payrolls for April came in at 223K, beating the prior reading from March of 85K. This unemployment reading was highly anticipated by the market. An improvement in the labor market is considered by many to the green light for the Fed to raise interest rates. The reading Friday was good in terms of the beat in the unemployment rate, but bad in terms of nonfarm payrolls, as a result, the market rallied on the notion the Fed will still wait to raise rates. Unlike the American Unemployment rate, the Canadian rate remained stable at 6.8%. With this being said, the consensus among economist was that of a raise to 6.9%. The situation regarding the net change in employment was not as good. According to the figure, Canada lost 19.7K vs. an expectation of a loss of 5K and a prior reading for March saw the creation of 28.7K. With this being said, the TSX did manage to rally on the day, closing up Friday 81 points higher or 0.54%.

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