Recap: Week Ending October 30, 2015

November 1, 2015

Equities in the United States climbed higher last week, creating a fifth straight week of gains for the markets. The NASDAQ 100 index led the way higher, climbing 0.54% last week to close Friday at 4,648.83. On the flip side, the Dow Jones Industrial Average was the laggard last week, closing up only 0.10% to settle Friday at 17,663.64. Ranges among major averages were relatively low in comparison to wide range activity seen recently. Low trading ranges come as the S&P 500 hit a two-month high last week, putting it roughly 2.6% away from all-time highs that it made earlier this year. The move higher towards record levels comes as a third of S&P companies were scheduled to report earnings last week. There was a mix of both positive and negative announcements, and, as a result, little direction occurred in the markets. It must be noted that there was earnings weakness seen in the energy and materials sectors. Both of these sectors continue to be hit hard by falling commodity prices. With this being said, the major news out last week was a hawkish stance by the US Federal Reserve following their meeting on Wednesday regarding the future of US interest rates. The outcome of this meeting was the belief that interest rates would increase at their mid-December meeting. This is one of the first times that the Fed has indeed come out and made a firm statement in regards to a rise in interest rates. As a result of the news bond markets sold off with the ten year US Treasury Note trading from a yield of 2% up to a yield of 2.18%. Remember that prices and yields are inverted. Last week also saw a sell-off in the long 30 Year Us Treasury Bond, which fell $0.57 or 0.37% in price to settle the week at $155.77. As the Federal Reserve increases interest rates, the values of bonds will move lower as investors seek higher returns in other newer listed bonds. The market will continue to wait for the next Fed announcement in the middle of December to see weather or note the central bankers are serious in their views towards an interest rate hike, or if such statements were to solely test the reaction of the market. Going forward the interest rate complex will take their eyes off of economic figures and more towards the speeches of voting FOMC members as it appears that the committee has an overall view of increasing rates. The question going forward is when rather than if.

 

The Toronto Stock Exchange Composite Index, or TSX, fell hard last week, closing the week down 424 points or 3.04% to settle Friday at 13,529. The move lower in the Canadian benchmark comes as the drugmaker Valeant, a large constituent of the TSX, fell $30.65 or 20% to last week to close at $122.04 on the TSX. Recently the Quebec-based company has come under fire due to what some are considering illegal selling practices. The stock has fallen from over $340. The move lower has without a doubt hurt the TSX in any upside action. The research company that has called out Valeant, Citron says that they have uncovered more dirt about the company and is planning on releasing it Monday. A tweet from Citron states “$VRX has a better chance of going to 0 than $HLF ever will.” Such negative news will most definitely have an effect on the price of Valeant. However, negative implications will still be seen across the broader TSX markets.

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