Recap: Week Ending February 5, 2016

February 7, 2016

Equities in the United States broke a two-week win streak last week as stocks closed lower. The move lower in the major benchmark indexes was lead by a very weak NASDAQ 100 index which tumbled 5.95% last week to close Friday at 4,204. One of the causes for a sharp decline was that of weak earnings from technology-based companies. On the flip side, the Dow Jones Industrial Average traded lower by 1.59% last week to settle the week at 16,204 on Friday. The overall selloff comes after a very volatility choppy trading week which saw very wide trading ranges. One factor weighing on the market was the amount of volatility seen in the energy complex, in particular, crude. In recent times, equities have looked to crude for direction and have subsequently sold off. There were renewed fears last week that crude could very well once again slide below $30 a barrel. Like equities, crude ended a two-week winning streak, closing the week down $2.74 or 8.12%. With this being said, there was a small bounce mid-week in the energy complex as a possible production cutback agreement between Russia, and various other non-Gulf producing nations may emerge. Furthermore, various oil companies are starting to report earnings, showing the true effect of the collapse in the price of oil as well as the energy complex as a whole. Such weakness was brought to the forefront when Exxon announced that it would be reducing the scale of its stock buyback program. Despite a weak price of crude, the Toronto Stock Exchange closed the week with relative ease.


The Toronto Stock Exchange, or TSX, traded lower by 0.45% last week to settle Friday at 12,764. The move lower in the TSX was much less intense following a late-week rally as the index moved from weekly lows on Wednesday to make new weekly highs on Thursday. In recent times, the TSX has been whipped around by the falling price of crude. Last week crude indeed fell, however, the TSX remained rather stable. One of the causes of this can be related to a strong price of gold. Over the last few years, gold has taken a real hit and is currently attempting to form a trend to the upside. Gold has traded higher for the past six trading days, pushing it above its 200-day simple moving average. Last week gold traded higher by $18.10 or 1.57% to settle the week at $1,174.10. The move in gold comes as the global economy continues to look uncertain. The next possible stop for gold may be around the $1,190 zone which marks the highs seen in October of 2015. The strong bid in gold last week did without a doubt support the TSX. Last week also saw large swings in the CAD/USD pair as a result of the wild action in both gold and crude. Last week the Canadian Dollar closed the week at 0.719, gaining 0.42% on the week.


One of the key economic figures released last week was the monthly unemployment reports in both Canada and the United States. In the United States, unemployment fell from a previous reading of 5% to 4.9%, beating the consensus reading of 5%. The picture was not as rosy as nonfarm payrolls came in at 151K, well below the previous reading of 262K and the consensus of 190K. The Canadian unemployment picture looked a bit worse as unemployment ticked up to 7.2% from a previous reading of 7.1%. The consensus among economist was that of no change in unemployment on a month over month basis.

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