Recap: Week Ending March 4, 2016

March 7, 2016

Equities across the globe moved higher for a second straight week as large losses which were seen in early 2016 are slowly losing their sting. Last week upside activity was led by the S&P 500 which rallied 2.67% to settle Friday at 1,999. The move higher last week continues to erase a year to date loss which has been seen in the index in the 2016 calendar year. So far for 2016, the S&P has fallen 2.40%. Upside activity was also seen in the Dow Jones Industrial Average and NASDAQ Composite Index, which both gained 2.20% last week to settle at 17,006 and 4,329 respectively. So far for the 2016 year the Dow is experiencing a loss of 2.40% while the NASDAQ is a bit further into the red, down 5.8% so far this year. The movement higher last week can be contributed to numerous events, one of them being positive economic data. One of the catalysts for the action was ISM Manufacturing PMI for the month of February, which was released on Tuesday. The figure came in at 49.5, beating a consensus of 48.5 and a previous reading of 48.2. This figure provides a good insight into the strength of the US economy as it indicates the current conditions in manufacturing. Any reading above 50 is considered very bullish for markets. From this number markets rallied hard on Tuesday, with the Dow Jones moving higher by over 400 points. The move higher spilled over as the market traded higher every day to close the week off well into the green. To cap the week off markets saw the release of the US unemployment rate for the month of February on Friday. The consensus among economists believed no change in the previous reading of 4.9% would occur. The consensus was indeed right, and the actual figure for February came in at 4.9%. Even though there was no change in the unemployment rate, there was an increase on a month over month basis in Nonfarm Payrolls for February. The actual reading came in strong with 242K jobs created in February vs. a previous reading of 172K and a consensus of 190K. As a result of such news, markets rallied once again, with the Dow trading higher by 0.37% on Friday, closing the week close to its weekly highs. A strong bid in the price of oil also provided a strong basis for upside activity in US equities.

Last week the Toronto Stock Exchange, or TSX, saw a very strong push to the upside as the Canadian equity benchmark index rose 3.24% to settle the week off at 13,212. It must be noted that the push higher last week in the TSX moved the index into positive territory for the 2016 calendar year, a zone which American indexes have yet to reach. The move higher in the TSX can be attributed to a nice bid in the price of crude oil. Last week the price of NYMEX crude rallied $3.49 or 10.63% to settle the week off at $36.33. The move higher in the energy product is the third straight week of gains and continues to mark a strong turnaround from the lows which it established in February. In recent times, the TSX has developed a strong correlation with crude due to the notion that many Canadian companies are dependent on the price of oil as a source of revenue. More good news for the TSX emerged last week as gold also saw a strong rally which sent it higher by $37.50 or 3.05%. Last week gold settled at $1,260.10, ending a two-week losing streak. The move higher in the precious metal has benefited the TSX, as like crude, many companies are dependent on it as a source of revenue. From a technical analysis perspective, on the daily timeframe the 50-day moving average just crossed above the 200-day moving average, providing a very strong buy indicator. This signal is known as the golden cross as is known in the industry as a fundamentally sound directional indicator of price activity.

DeGroote on Facebook DeGroote on Twitter WMA LinkedIn