Weekly Market Update (October 16 – October 20, 2017)

October 23, 2017

A strong start to the North American earnings season has again rallied markets to record high closes on Friday. The DJIA closed up +2.0% for the week hitting 23,328 on Friday, alongside the S&P 500 gaining 22 points to close at 2,575. This marks the sixth straight week of gains for both indices, the longest rally since the seven week December “Trump” rally. The market’s current rally was supported by the US Senate’s agreement of next year’s federal budget blueprint, which is a major step in the proposed tax cuts by President Trump. Earnings season also helped this week’s rally, with 76% of reported companies beating analyst estimates.  Investors are keeping their eyes on the markets over the next two weeks, as this is when a majority of companies are scheduled to release their Q3 releases. Gold hit a two-week low in accordance to the strengthening of the USD following the Senate’s budget meeting, with December futures losing $9.50 an ounce.

 

In Canada, the TSX posted modest gains for the week closing up 50 points (+0.32%) to 15,857. Bombardier announced late Monday, that it would engage with Airbus in a strategic partnership allowing Airbus to acquire a majority stake in the Canadian airline producer. The announcement drove shares of Bombardier to open 20% up from the previous days close leading the market gains into the mid-week. Excitement in the Canadian markets subsided after the disappointing release of inflation and retails sales statistics. Inflation in Canada hit 1.6% year-over-year growth, alongside the decline in retail sales of -0.3% month-over-month which is below the +0.5% consensus estimates. Expectations of another interest rate hike are becoming unlikely, with the decline in retail sales. The loonie closed slightly higher against the greenbacks on Friday, as yet another decline in the number of active U.S. oil rigs drove oil prices up. European markets closed the week flat, as concerns over the Catalan separatist movement continued to grow. Spain announced it may invoke “Article 155” of its constitution, stripping the region of power. Increasing tensions created volatility in the markets, posing gains and losses throughout the week with the IBEX up +0.25% on Friday.

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