Weekly Market Update (October 23 – October 27, 2017)

October 29, 2017

This marks the seventh straight week in a row that U.S markets reached record high levels. The S&P 500 closed at 2,581 on Friday gaining over 20 points for the day following one of the busiest weeks in the third-quarter, with over 35% of companies releasing earnings. Tech stocks had strong gains for the week, resulting in the NASDAQ rallying up 2.2% on Friday. This was after some of the largest tech stocks reported solid earnings for the quarter, with Microsoft, Amazon.com, Alphabet, and Intel all performing better than expected. Assumptions that John Taylor might become the next Chair of the Federal Reserve pushed U.S 10-year yields up to 2.40%; the highest they have been since March. U.S economic releases were also positive, supporting the current bull market. U.S GDP QoQ hit 3.0% beating consensus estimates, paired with a positive Manufacturing PMI reports of 54.5 and a rise in new home sales assisted the week’s rally. A main point of focus in the upcoming week, will be on Wednesday’s FOMC decision on interest rates.

Canadian markets also finished the week at record highs, with the TSX closing at 15,953 – the first time it’s broken above the previous record of 15,992 in February of 2017.  Strong corporate earnings and the rise in the price of oil to $53.90 a barrel outweighed previous worries surrounding NAFTA uncertainties and the decrease in retail sales. Consumer staples, industrials, telecommunications, technology, and energy sectors all posted gains for the week, leading the rally in the Canadian markets. The Bank of Canada decided to keep interest rates at 1.00% over the next few months, after the previous 0.25% increase. Strengthening in the USD following the positive economic releases and new Fed Chair “Taylor” assumptions caused the loonie’s value to decrease relative to the greenback.

The IBEX 35 took a hit this week, closing at 10,197 – down 150.30 points on Friday. Spain’s Senate passed a vote allowing the country to take control of the Catalan region after Catalonian separatists declared independence. Eurobonds were up over the week, while the Euro declined in value against most currencies, as a result of the ECB’s meeting. The ECB announced it would halve its bond-buying program to 30B Euros, from Jan-Sept 2018. It promised to keep interest rates constant while the new buyback program is in place. Japan’s Prime Minister Shinzo Abe won last week’s general election in a landslide victory, causing the Nikkei to close at a 21-year high of 22,008.

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