Equities
The stock market continued its impressive run, with the Dow Jones closing at 16,097, while the S&P finished its session at 1,807, both all-time closing records. The NASDAQ added to the enthusiasm by eclipsing the 4,000 mark, a level not seen since 2000.
While the velocity and performance of the domestic equities sector has exceeded many people’s expectations, the debate has now shifted to whether the markets today are fairly priced or if we’re reaching a speculative bubble. According to Wharton professor of finance, Jeremy Siegel, current earnings for the thirty companies listed in the Dow Jones suggest that the index is actually undervalued, with earnings and valuations reaching parity at around 18,000 points.
Peter Schiff, CEO of Euro Pacific Capital, also voiced support for stocks moving higher, but believes that equities are grossly over-valued, with current point levels achieved only via bullish speculation. While Mr. Schiff acknowledges that an accommodating Federal Reserve has been great for stocks on a nominal basis, he warns that the added liquidity from the Fed’s QE program is not reaching small businesses, which will eventually hamper economic development.
(video hyperlink … http://finance.yahoo.com/blogs/talking-numbers/schiff-siegel-stocks-going-higher-110707082.html )
Currencies
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U.S. Dollar
The performance of the U.S. Dollar index was muted this week, losing the 81 level achieved last week and eventually settling down to the mid-80 range. However, recent economic data suggests that the dollar could move significantly higher in the coming weeks.
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Dollar/Yen
The Dollar/Yen made the biggest splash this week, with an unexpected improvement in U.S. employment statistics driving the currency pair higher, closing above the 102 level. Positive speculation is now building back for Japanese stocks, which could be set for another stellar year.
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Euro/Dollar
Euro/Dollar also made significant gains, closing slightly above the 136 level, although FOREX traders are keying in on German unemployment trends to determine whether the current market sentiment is sustainable or not.
Winners & Losers
The winner for this week is Hewlett-Packard, ticker symbol HPQ :
- Shares closed up over 9% on Wednesday after a surprise Q3 revenue result of $29.13 billion comfortably beat consensus estimates.
- Despite the lift in share prices, many investors remain cautious since only one business group within the HP umbrella experienced revenue growth.
The loser for this week is Goodrich Petroleum Corp., ticker symbol GDP:
- Shares dropped 5% off the back of extremely bearish trading activity, as well as a declining crude oil market.
- However, earnings trend is improving for Goodrich, so some fund managers are expressing positive sentiment for this stock.
Precious Metals
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Gold & Silver Bullion
The precious metals market was subdued this week, with gold closing at $1,245 and silver at $19.68. On a positive note, both metals are technically over-sold, which may mean bearish activity has worn itself out.
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Palladium Bullion
Palladium bucked the bearish trend in the metals, making a small gain for the week and settling in at $717. Palladium has consistently held a long-term support line that began in July of 2012, which suggests a breakout move is possible over the next few months.