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Equities

The equities market got another shot of testosterone as the Dow Jones and the benchmark S&P 500 flexed their record-breaking muscle once more following Fed chair nominee Janet Yellen’s confirmation. The Dow Jones Industrial Average broke another all-time record, closing at 15,876 points. Not to be outdone, the S&P 500 closed at 1,790, exceeding its prior day’s record by nearly half-a-percent. Both are now set to take out new psychological thresholds : 16,000 for the Dow, and 1,800 for the S&P. The NASDAQ composite index is within 30 points of reaching 4,000, a level not seen in over a decade.

The Fed

As is usually the case, the main culprit behind this week’s market volatility was the Federal Reserve, when it released the contents of a rather ambiguous FOMC meeting minutes on Wednesday. At stake was the future of the Fed’s bond buy-back program, with policy makers debating the merits of QE-tapering under tenuous economic conditions. However, the general interpretation of the minutes was that Fed could decide the fate of the much maligned QE program in one of its next few meetings depending on whether the economy has met certain criteria.

Currencies

  • U.S. Dollar

    The US-Dollar index was under pressure for the first half of the week but was immediately lifted following Wednesday’s release of the FOMC minutes. Currently, the greenback is trading slightly below the 81 level as traders digest the recent kink in market dynamics.

  • Dollary/Yen

    The Dollar-Yen pair soared during overseas trading as the Bank of Japan reiterated its loose monetary policy and affirmed that modest improvements in the economy were being witnessed. As a response, the Japanese stock market jumped up nearly 2% higher from its prior session.

Winners & Losers

The winner this week is J.C. Penney, ticker symbol (JCP):

  • After losing more than 67% in valuation from the beginning of this year until mid-October, JCP has staged a remarkable comeback. On Wednesday, shares popped up more than 8%, putting to rest fears of an imminent bankruptcy.
  • However, it does have to be noted that JCP intends to stage a recovery by sacrificing margins for the holiday season, a strategy that is fraught with risk.

The loser this week is Best Buy, ticker symbol (BBY):

  • Last week, shares were trading around $44 dollars, but eventually dropped down to a low of $38.70 following their earnings report, which, despite beating EPS forecast by 6-cents, the company warned of a Q4 margin hit at the higher end of prior estimates.

As maligned companies such as J.C. Penney are desperate to gain momentum, the retail sector will be especially volatile this year

Precious Metals

  • Gold Bullion

    Gold was taken down by bearish trading activity following speculation that the Fed will taper down its QE program much sooner than anticipated. The yellow metal is precipitously hanging below the $1,250 level and is in need of a lifeline to get it back above technical support lines.

  • Silver Bullion

    Silver also got hammered, but actually fared slightly better than gold on a percentage basis. Still, an important support line was breached when it dipped below the $20 dollar level and it too is in need of some help.

  • Palladium Bullion

    Finally, palladium softened under the bearish conditions of the metals sector, although its losses were half of that suffered in the gold market on a percentage basis. Still, there are concerns about palladium’s long-term sustainability, as selling volume has been particularly heavy in recent days.

 

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