Canadian stock markets fell on Friday, ending a great week with the heavily weighted materials sector retreating on weaker gold prices, while the technology sector advanced ahead of quarterly reports this week. The S&P/TSX composite index ended the session down 0.71% after bouncing from flat, to positive and then into negative territory throughout the day. The materials sector dropped 1.69%, largely as the price of bullion backed away from 18-month highs. The oil & gas sector weakened by 1.45% as the price of crude slipped toward $72 a barrel. Investors should not be surprised by a bit of a short-term pull back from time to time but in general it appears that this current bull market is pretty sound. On the week, the TSX was up 1.7% - the 4th straight weekly gain.
In the United States stocks rose on Friday with consumer staples assisting the overall stock market for a 2nd week of gains. Investors are starting to feel that on a short-term basis, the market is due for a pause, but the underlying tone of the market and the economy is positive. The Dow Jones industrial average was up 0.55%, the Standard & Poor’s 500 Index was up 0.44% and the Nasdaq Composite Index was up 0.48%. The S&P was up more than 2% for the week.
World leaders will probably agree this week to work together when the time comes to end their massive economic stimulus programs and they are also moving toward a stiffer line on bankers’ pay (thereby, not rewarding risk-taking by the banks since they are not rewarded). In the week ahead (September 24 & 25) the Summit of the leaders of Group of 20 nations will be held in the U.S. steel town of Pittsburgh. Leaders will agree to coordinate any talk of exit strategies going forward, they will agree to use the words ‘exit strategy’ more and more.’ Hundreds of billions of dollars have been pumped into the global economy in the past year and G20 leaders are anxious to show they have a plan for withdrawing this stimulus only once a recovery is fully underway and before inflation materializes.
Germany’s Merkel said that, amid tentative signs of global recovery, G20 leaders must step up more than they did when they met in April in London to show that they have the will to pursue meaningful financial market reform that will bring more stability. “It is very important that we get concrete results that go well beyond what was agreed in London,” Merkel said. The G20 agreed in April to “extend regulation and oversight to all systemically important financial institutions, instruments and markets”, and Merkel said a regime to give this pledge substance was vital now. “The main message at the G20 will be send a clear signal to show the economy is under control, reform is going on and happening, and money is finding its way through to the economy.”
Stocks could extend their rally and the Dow industrials may climb above 10,000, should the Fed’s policy-makers and economic data support the view the economy is recovering from recession. This week the Federal Open Market Committee will meet on Tuesday & Wednesday, when investors will anxiously await the policy-makers’ assessment of whether the economy is improving. The week’s key economic data will include U.S. existing home sales, a report on new orders of durable goods, new home sales and a final reading for September on consumer sentiment. All will likely to put the expectations for recovery to the test.
The Standard & Poor’s 500 Index has a 6 month advance of 58%. The rally has fed on expectations of a rebound from recession coupled with record low cost for money that has flooded the market. We are seeing investors that were really direly pessimistic move to a slightly more optimistic outlook, and that is confirmed with each little piece of economic data. That optimism has translated into an extension of the rally in stocks. For the week, the Dow rose 2.24%, capping its best week in 2 months, the Standard & Poor’s 500 index gained 2.45% and the Nasdaq added 2.50%.
World stock markets were modestly lower this morning as investors look to this week’s Federal Reserve meeting for more clues about the strength of the U.S. recovery. World markets posted more gains last week as U.S. Federal Reserve Chairman Ben Bernanke said recession in the world’s largest economy was “likely over.” Futures pointed to losses on Wall Street.
Regards,
Wilfred Vos Bcs, FMA, CIM, CFP, FCSI, DMS, CBV, MBA, CFA
SVP & Partner
