Craig Johnson’s

Market Commentary

Monday, September 15, 2014

Financial Markets Recap for Last Week:

  • The major indices declined last week. Most declined about 1% for the week. The best performer was the Nasdaq Composite, while the S&P 500 fared the worst.
  • Weakness in the fixed income market along with declining energy and gold prices, utilities and consumer stocks all weighed on the indices.
  • Last week’s decline moved the Russell 2000 Index return back into the negative for the year to date. The Russell 2000 Index, which represents the small capitalization sector of the market, has struggled this year after being one of the better performing indices in 2013.
  • The U.S. dollar has climbed higher for nine consecutive weeks making it the longest rally for the dollar in 17 years (December 1996 – February 1997). The dollar is not strong in an absolute sense. It is valued against other currencies such as the yen, the euro, etc.
  • The strength of the U.S. dollar is being driven by a combination of positive U.S. economic data and expectations for the Federal Reserve to raise interest rates next year. It comes at a time when other developed country’s central banks such as Japan and the European Central Bank remain in easing mode.
  • Gold traded below $1230 an ounce on Friday.  The lowest it has been since January of this year. It managed to climb back a bit by the close on Friday to near $1231 an ounce. 

Financial Markets Health and Outlook:

  • The pullback in stocks last week and the sideways movement during the previous few weeks has generally been orderly providing stocks a healthy environment for the consolidation of their recent gains. The stock market remains bullish. One interesting note is that the Russell 2000 Index could be nearing the end of a multi-month correction, which could lead to a spirited rally in the coming weeks.
  • The Federal Open Market Committee meets for a two day meeting this week on Tuesday and Wednesday. They will also update their economic projections.
  • Friday is quadruple witching expiration. This is when index options, stock options, index futures and stock futures expire at the same time. This will add volatility to the trading this week and could have already showed a bit of its impact last week.
  • The yield on the ten year U.S. Treasury note soared last week slightly exceeding the July 31 high of 2.614% reaching 2.616%. Significant resistance resides at 2.65%. It closed Friday at 2.614%. The five year U.S. Treasury note yield nearly reached a 52 week high.
  • Corn and soybean prices fell to four year lows after the U.S. Department of Agriculture forecast record harvests.  

Sources: bankrate.com, bloomberg.com, briefing.com, Dow Jones News, Financial Times, finviz.com, Investor's Business Daily, marketwatch.com, seekingalpha.com, Thomson Reuters/First Call, U.S. Dept of Treasury, yahoo.com and individual company web sites and press releases.

Leonetti & Associates, LLC views or opinions are as of a certain date and subject to change without notice.  The material contained herein is for informational purposes only and obtained from sources we consider reliable. We make no guarantee as to its accuracy or completeness.  References to specific securities and industries/sectors should not be considered recommendations to buy or sell any security or advisory service.  Past performance is not a guarantee of future results.

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