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Weekly market recap: Markets post new highs

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For the week ending March 1, 2014

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Overview

This past week the markets made significant gains with all but the Dow posting new record highs. Stocks rose on M&A activity, expectations that the Fed will maintain low interest rates through the year, and that poor economic data was due to extreme weather conditions.

The week began on a positive note with M&A activity: RF Micro Devices agreed to purchase TriQuint Semiconductor; and Men's Wearhouse increased its cash offer for Jos. A. Bank Clothiers.

On the earnings front, JC Penny and Best Buy posted strong results, with JC Penny forecasting an increase in sales for 2014 (its stock surged 25%).

Fed Chair Janet Yellen completed her testimony before the Senate on Thursday. The markets responded positively to Yellen's statement that interest rates will remain low despite the continuation of tapering, and she instills confidence in her leadership. FedSpeak continues to reiterate the message of the FOMC Minutes, and this has helped propel the markets forward.

In the interim, the markets continued to give a pass to poor economic data due to the extreme cold weather as fourth quarter GDP dropped to 2.4% (down from 4.1% in the third quarter). On the bright side, there are signs of improvement in housing, manufacturing, and the consumer sector. As the weather improves, it is expected that the economy will improve further adding fuel to the rally going into the second quarter.

Globally, there was an abundance of economic news: GDP for the UK, U.S., Germany, Canada, and India; Euro zone money supply and lending; and a slew of data from Japan. For the week, 17 indices advanced; 6 declined, and 1 was unchanged.

The situation in the Ukraine is generating some nervousness amongst investors as the National Bank of Ukraine banned trading certain currency contracts and limited the amount that depositors can withdraw. The acting President removed the army chief of staff as Russia sent in troops and helicopters to the Crimea.

Concern over emerging markets continues to grow as investors lower their bond holdings. Pimco, the world's largest fund manager, has seen enrollment drop in its emerging market local currency fund and is now heavily selling holdings in Brazil, Mexico, Russia, and Turkey. See Concern Grows as Investors Exit Bond Holdings in Emerging Markets.

Overall, equities advanced over the month of February as the markets discounted disappointing economic news as a result of bad weather. Chair Janet Yellen assured the markets that the Fed will monitor closely weather affects. The economy is still showing positive signs across key sectors, and we expect growth to increase as weather conditions improve. Expect an increase in volatility next week as profit-taking increases and the markets experience wide swings on economic news (there may even be a large drop to major support areas).

The focus next week will be on the consumer and manufacturing sectors with Motor Vehicle Sales, Durable Goods Orders, ISM, and PMI reports. The all important Employment Situation (which includes the Jobs Report and Unemployment Rate) will take the spotlight Friday morning.

Market Gauge

Year-to-date the markets are mixed: Dow -1.5%; S&P500 0.6%; Nasdaq 3.1%.

The Markets for the past week were: DJIA up 1.0%; S&P500 up 1.1%; Nasdaq COMP up 1.5%.

Commodities (ETFs) for the past week were: Gold (GLD) up 0.03%; Silver (SLV) down 2.96%; Oil (OIH) up 2.67%; Dollar (UUP) down -0.65%; 30-yr Bonds dropped 12 basis points to 3.58%.

The VIX this past week (a measure of market sentiment and volatility) dropped to 14.0 due to statements made before the Senate by Fed Chair Yellen which calmed the markets, and expectations that the economy will bounce back as weather conditions improve.

Top Headlines

To view details of headlines, go online to CNBC.

In the U.S., Kocherlakota on instability concerns; Wealth redistribution or growth: Zell; Jobless rate to dip below 6%: Fed's Bullard; US GDP slashed as growth falls short; US Midwest business index higher in February; US sentiment shrugs off bitter cold, rises in Feb.; Pending homes sales near flat, disappoint; Why Rome is looking like the next Detroit; Yellen says cold weather may have impacted economy; US jobless jump, durables paint mixed picture; Retail stuck in double helix: Soft sales, margins; The Fed is 'out of touch' with US economy: Polcari; Consumer confidence falls below estimates in Feb.; Harsh weather tests optimism over the US economy; US home prices surged at year's end: Case-Shiller; NABE economists divided over pace of Fed tapering; This winter could be top 5 costliest since 1980; US service sector growth slows in February: Markit; It's not the weather, stupid, it's the economy!; US gas prices up almost 12 cents over two weeks; IMF confident about 'action-oriented' G-20 plan; Ambitious global growth target achievable: France; G-20 global growth target likely to come Sunday; and The millennials' rut: Why it costs all of us.

In Europe, Yanukovych will 'struggle for Ukraine'; UK house prices in biggest annual rise in almost 4 years; Rome, the next Detroit?; Euro zone inflation tops forecasts, unemployment unchanged; Cyprus faces fresh bailout uncertainty after privatization vote; Yahoo chats, pics intercepted by UK spies: Report; Putin: Russia to consider aid to Ukraine; French bank settles lawsuit with feds for $122M; Merkel: EU can change, but won't satisfy UK wishes; Coming soon: Transatlantic flights for $13?; 'Risk off' in markets as Ukraine tensions heighten; Building an empire: New products drive Lego sales; WPP's Sorrell: Facebook's WhatsApp deal 'potty'; RBS pre-tax loss widens as major overhaul signaled; German court decision 'real threat' to ECB's safety net; Standard Life plans move from independent Scotland; Pre-nups: Why it may no longer pay to divorce here; Merkel and Cameron: Flirtation or marriage?; Senate scolds prosecutors, Swiss bank in tax spat; 'Too much focus' on rates: Broadbent in frame for BoE job; Risk of a bank run heightens in Ukraine; Markit IPO latest step in banks’ data war; Putin orders military drill amid Ukraine turmoil; and UK business investment soars as GDP uptick confirmed.

In Asia, What to expect at China's big powwow; A Mt. Gox user is suing the exchange; Head of India's Sahara conglomerate surrenders to police; Japan gets inflation, but is it the ‘good’ stuff?; CEO of embattled Qantas: My job is safe; Free mobile messaging a bane to telcos; A good start to the year for Japan's economy; If Vietnam’s banks are troubled, why are its shares up?; More geopolitical tensions: North Korea fires missiles; China cracks down on taxi apps market; China crude imports slow amid drive to curb pollution; Yuan to topple dollar as top reserve currency: Survey; Singapore's first bitcoin ATM opens for business; Poll indicates landslide victory by India’s BJP Party; The 'Chinese dream' is…the US?; GDP Preview: India's economy still stuck in a rut; Australia’s flying kangaroo slashes 5,000 jobs; Malaysia, Singapore grapple with prolonged dry spell; Once hardy Thai economy feeling the strain; Is China getting ready to widen the yuan’s band?; China’s billionaires got way richer in past year; Apple, Samsung won 3G; will ZTE dominate 4G?; Mt.Gox CEO: 'I'm still in Japan, don't bother staff'; and Will the yuan’s slide zap China’s demand for Treasuries?

Weekly Review

On Monday, despite poor economic news, the Dow rose 0.7% to 16,209.

On Tuesday, with mixed economic news, the Dow dropped fractionally to 16,179.

On Wednesday, despite a surge in new home sales, the Dow rose fractionally to 15,198.

On Thursday, with reassuring statements from Fed Chair Yellen, the Dow rose 0.5% to 16,272.

On Friday, with positive economic news and expected poor GDP figure, the Dow rose 0.3% to 16,323. Gold held steady at $1,330.

Next Week's Calendar

The economic calendar for next week is moderate: on Monday – Motor Vehicle Sales, Personal Income and Outlays, PMI Manufacturing Index, ISM Mfg Index, Construction Spending; on Tuesday – FedSpeak; on Wednesday – ADP Employment Report, ISM Non-Mfg Index, EIA Petroleum Status Report, Beige Book, FedSpeak; on Thursday – Weekly Jobless Claims, Productivity and Costs; and Friday – Employment Situation, International Trade, FedSpeak.

If the Markets move down, stay on the side lines or consider Contra ETFs. For Option players, selling premium is advised. To learn more about options and earning consistent weekly income, go to optionsannex.com.

To the Charts

The following ETFs (DIA, SPY, QQQ) provide a technical review of the Market (and are also excellent Option trading vehicles). Represented are the Dow Industrials (DIA), S&P500 (SPY), and Nasdaq 100 (QQQ).

The Charts for each include views for Monthly, Weekly (including Price Channels), and Daily (including monthly Pivot Points) with MACD and Stochastic indicators. The Pivots are: white for central pivot point; yellow for R1 and S1; magenta for R2 and S2; red for R3 and S3.

DIA

The Dow Industrials (DIA) closed up at 163.02. If the DIA drops, then the next level of support will be at 153.12 (weekly chart); the next level of major resistance is 165.51 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving down above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up above the midpoint.

The daily chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up above the overbought area.

SPY

The S&P500 (SPY) closed down at 186.29. If the SPY drops, then the next level of support will be at 173.71 (weekly chart); the next level of major resistance is 184.95 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up at the overbought area.

The daily chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up above the overbought area.

QQQ

The Nasdaq 100 (QQQ) closed up at 90.34. If the QQQ drops, then the next level of support will be at 83.74 (weekly chart); the next level of major resistance is 90.47 (weekly chart).

The monthly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving down above the overbought area.

The weekly chart indicates a bullish posture (up Arrow) with the MACD positive and strengthening, and the Stochastic moving up above the overbought area.

The daily chart indicates a bullish posture (up Arrow) with the MACD positive but weakening, and the Stochastic moving down above the overbought area.

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