“Never Again Is What You Swore The Time Before” -Martin L. Gore

 

Rough Day For The Markets

The Toronto stock market dropped over 200 points Friday as emerging market worries persuaded investors to avoid riskier assets like equities and commodities.  The S&P/TSX composite index dropped 215.18 points to 13,717.79. The Canadian dollar was ahead 0.21 of a cent to 90.31 cents US. The Dow Jones industrials fell 318.24 points to 15,879.11 after plunging 176 points on Thursday. The Nasdaq was 90.7 points lower to 4,128.17 while the S&P 500 index was down 38.17 points to 1,790.29. The market hasn’t experienced a serious correction in almost 18 months. The S&P 500 soared about 30 per cent last year. Investors are worried about sharp drops in the values of currencies in several emerging markets, including Turkey, Russia, South Africa and Argentina. These drops were sparked by fears over growth in China and expectations that the U.S. Federal Reserve will scale back its stimulus program next week hitting emerging-market assets and denting investor sentiment.

 

A Natural Stock Market Correction ?

The correction many have been waiting for appears to have arrived, according to Tony Dwyer, U.S. portfolio strategist at Canaccord Genuity. He believes in order for this meaningful equity market pullback to last more than a day, there must be a fear of fundamental change. And Mr. Dwyer thinks enough ammunition is being provided by weak Chinese manufacturing data, more tapering from the Federal Reserve at its meeting next week, and U.S. Treasury Secretary Jack Lew renewing debt ceiling fears. “As we move through the correction process, it is always important to remember that corrections are considered ‘natural, normal, and healthy’ – until they actually happen. This one should prove no different,” Mr. Dwyer told clients. The strategist noted that history suggests the market is tired and overdue for a pullback in excess of 5%. He also pointed out that when the S&P 500 peaked last week, it had risen 17.5% over 142 trading days since the last 5% pullback, representing the third longest winning streak since 2000.

 

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Market Update as of January 24 2014

The TSX closed at 13718, down -170 points or -1.22% over the past week. YTD the TSX is up 0.70%.

The DOW closed at 15879, down -580 points or -3.52% over the past week.YTD the DOW is down -4.21%.

The S&P closed at 1790, down -49 points or -2.66% over the past week.YTD the S&P is down -3.14%.

The Nasdaq closed at 4128, down -70 points or -1.67% over the past week.YTD the Nasdaq is down -1.17%.

Gold closed at 1270, up 16.00 points or 1.28% over the past week.YTD gold is up 5.48%.

Oil closed at 96.87, up 2.57 points or 2.73% over the past week.YTD oil is down -1.76%.

The USD/CAD closed at 1.1084, up 0.0119 points or 1.09% over the past week.YTD the USD/CAD is up 4.25%.

 

Sources: Bloomberg; advisor.ca; Investment Executive