In a press release on Wednesday, the US Federal Open Committee cited current economic conditions – low rates of resource utilization and a subdued outlook for inflation over the medium run – as reasons to keep a low federal funds rate at least through late 2014.
This follows an August 2011 announcement that interest rates would stay near zero until at least mid-2013.

The Committee expects interest rates will eventually rise to 4.5%, which will help maintain its target rate for inflation of 2%.

This type of announcement is aimed at giving the investing public an idea of longer-term inflation expectations and a clear picture of how long they can obtain cheap credit.

Market Recap (as of Friday, January 27, 2012)

• The TSX closed at 12467, up 0.56% over the past week. YTD the TSX is up 4.28%.
• The DOW closed at 12660, down -0.47% over the past week. YTD the DOW is up 3.62%.
• The S&P closed at 1316, up 0.08% over the past week. YTD the S&P is up 4.61%.
• The Nasdaq closed at 2817, up 1.08% over the past week. YTD the Nasdaq is up 8.14%.
• Gold closed at 1738, up 4.45% over the past week. YTD gold is up 11.05%
• Oil closed at 99.59, up 1.42% over the past week.YTD oil is up 0.70%.
• The CAD/USD closed at 0.999, up 1.14% over the past week. YTD the CAD/USD is up 1.96%.

Source: Dynamic Funds

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“Your Life Is What Your Thoughts Make It” -Marcus Aurelius

TSX LOWER ON U.S. TRADE DATA, EUROZONE WORRIES
North American stock markets closed lower Friday as France lost its AAA credit rating and traders worried as Greece’s bond swap talks stalled.  Economic data also depressed markets after the U.S. Commerce Department reported the American trade deficit with the rest of the world increased 10.4% to US$47.8 billion in November, the highest level since June. The S&P/TSX composite index closed well off session lows, coming back from a 157-point deficit to lose 43.27 points to 12,231.06 while the TSX Venture Exchange lost 4.47 points to 1,536.03.   The Canadian dollar was also lower despite a strong domestic trade report, down 0.42 of a cent to 97.78 cents US as the greenback strengthened with investors moving into the perceived safety of U.S. Treasuries. The Dow industrials lost 48.96 points to 12,422.06. The Nasdaq fell 14.03 points to 2,710.67 while the S&P 500 index was down 6.41 points to 1,289.09 after France’s finance minister announced that ratings firm Standard & Poor’s has cut its credit rating by a notch to AA.
France’s loss of its AAA rating deals a heavy blow to the eurozone’s ability to fight off its debt crisis. The country is the second-largest contributor to the currency union’s bailout fund and a lower credit rating often results in higher borrowing costs. It’s really mixed news on Europe today–the downgrade is definitely negative,” said Jeff Bradacs, portfolio manager at Manulife Asset Management.  “But borrowing by Italy came in at lower rates than expected and that’s partially driven by European banks getting low funding costs through the ECB and buying the Italian bonds.”  Meanwhile, negotiations between the Greek government and its private creditors on a bond swap deal needed to avoid default appeared stalled  Friday, with representatives of the bondholders saying they had been “paused for reflection.”

The TSX closed at 12231, up 42 points or 0.34% over the past week. YTD the TSX is up 2.31%.

The DOW closed at 12422, up 62 points or 0.50% over the past week.YTD the DOW is up 1.67%.

The S&P closed at 1289, up 11 points or 0.86% over the past week.YTD the S&P is up 2.46%.

The Nasdaq closed at 2711, up 37 points or 1.38% over the past week.YTD the Nasdaq is up 4.07%.

Gold closed at 1639, up 22.00 points or 1.36% over the past week.YTD gold is up 4.73%.

Oil closed at 99.2, down -2.63 points or -2.58% over the past week.YTD oil is up 0.30%.

The CAD/USD closed at 0.9773, up 0.0043 points or 0.44% over the past week.YTD the CAD/USD is down -0.26%

Sources:  Bloomberg, Investor Executive, Manulife Asset Mgt

“Cheers To New Year and Another Chance for US to Get It Right” -Oprah Winfrey

Jobs Grow But Unemployment Edges Up

Canada’s economy began creating jobs again in December after two consecutive months of declines, but it was not enough to keep the unemployment rate from edging up a notch to 7.5%.  Statistics Canada said the unemployment rate rose one-tenth of a point despite the jobs increase because more Canadians entered the labour force.  The pick-up of 17,500 jobs was welcome news after November and October’s significant setbacks of 73,000.  The agency noted that all the gains were in the categories of part-time and self-employment, whereas full-time work fell by 25,500 and the number of employees in the country declined by 13,600 in December. The losses were offset by gains of 43,100 in part-time work and 31,100 in self-employment.  “In general, growth in the labour market is fairly consistent with expectations,” says Benoit P. Durocher, senior economist at Desjardins. “Economic conditions deteriorated over the last few months, notably due to the problems in Europe and upheaval in the financial markets. It is therefore no surprise that Canadian businesses are being cautious in limiting hiring.”

Meanwhile down in the U.S. a burst of hiring in December pushed the U.S. unemployment rate to its lowest level in nearly three years, giving the economy a boost at the end of 2011.  Employers added a net 200,000 jobs last month and the unemployment rate fell to 8.5%, the lowest since February 2009, according to the Labor Department. The rate has dropped for four straight months. the hiring gains cap a six-month stretch in which the economy generated 100,000 jobs or more in each month. That hasn’t happened since April 2006. “We see this employment report as further evidence of labor market improvement, consistent with the acceleration in the U.S. economy in the second half of last year,” says Michael Gapen, director, U.S. economic research at Barclays Capital.

The TSX closed at 12189, up 234 points or 1.96% over the past week. YTD the TSX is up 1.96%.
The DOW closed at 12360, up 142 points or 1.16% over the past week.YTD the DOW is up 1.16%.
The S&P closed at 1278, up 20 points or 1.59% over the past week.YTD the S&P is up 1.59%.
The Nasdaq closed at 2674, up 69 points or 2.65% over the past week.YTD the Nasdaq is up 2.65%.
Gold closed at 1617, up 52.00 points or 3.32% over the past week.YTD gold is up 3.32%.
Oil closed at 101.83, up 2.93 points or 2.96% over the past week.YTD oil is up 2.96%.
The CAD/USD closed at 0.973, down -0.0068 points or -0.69% over the past week.YTD the CAD/USD is down -0.69%.

Sources: Bloomberg, Statistics Canada,  Investment Executive, Advisor.ca

“If We Do Not Wrap Up a Little Love With Our Christmas Gift What Is The Use” -Bob Edwards

TSX – Strong Close To Down Week

Mining stocks helped push the Toronto stock market to a strong gain Friday as metal prices recovered from losses earlier in the week. But Research In Motion was a weight on the TSX as the BlackBerry maker’s shares tumbled $1.83 or 11.58% to $13.97 after it disappointed investors with much lower profits and an announced delay until late next year for delivery of its new generation of BlackBerrys to consumers.  RIM reported a third-quarter net profit of only US$256 million, compared with $911 million for the same period last year.  The S&P/TSX composite index gained 130.96 points to 11,635.38 while the TSX Venture Exchange gained 21.18 points to 1,426.11. The Canadian dollar lost 0.12 of a cent to 96.43 cents US and New York markets turned lower on concerns about worsening economic conditions in Europe.  The Dow Jones industrial index dipped 2.57 points to 11,866.24. The Nasdaq composite index gained 14.32 points to 2,555.33 and the S&P 500 index was ahead 3.9 points to 1,219.65.

Despite the positive showing Friday, it was another negative week for the TSX, which fell 399 points or 3.31% as worries about the European debt crisis vied for attention with improving economic reports. “The debate going on right now is Europe and the risks of the unknown with the banking crisis versus the economic data, especially out of the U.S. which has been better than expected,” said Mark Bayko, portfolio adviser, U.S. and International Equities, RBC Dominion Securities.  American markets had been higher in the morning against a backdrop of positive U.S. data, including a report Thursday showing the number of people applying for unemployment benefits dropped sharply last week to the fewest since May 2008. Traders had also been encouraged by two strong regional manufacturing reports.

The TSX closed at 11635, down 399 points or -3.32% over the past week. YTD the TSX is down -13.44%.

The DOW closed at 11816, down 318 points or -2.61% over the past week.YTD the DOW is up +2.49%.

The S&P closed at 1219, down 36 points or -2.86% over the past week.YTD the S&P is down -3.10%.

The Nasdaq closed at 2555, down 92 points or -3.48% over the past week.YTD the Nasdaq is down -3.69%.

Gold closed at 1597, down 148 points or -8.48% over the past week.YTD gold is up +12.39%.

Oil closed at 93.53, down -6.30 points or -6.3% over the past week.YTD oil is up +1.98%.

The CAD/USD closed at 0.9643, down 0.02 points or -2.03% over the past week.YTD the CAD/USD is down -3.79%.

Sources: Bloomberg, Investment Executive, Advisor Analysis

“Will You Love Me In December As You Do In May” -James Walker

Markets Up As European Leaders Agree To New Treaty

The markets closed higher Friday as the European Union moved to establish a new treaty that aims to more closely integrate the finances of member countries.  The S&P/TSX composite index gained 82.95 points to 12,034.75 after most members of the European Union signed on to a deal to ensure there is no repeat of the current European debt crisis. Britain was the lone holdout, arguing the treaty wasn’t in its best interest.  The Canadian dollar reversed early weakness and rose 0.4 of a cent to 98.19 cents US.  U.S. markets surged as the Dow industrials gained 186.56 points to 12,184.26.  The new eurozone treaty calls for participating governments to have balanced budgets, which is calculated as a structural deficit no greater than 0.5% of gross domestic product and will require constitution amendments to include such a requirement. An unspecified “automatic correction mechanism” would punish countries which break the rules. In addition, countries that run deficits larger than 3% would face sanctions.

Analysts said while the treaty proposal didn’t meet everyone’s expectations, it certainly represented progress. “We have been far enough down this road to realize that one meeting isn’t going to solve everything,” said Colin Cieszynski, market analyst at CMC Markets Canada. “At least this time around, they seem to have gotten to the point where they have taken it fairly seriously, they have brought in real measures that have to be taken care of and it looks like they’re trying to accelerate the ratification process.” Meanwhile, many think that a solution to the debt crisis can only come if the European Central Bank takes a more active role, possibly by buying up more government debt in the markets. It currently buys bonds in the markets, but only reluctantly and in small quantities.

-The TSX closed at 12035, down 40 points or -0.33% over the past week. YTD the TSX is down -10.47%.

-The DOW closed at 12184, up 165 points or +1.37% over the past week. YTD the DOW is up 5.24%.

The S&P closed at 1255, up 11 points or +0.88% over the past week. YTD the S&P is down -0.16%.

-Gold closed at 1717, down 29.00 points or -1.66% over the past week. YTD gold is up 20.91%.

-Oil closed at 99.41, down 1.72 points or -1.70% over the past week. YTD oil is up 9.01%.

The CAD/USD closed at 0.982, up 0.001 points or +0.10% over the past week. YTD the CAD/USD is down -2.32%.

Souces: Bloomberg, Investment Executive