By Friday, the US stock market finished an upbeat week on a mixed note. The S&P 500 increased just over a point, holding its weekly gain at 1.0% while the NASDAQ fell 0.4%.
All in all, the major averages began Friday on an upbeat note, but relinquished their opening gains during the first 90 minutes of trading. The early sentiment was boosted by a better-than-expected nonfarm payrolls report for February (175,000 versus market analysts predicting163,000). However, a closer look into the report suggested that the excuse many are giving about the weather being the cause, may have been overused in justifying some of the disappointing economic data received in recent weeks.
On the week, the Dow Jones Industrial Average was up 30.83 points to close at 16,452.72 while the NASDAQ was down 15.90 points closing at 4,336.22. The S&P 500 was up marginally by 1.01 to close at 1,878.04.
On Friday, stocks retreated from their opening highs with the NASDAQ heading up the falling trend. Specifically, biotechnology underperformed for the second day in a row, which fueled much of the NASDAQ weakness. Although biotechnology was able to climb off its lows, the rebound coincided with selling in the traditional technology sector, with a decline of 0.3%. As a result, the NASDAQ was pressured throughout the day.
Even though sectors like technology and health care (falling 0.2%) weighed on the broader market, the S&P 500 held up relatively well thanks to the relative strength of the financial sector (+0.5%), which continued its recent outperformance. The influential sector finished the week with a gain of 3.0%.
Elsewhere among cyclical groups, energy (+0.4%) and industrials (+0.3%) outperformed while consumer discretionary (-0.1%) and materials (-0.5%) lagged. The energy sector posted a modest gain as crude oil rose 1.0% to $102.54/bbl. Despite Friday's increase, the energy industry remains the weakest cyclical group of the year, down 1.8%.
Dow Jones Industrial Average (March 3rd – 7th, 2014)
On the economic front, US nonfarm payrolls added 175,000 jobs in February after adding an upwardly revised 129,000 (from 113,000) in January. Market analyst consensus expected an increase of 163,000. Private payrolls were a little lighter, up 162,000 in February after adding 145,000 in January. The consensus expected private payrolls to increase by 170,000. Over the last several weeks, economists have pointed toward the winter weather as the reason for the recent economic slowdown. The above estimate for the February employment report refutes that theory. Sectors that are normally impacted by weather events, such as construction of buildings, reported positive payroll gains. These sectors should have seen a sizable decline if weather was the root cause of the economic malaise.
Additionally, it was announced that the American trade deficit widened in January to $39.10 billion from an upwardly revised $39.00 billion (from $38.7 billion) in December. Market analysts expected the trade deficit to fall to $37.30 billion. The goods deficit rose to $59.30 billion from $58.70 billion, a gain of $0.70 billion.
Consumer credit also increased by $13.70 billion in January after increasing a downwardly revised $15.90 billion (from $18.80 billion) in December. Market analyst consensus expected consumer credit to increase by $11.80 billion in January.
Despite the continued uncertainty surrounding the situation in Ukraine, stocks climbed as we headed towards closing time, suggesting participants remained hopeful that a worst case scenario would be avoided. The sentiment was a bit different in Europe where major regional indices finished on their lows.
On Friday, Spanish firm Telefonica was in the headlines quite a lot. On Friday, Telefonica amongst other companies like Procter & Gamble were slashing the value of assets held in Venezuela as a dollar shortage paralyzed the state-run foreign exchange system.
The Madrid-based Telefonica said last week it will reduce Venezuelan holdings to 1.5 billion euros ($2.1 billion) from 2.7 billion euros this quarter as it gives up on the government providing dollars at the official exchange rate.
Venezuela’s official exchange rate of 6.3 bolivars to the dollar is becoming harder to obtain as the government saves US dollars for food and medicine imports to calm protests that have left 19 people dead since February 12th. Venezuela’s dollar reserves have dropped by more than half since 2008, causing shortages of imported goods ranging from milk to car batteries.
Companies pay 11 bolivars per dollar in a secondary auction system known as Sicad, which was created last year for importers of non-essential products, such as Telefonica. Companies that can’t get access to any official currency systems pay about 80 bolivars on the black market.
Telefonica (March 3rd – 7th, 2014)
Just before this, on Thursday, Telefonica announced it was close to buying pay-TV firm Prisa. Telefonica said that it is nearing an agreement to buy a controlling stake in the media company’s pay-TV business for about 800 million euros ($1.1 billion).
Telefonica is Spain’s biggest phone company and is planning on paying for Prisa’s 56% stake in DTS Distribuidora de Television Digital SA with cash. While a final agreement may be imminent, the media company still needs to give final approval for the deal, one of the people said. Madrid-based Telefonica was competing with bidders including media firm, Al Jazeera.
Market analysts suggest that it is quite an expensive deal for Telefonica and it’s unclear if they will get a lot out of it. For Prisa, it’s a very positive transaction as the media company needs to trim its debt pile.
Telefonica, which already owns 22% of the asset, is interested in acquiring Madrid-based Prisa’s stake in its pay-TV business to expand offerings in Spain. Telefonica on Wednesday announced a new package for its TV offerings with fixed-line, mobile-phone and Internet services under the brand Movistar Fusion TV, starting at 75 euros.
Prisa rose 5.4 euro cents to 44.9 euro cents in Madrid, the biggest advance since Sept. 13, valuing the company at 608.5 million euros. Telefonica climbed 1.6% to 11.39 euros.
Over the course of the trading week, Telefonica’s stock reached a weekly high of 11.45 on Friday following its weekly low of 10.87 on Monday.
Equities/indices: the Dow Jones Industrial Average experienced a bit of a rollercoaster ride for most of the week. Those that traded binary options based on the value of the Dow Jones midday on Monday through a binary call option would have been “in the money” by late afternoon of the same trading day.
EUR/USD: the EUR/USD currency pair was trading at record highs for most of the trading week before it dropped slightly on Friday. Those that traded binary options based on the value of this currency pair midday on Friday through a binary put option would have experienced successful results by closing time on Friday.
Telefonica: this Spanish stock experienced a number of announcements this trading week. However, Telefonica’s stock seemed to steadily increase throughout the trading week. Those that traded binary options based on the price of this stock first thing on Thursday morning through a binary call option would have been “in the money” by the afternoon of the same trading day.
It was another week of twists and turns across the global markets. With the uncertainty in Ukraine, many in the trading community are watching closely to understand how it will continue to impact stocks and indices worldwide. Additionally, with the news of positive US jobs data and other similar announcements in Europe, the markets had their fair share of movement. Will this trend continue or will things start to finally stabilize?
click here for 2013's reviews
The option prices are the prices by which EZTrader is willing to issue an option for the underlying security, and are not the real time prices for the underlying securities
Copyright © 2008 EZTrader.com, all rights reserved
12 Themistokli Dervi & 33 Vasilisis Frederikis, Nicosia 1066, Cyprus.
You will be logged out of EZTrader, are you sure?