U.S. equity markets experienced considerable swings this week. The Dow saw triple digit falls and increases multiple times. Friday saw markets recovering losses but still ended down on the week.
Economic growth for the U.S. was revised even higher for the second quarter of 2014. The first revision of 4.2% was marked up to 4.6% on Friday pushing markets higher and providing more support for the nation’s recovery.
News and data out of Europe continues to disappoint and provide ammunition to those desiring a more activist ECB. Speaking earlier this week Mario Draghi stated that there were additional unconventional tools the central bank could use to revitalize the Euro area.
News out of China early Monday put a scare in markets as the nation’s Finance Minister tried to dampen expectations about future stimulus measures. The Wall St. Journal reported a week ago that five of the largest financial institutions had received injections of $81 billion from the People’s Bank of China.
Later on during the week talk emerged that China was debating removing Zhou Xiaochuan, head of the central bank. Speculation is that such a move would serve to consolidate allies in key institutions for Prime Minister Xi but the situation is not entirely clear.
Yields on the benchmark 10 year Treasury bond ended slightly lower this week. News broke on Friday that legendary bond investor Bill Gross was leaving PIMCO, where he ran the world’s largest fund, for Janus Capital. Bond commentators are wondering if the move will spark redemptions in PIMCO funds and thus liquidations.
The U.S. Dollar Index hit a 4 year high this week, continuing a recent rising trend. The rally is hitting the energy and materials sectors hardest.
Small cap stocks, as measured by the Russell 2000, have continued their downward trend this year. The index has fallen roughly 5% this month and is the only major index down in 2014. Small caps have been trading at premium valuations compared to large cap stocks pushing flows to the latter.