The downing of the Malaysian jetliner with 298 people aboard took the spotlight on Thursday eclipsing the Labor Department’s first time unemployment report. The weekly report showed first time unemployment claims declined by 3,000 to 302,000. The attack was attributed to a Russian rocket which may have been fired by the rebel faction in Ukraine. In addition to the Ukraine situation, Israel continues its pursuit of the rocket launchers targeting their country in Gaza. The unfortunate collateral damage due to Hamas fighters using civilians as human shields continues. The ongoing crisis needs resolution to avoid expansion of hostilities in the oil producing region. Markets react to news and we will try to assess the potential ramifications for traders.
Interest Rates: The 30-year treasury bond closed Friday at 138 02/32nds down 2/32nds but still managed a slight gain for the week. The yields rose a half basis point to 3.295%. The yield had initially sold off as bonds rallied pushing that yield to 3.271%, its lowest level since early June of 2013. The usual transfer of funds between equities and treasuries occurred as the equity market recovered from the sharp Thursday loss tied to the downing of a civilian jetliner by the pro Russian rebels. We could continue to see price and yield swings as news develops as well as the relationship between the economies of the U.S. and its trading partners. U.S. consumer sentiment declined to a four month low. For now we prefer the spreads for our clients.
Stock Indices: The Dow Jones industrials closed Friday at 17,100.18, up 123.37 points after losing 161.39 points on Thursday after the reported shooting down of the Malaysian passenger jet with 298 people aboard. The S&P 500 (CME:SPU14) closed at 1,978.22, up 20.1 points after losing 23.45 points on Thursday. The Nasdaq gained 68.70 points to close at 4,432.15 after the sharp drop on Thursday. The market are highly sensitive to geopolitical events as well as the economic data so we expect continued wide price swings. Our admonition to holders of large equity positions of implementing risk hedging strategies still applies.
Currencies: The U.S. dollar closed Friday at 80.610, up 4 ticks as some return to dollar attraction prompted by the geopolitical events and the potential impact on energy availability in Western Europe. The ongoing crisis in Ukraine coupled with the downing of a passenger jet by a Russian missile fired by East Ukraine separatists prompted some degree of angst in Europe. The Israel/Gaza Hamas situation accelerated with civilian casualties growing. The September Euro closed at $1.3527, down 2 ticks the Swiss Franc lost 9 points to $1.1136, the Japanese yen lost 5 points to 0.09871, and the british Pound closed at $1.7078, down 26 points.
Gains were posted in Canadian dollar 9 points to 93.01c and the Australian dollar 16 ticks to 93.56c. We continue to favor the dollar even though our view of the U.S. economy is one of stagnation but a safe haven relative to its trading partners.