Weekly Wrap-Up 20 September 2013

September 20th, 2013
in contributors

by Staff,

U.S. stocks plunge on talk of Fed tapering; Dow falls 1.19%

U.S. stocks dropped on Friday after a key Federal Reserve official said the U.S. central bank could begin tapering stimulus programs in October, while fears that a fiscal impasse in Washington could threaten to shut down the government fueled losses as well.
Trading volume was heavy, as stock index futures, stock index options, stock options and single stock futures expired, which happens on the third Friday of March, June, September and December.

At the close of U.S. trading, the Dow Jones Industrial Average finished down 1.19%, the S&P 500 index fell 0.72%, while the Nasdaq Composite index fell 0.39%.

Follow up:

The Federal Reserve could decide at its October monetary policy meeting to taper its USD85 billion monthly asset-purchasing program, St. Louis Fed President James Bullard said Friday.

On Wednesday, the Fed decided to leave the stimulus program unchanged, surprising many who were expecting a decision to trim the amount of assets purchased a month by USD10 billion or even more.

The Federal Reserve will hold its next monetary policy meeting Oct. 29-30 but is not due to hold a press conference that day, which left many expecting a decision to taper asset purchases to come in December, though don't rule out action next month if economic indicators improve before then.

"This was a close decision here in September, so it's possible you could get some data that change the complexion of the outlook and could make the committee be comfortable with a small taper in October," Bullard told Bloomberg Television.

"It's possible, but I'm not saying it will happen. You have other meetings after that."

Monetary stimulus tools boost stock prices by keeping long-term borrowing costs low.

Still, stocks finished the week higher after the Fed said it was keeping monetary stimulus programs in place.

Elsewhere in the U.S., the House of Representatives gave the green light to legislation to fund the government through Dec. 15, however, lawmakers voted to defund President Barack Obama's healthcare bill, the Affordable Care Act.

While the bill faces little chance of survival in the Senate, not to mention a presidential veto, the posturing sparked fears of brinkmanship and inaction that sent investors seeking safety in the dollar ahead of a fiscal showdown brewing in the U.S.

Failure to agree on debt-ceiling solution could result in a government shutdown in October, and the growing uncertainty sent investors snapping up safe-haven dollar positions.

In company news, Blackberry shares plummeted by more than 17% after preliminary second-quarter results disappointed investors as did news the company plans to cut 4,500 jobs, or about 40% of its workforce.

The company's shares were briefly halted prior to announcing the disappointing results.

Leading Dow Jones Industrial Average performers included Pfizer, up 0.49%, JPMorgan Chase, up 0.23%, and Hewlett-Packard, which was down 0.14%.

The Dow Jones Industrial Average's worst performers included Caterpillar, down 3.09%, Microsoft, down 2.44%, and United Technologies, down 1.91%.

European indices, meanwhile, finished lower.

After the close of European trade, the EURO STOXX 50 fell 0.16%, France's CAC 40 fell 0.06%, while Germany's DAX 30 finished fell 0.21%. Meanwhile, in the U.K. the FTSE 100 finished down 0.44%.


The dollar firmed against most major currencies on Friday after a Federal Reserve official said the U.S. central bank can't rule out an October start date to begin tapering stimulus measures.

Brewing fears of a fiscal impasse in the U.S. sent investors seeking safety in liquid greenback positions as well.

In U.S. trading on Friday, EUR/USD was down 0.09% at 1.3518.

The Federal Reserve could decide at its October monetary policy meeting to taper its USD85 billion monthly asset-purchasing program, St. Louis Fed President James Bullard said Friday.

Meanwhile in the euro zone, investors braced for the outcome of Germany's general election on Sunday, with Chancellor Angela Merkel looking to secure a third term.

The greenback was up against the pound, with GBP/USD down 0.09% at 1.6018.

Official data showed that U.K. public-sector net borrowing rose less than expected in August, rising by GBP11.5 billion after a downwardly revised 1.1% decline the previous month. Analysts were expecting public-sector net borrowing to rise by GBP12 billion last month.

The dollar was down against the yen, with USD/JPY down 0.08% at 99.38, and flat against the Swiss franc, with USD/CHF trading up 0.01% at 0.9107.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.35% at 1.0301, AUD/USD down 0.39% at 0.9403 and NZD/USD trading up 0.00% at 0.8376.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.11% at 80.57.


Gold prices dropped on Friday after a key Federal Reserve official said monetary authorities may consider tapering stimulus programs in October.

The commodity skyrocketed earlier this week after the Federal Reserve announced it would continue to stimulate the U.S. economy with its USD85 billion monthly bond-buying program.

Ultra-loose monetary policies that include asset purchases drive down interest rates to spur recovery, weakening the dollar in the process and making gold an attractive hedge.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,333.00 during U.S. afternoon hours, down 2.65%.

Gold prices hit a session low of USD1,328.30 a troy ounce and high of USD1,368.40 a troy ounce.

Gold futures were likely to find support at USD1,291.70 a troy ounce, Wednesday's low, and resistance at USD1,375.10, Thursday's high.

The December contract settled up 4.72% at USD1,369.30 a troy ounce on Thursday.

Gold prices soared this week after the Federal Reserve concluded a two-day monetary policy meeting and made no changes to its USD85 billion bond-buying program, much to the surprise of many.

Elsewhere on the Comex, silver for December delivery was down 5.66% at USD21.973 a troy ounce, while copper for December delivery was down 0.68% and trading at USD3.324 a pound.


Crude oil futures softened on Friday on reports that Libyan production is on the mend, while sentiments that the Federal Reserve still remains on track to begin unwinding stimulus programs pushed down prices as well.

On the New York Mercantile Exchange, light sweet crude futures for delivery in November traded at USD104.85 a barrel during U.S. trading, down 0.495%.

The November contract settled down 1.32% at USD105.86 a barrel on Thursday.

The commodity hit a session low of USD104.82 and a high of USD106.11.

Reports that Libyan oil production is on the rise after protesters reopened access to facilities sent oil prices dipping on Friday, as did talk Iraqi output is on the mend as well.

Waning concerns the U.S. will attack Syria also allowed for modest declines.

Elsewhere, St. Louis Federal Reserve President James Bullard said that the U.S. central bank could decide to taper its stimulus program at its October meeting, which also allowed for declines.

Meanwhile on the ICE Futures Exchange, Brent oil futures for November delivery were up 0.20% at USD108.98 a barrel, up USD4.13 from its U.S. counterpart.

Natural Gas

Natural gas prices fell on Friday as investors bet the arrival of fall in the northern hemisphere will bring cooler temperatures and curb demand for the commodity at the nation's thermal power plants.

On the New York Mercantile Exchange, natural gas futures for delivery in October traded at USD3.688 per million British thermal units during U.S. trading, down 0.87%.

The October contract settled up 0.19% at USD3.720 per million British thermal units on Thursday.

The commodity hit a session low of USD3.658 and a high of USD3.715.

Fall will arrive on Sunday, and expectations for permanent cooler weather patterns sent prices dipping on Friday.

Demand for natural gas tends to wane at the country's thermal power plants as temperatures fall, as homes and businesses throttle back on their air conditioners.

Colder temperatures typical of winter hike demand for the commodity as demand for heating rises.

Updated weather forecasts pointed to seasonable temperatures across the eastern U.S. next week, though portions of the central U.S. could see above-normal mercury readings, which curbed losses.

Waning possibilities of a tropical storm developing in the Gulf of Mexico pushed prices down as well.

The National Hurricane Center said earlier a weather system in the southwestern Gulf of Mexico stood a 30% chance of developing into a tropical cyclone in the next five days, down from original calls for an 80% chance.

Tropical weather systems often disrupt production by prompting gas rig operators to evacuate offshore facilities.

The Gulf of Mexico is home to 10% of U.S. natural gas production.

Natural gas accounts for about a quarter of U.S. electricity generation.

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