Weekly Wrap-Up 10 October 2014

October 10th, 2014
in contributors, syndication, forex

U.S. stocks drop on tech sell off, global growth woes; Dow drops 0.69%

by Staff,

U.S. stocks tumbled on Friday, with the Dow Jones giving back 2014's gains amid a tech sell off and concerns a global slowdown will water down U.S. earnings.

At the close of U.S. trading, the Dow 30 fell 0.69%, the S&P 500index fell 1.15%, while the NASDAQ Composite index plummeted 2.33%.

The Volatility S&P 500 index, which measures the outlook for market volatility, was up 13.22% at 21.24.

Follow up:

Wall Street stocks continued to take a beating on fears softening European and Asian economies could slow U.S. business concerns overseas.

In the U.S. earlier, data revealed that import prices fell 0.5% in September from August, better than market calls for a 0.7% contraction, though still a decline nonetheless, a sign a stronger dollar and a softer global economy could hurt U.S. businesses with overseas exposure.

Elsewhere, technology stocks suffered after semiconductor maker Microchip Technology Incorporated (NASDAQ:MCHP) cut its sales outlook for the third quarter.

Leading Dow Jones Industrial Average performers included Coca-Cola Enterprises Inc (NYSE:CCE), up 1.39%, Procter & Gamble Company (NYSE:PG), up 1.23%, and Walt Disney Company (NYSE:DIS), up 0.67%.

The Dow Jones Industrial Average's worst performers included Intel Corporation (NASDAQ:INTC), down 5.04%, Microsoft Corporation (NASDAQ:MSFT), down 3.94%, and 3M Company (NYSE:MMM), down 3.46%.

European indices, meanwhile, ended the day lower.

After the close of European trade, the DJ Euro Stoxx 50 fell 1.53%, France's CAC 40 fell 1.64%, while Germany's DAX fell 2.40%. Meanwhile, in the U.K. the FTSE 100 fell 1.43%.


The dollar strengthened against most major currencies on Friday amid safe-haven demand from investors concerned that while the U.S. may be recovering, the global economy continues to soften.

In U.S. trading on Friday, EUR/USD was down 0.59% at 1.2615.

The single currency continued to come under pressure on concerns the European economy is floundering and may require fresh ECB stimulus measures.

In Europe on Thursday, data revealed that Germany exports fell 5.8% in August, which took its toll on the single currency on Friday.

In France earlier, data revealed industrial production remained unchanged in August, better than expected 0.2% contraction, while Italy's figure expanded 0.3%, missing market calls for a 0.5% expansion

The euro slid on concerns monetary policy remains poised to loosen to steer the continent away from deflationary decline, as ECB President Mario Draghi has said monetary authorities will do what's necessary to kick start the European recovery.

Meanwhile in the U.S., import prices fell 0.5% in September from August, better than market calls for a 0.7% contraction, though still a decline nonetheless, a sign a stronger dollar and a softer global economy could water down inflationary pressures in the U.S.

Earlier this week, the Federal Reserve suggested rate hikes might not come as quickly than markets are expecting, though the dollar firmed anyway due to ongoing expectations for U.S. monetary policy to diverge from those in Europe and Asia.

The dollar was down against the yen, with USD/JPY down 0.06% at 107.77, and up against the Swiss franc, with USD/CHF up 0.46% at 0.9584.

Earlier Friday, the minutes of the Bank of Japan's Sept. 3-4 policy meeting showed that some members voiced concerns over possible adverse effects of additional stimulus measures, which bolstered the yen.

These concerns raised the prospect of the first policy split vote under BoJ Governor Haruhiko Kuroda's mandate, even as the central bank head continues to emphasize his readiness to take fresh action to meet the BOJ's 2% inflation target, if needed.

On Tuesday, the BoJ left monetary policy unchanged at its policy meeting, but acknowledged that declining domestic demand as a result of a sales tax increase in April was leading to economic weakness.

Separately, official data on Friday showed that tertiary industry activity slipped 0.1% in August, confounding expectations for a 0.2% rise, after a 0.3% fall in July.

The greenback was up against the pound, with GBP/USD down 0.39% at 1.6054.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.25% at 1.1213, AUD/USD down 0.99% at 0.8696 and NZD/USD down 0.65% at 0.7812.

Statistics Canada reported earlier that the number of employed people rose by 74,1000 in September, blowing past expectations for an increase of 20,000, after a decline of 11,000 the previous month.

The report also showed that Canada's unemployment rate fell to 6.8% last month from 7.0% in August. Analysts had expected the unemployment rate to remain unchanged in September, and the report strengthened the loonie earlier though profit taking sent the currency back down.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.42% at 86.02.

Commitments of Traders data from the CFTC (Commodity Future Trading Commission) - Bearishness continued for the euro and Japanese yen with only minor changes in sentiment. For the entire set of futures tracked here only the Australian dollar had a significant change, becoming committed to bearish sentiment after being nearly neutral last week.



Gold futures edged lower on Friday after the dollar continued to see support on concerns the global economy may be slumping as the U.S. recovers, though dovish language out of the Federal Reserve this week cushioned losses.

On the Comex division of the New York Mercantile Exchange, goldfutures for December delivery traded at 1,222.40 a troy ounce, down 0.24%, up from a session low of $1,217.70 and off a high of $1,225.80.

The December contract settled up 1.60% at $1,225.30 on Thursday.

Futures were likely to find support at $1,183.30 a troy ounce, Monday's low, and resistance at $1,234.00, Thursday's high.

In the U.S. earlier, data revealed that import prices fell 0.5% in September from August, better than market calls for a 0.7% contraction, though still a decline nonetheless, a sign a stronger dollar and a softer global economy could water down inflationary pressures in the U.S.

Earlier this week, the Federal Reserve suggested rate hikes might not come as quickly than markets are expecting, though the dollar firmed anyway due to ongoing expectations for U.S. and European monetary policies to diverge, which kept gold in negative territory though supported somewhat nonetheless.

Gold and the dollar tend to trade inversely with one another.

Meanwhile, silver for December delivery was down 0.55% at $17.322 a troy ounce, while copper futures for December delivery were up 0.24% at $3.037 a pound.


U.S. oil futures dropped to the lowest level since July 2012 on Friday, as rising supply and concerns over global economic growth weighed heavily on demand for the commodity.

On the New York Mercantile Exchange, crude oil for delivery in November traded at $84.70 a barrel during European early afternoon trade, down 1.07$ or 1.25%.

Prices lost 1.54$ or 1.76% on Thursday to settle at $85.77.

Futures were likely to find support at $82.10 a barrel and resistance at $87.95, Thursday's high.

Oil prices remained under pressure after the U.S. Energy Information Administration said in its weekly report on Wednesday that U.S. crude oil inventories increased by 5 million barrels in the week ending October 3, blowing past expectations for a gain of 1.6 million barrels.

The report also showed that gasoline stockpiles rose by 1.2 million barrels, confounding expectations for a drop of 1.0 million barrels.

The data came a day after the American Petroleum Institute said that U.S. crude inventories increased by 5.1 million barrels in the week ending October 3, more than expectations for a rise of 1.4 million barrels.

Meanwhile, worries over the health of the global economy persisted after the International Monetary Fund cut its global economic growth forecasts for the third time this year on Tuesday and warned that the recovery remains weak and uneven.

Sentiment was also hit by concerns over a recession in Germany after two local officials reportedly said that Europe's largest economy would cut its growth forecasts for 2014 and 2015 next week.

The news followed data earlier this week that showed exports in Europe's largest economy fell in August by the most since January 2009.

Elsewhere, on the ICE Futures Exchange in London, Brent Oil for November delivery dropped 0.67$, or 0.74%, to hit $89.39 a barrel.

The spread between the Brent and the WTI crude contracts stood at $4.69.

Natural Gas

Natural gas futures edged higher in choppy trading on Friday, as no change to weather forecasts calling for mild air prompted investors to wait on the sidelines, though possible trouble in the tropics allowed for some gains.

On the New York Mercantile Exchange, natural gas futures for delivery in November were up 1.95% at $4.009 per million British thermal units during U.S. trading. The commodity hit a session low of $3.946, and a high of $4.029.

The November contract settled down 2.26% on Thursday to end at $3.932 per million British thermal units.

Natural gas futures were likely to find support at $3.908 per million British thermal units, Thursday's low, and resistance at $4.184, Wednesday's high.

Natural gas prices rose after weather-forecasting services predicted a cool snap to trek across the northeastern U.S. in the coming days and drive demand for heating. reported in its Friday midday update:

"A strong weather system with heavy rains, strong thunderstorms, and even a few snowflakes continues to race across the Midwest with the trailing cold front pushing deep into the Gulf Coast. More importantly to the nat gas markets, temperatures will be 8-20F cooler than normal for much of the central and eastern U.S. the next few days.

"A secondary reinforcing surge of cooler Canadian air will arrive early next week and impact many of the same regions. After a brief warm up late next week, the pattern will again become active as additional Canadian cool blast line up and push deep into the central U.S. October 11-15th.

"The greatest forecast challenge remains over the eastern U.S. coast where warmer conditions are possible as cooler Canadian air struggles to advance east. This could bring slightly warmer than normal temperatures to the Southeast and eastern U.S. coastline. It should be mentioned Southern California will see a couple more days of hot temperatures as Los Angeles and San Diego reach the 90s to near 100F."

Uncertainty as to how far east the cooler weather will make it managed to drive prices up by stoking expectations that warmer air will remain and drive demand for air conditioning.

Investors continued to digest Thursday's weekly U.S. supply report, which sent prices plunging to levels ripe for profit taking.

The U.S. Energy Information Administration said Thursday that natural gas storage in the U.S. in the week ending Sept. 26 rose by 112 billion cubic feet, above expectations for an increase of 107 billion, which sent prices falling.

Inventories rose by 99 billion cubic feet in the same week a year earlier, while the five-year average change is a build of 85 billion cubic feet.

Injections of gas into storage have surpassed the five-year average for 24 consecutive weeks, alleviating concerns over tightening supplies.

Total U.S. natural gas storage stood at 3.100 trillion cubic feet. Stocks were 373 billion cubic feet less than last year at this time and 399 billion cubic feet below the five-year average of 3.499 trillion cubic feet for this time of year.


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