Investing.com Weekly Wrap-Up 08 May 2015

May 8th, 2015
in contributors, syndication, forex

U.S. stocks move broadly higher, as unemployment hits six-year low

by Investing.com Staff, Investing.com

U.S. stocks moved broadly higher on Friday after a mixed employment report from the Labor Department provided little hints on the timing of a much-anticipated interest rate hike from the Federal Reserve.

The Dow Jones Industrial Average, the NASDAQ Composite index and the S&P 500Composite index all gained more than 1% on a bullish day for major indices. The Dow rose by 267.05 or 1.49% to 18,191.11, to post its biggest one-day gain in more than a month as all 30 components closed higher.

Follow up:

The NASDAQ gained 58.00 or 1.17% to move above the symbolic 5,000 level at 5,003.55. The S&P 500, meanwhile, rose 28.10 or 1.35% to 2,116.10, as it neared an all-time closing record. All 10 sectors on the S&P 500 closed in the green, as stocks in the Healthcare, Energy and Basic Materials sectors led.

The U.S. Department of Labor said on Friday that nonfarm payrolls for the month of April increased by 223,000, slightly above forecasts for a 220,000 gain. The unemployment rate, meanwhile, fell by 0.1% to 5.4%, its lowest level since May, 2008 before the Financial Crisis. Nonfarm payrolls for March were also revised downward to 85,000 from an already paltry reading of 126,000.

As a result, the U.S. Dollar Index remained flat in U.S. afternoon trading at 94.73. The index measures the strength of the greenback versus a basket of six other major currencies.

Nike Inc (NYSE:NKE) gained 0.98 or 0.97% to 102.43, after the company promised to create 10,000 U.S. based manufacturing jobs if a comprehensive trade deal with at least 10 Asian-Pacific nations is completed. Nike executives made the announcement in a joint news conference with U.S. president Barack Obama at its company headquarters in Beaverton, Ore.

McDonald's Corporation (NYSE:MCD), meanwhile, rose 1.46 or 1.51% to 98.24 after posting lower than expected sales declines in April. McDonald's same-store global sales dropped by 0.6% for the month, significantly below forecasts of a 1.8% decline. In Europe, same-store sales grew by 1% spurred by increases in the United Kingdom and Germany.

The top performer on the Dow was Visa Inc (NYSE:V), which gained 2.78 or 4.18% to 69.36 after a report surfaced on Friday that the multi-national credit card company could purchase its Visa Europe arm. The two are currently wholly separate entities. The worst performer was Coca-Cola Company (NYSE:KO), which gained 0.24 or 0.59% to 40.94.

On the NASDAQ, the biggest gainer was TripAdvisor Inc (NASDAQ:TRIP) which rose 3.67 or 4.68% to 82.14. On Wednesday, TripAdvisor said quarterly revenues in its hotel booking segment grew 20% on a year-over-year basis. The worst performer was Monster Beverage Corporation (NASDAQ:MNST), which fell 14.90 or 10.38% to 128.59 after the energy drink company posted worse than expected earnings on Thursday after the bell.

The top performer on the S&P 500 was NRG Energy Inc (NYSE:NRG), which gained 1.48 or 5.93% to 26.45 on a strong session for energy stocks. Monster Beverage was also the worst performer on the S&P, just below NVIDIA Corporation (NASDAQ:NVDA) which dropped 1.67 or 7.43% to 20.82, after announcing that it will discontinue its development of LTE modems for smartphones.

Fast food restaurant chain Bojangles soared 4.75 or 25% to 23.75 after going public earlier this week.

Forex

EUR/USD fell slightly on Friday by roughly 0.5% as a surprising result in the UK general election and a mixed U.S. jobs report had little impact on the currency pair.

The euro stood at 1.1202 at Friday's close, down 0.0064 or 0.57%. For the week, the pair remained in a tight range between 1.11 and 1.1373 during a less volatile stretch than a host of others throughout a choppy spring. Last week, for instance, the euro gained roughly 3% amid heightened expectations of a delayed interest rate hike by the Federal Reserve.

Reaction in currency markets to the U.S. April jobs report being slightly softer than expected (based on backwards revisions) was generally muted as the pair rose modestly to 1.1247, 30 minutes after the release on Friday morning. By comparison, the euro plunged 1.70% to 1.0844 on Mar. 6 when a strong U.S. employment report signaled the possibility of a sooner than expected rate hike. In addition, the euro surged by 2.54% back to 1.0866 on Mar. 18 after relatively dovish comments from Fed chair Janet Yellen on the state of the economy fueled speculation of a delayed lift-off.

Last week, the Fed reiterated its data-driven approach to its first potential rate hike since 2006 by removing all calendar references to the timing of lift-off. Wary of a premature rate hike, the Federal Open Market Committee said it would like to see significant improvements with wage growth and upward movements in inflation toward its target goal of 2% before it decides to raise rates. While average hourly rates inched up by 1% in April, they have risen by 2.2% on a year-over-year basis. When the U.S. Bureau of Labor Statistics' released its Employment Cost Index last week, it reported a slight uptick in wage pressures.

Meanwhile, the labor force participation rate edged up 0.1% to 62.8% in April spurred by gains in professional and business services, healthcare and construction industries. The number of workers marginally attached to the labor force remained relatively unchanged over the past year, ticking down from 2.16 million in April, 2014 to 2.115 million last month. The reading is a gauge on the number of workers who have sought employment in the last 12 months, but stopped actively looking for work over the last four weeks.

In addition, there were 6.6 million part-time workers throughout the country in April, down from 7.4 million 12 months ago. The U-6 unemployment rate, a broader reading of the nation's labor condition, measures the total amount of unemployed Americans along with marginally attached and part-time workers. During testimony before the Senate Banking Committee in February, Fed chair Janet Yellen said the picture of the nation's labor condition was "less rosy," when the U-6 unemployment rate was examined.

The disappointing jobs report on Friday may convince the Fed to take a June rate hike off the table. The Fed may opt to wait until September or even December to increase its benchmark Fed Funds Rate.

In the United Kingdom prime minister David Cameron surprisingly posted a resounding victory on Thursday night in the British general election, as his Conservative party added 28 seats to boost its majority to 331. Throughout the year, polls indicated the possibility of a hung parliament in which no party would gain majority control. Cameron promised voters a referendum on the UK's membership in the European Union if elected.

The results boosted the pound, as GBP/USD gained 1.39% to close the week at 1.5456.

Yields on U.S. 10-Year Treasuries fell roughly three basis points to 2.15, one day after moving above 2.3% to reach a two-month high. Yields on German 10-Year bunds fell four basis points to 0.54%.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained 0.17 or 0.18% to 94.91.

CTFC Commitment of Traders

This weak speculators were less bearish on non-U.S. dollar currencies and less bullish on gold.

cot.2015.may.06

Gold

Gold futures remained relatively unchanged on Friday, after the U.S. labor force rebounded in April from a dismal month in March.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery rose 6.10 or 0.52% to 1,888.30. Gold traded in a range of $1,181 to $1,192.60 during a lightly traded session. For the week, gold futures rose by more than $11 an ounce but less than 1%.

The U.S. Department of Labor said on Friday that nonfarm payrolls for the month of April increased by 223,000, slightly above forecasts for a 220,000 gain. The unemployment rate, meanwhile, fell by 0.1% to 5.4%, its lowest level since May, 2008 before the Financial Crisis. Nonfarm payrolls for March were also revised downward to 85,000 from an already paltry reading of 126,000.

Reaction in commodity markets, however, was generally muted as gold rose less than 1% from 1,184.40 to 1,191.30 in the 30 minutes following the jobs release. By comparison, gold surged more than 1.45% on April 6 to $1,218 an ounce as the soft employment figures heightened expectations of a delayed interest rate hike from the Federal Reserve.

In February the economy added 260,000 nonfarm jobs, building on strong gains over the prior two months amid increases in construction, goods-producing and food services positions. When the February report was released on Mar. 6, gold plunged more than 2.65% to 1,164.30 as the optimistic data signaled the possibility of a sooner than expected rate hike.

Last week, the Fed reiterated its data-driven approach to its first potential rate hike since 2006 by removing all calendar references to the timing of lift-off. Wary of a premature rate hike, the Federal Open Market Committee said it would like to see significant improvements with wage growth and upward movements in inflation toward its target goal of 2% before it decides to raise rates. While average hourly rates inched up by 1% in April, they have risen by 2.2% on a year-over-year basis. When the Bureau of Labor Statistics released its Employment Cost Index last week, it showed an uptick in wage pressures on a seasonally-adjusted basis.

Meanwhile, the labor force participation rate edged up 0.1% to 62.8% in April spurred by gains in professional and business services, healthcare and construction industries. The number of workers marginally attached to the labor force remained relatively unchanged over the past year, ticking down from 2.16 million in April, 2014 to 2.115 million last month. The reading is a gauge on the number of workers who have sought employment in the last 12 months, but stopped actively looking for work over the last four weeks.

In addition, there were 6.6 million part-time workers throughout the country in April, down from 7.4 million 12 months ago. The U-6 unemployment rate, a broader reading of the nation's labor condition, measures the total amount of unemployed Americans along with marginally attached and part-time workers. During testimony before the Senate Banking Committee in February, Fed chair Janet Yellen said the picture of the nation's labor condition was "less rosy," when the U-6 unemployment rate was examined.

Earlier in the week, Chicago Fed president Charles Evans said he needed to see more encouraging indications of economic growth before recommending a hike in interest rates. Evans said during an appearance in Columbus, Ohio:

"The weak first-quarter data do give me pause, and I would like to see confirmation that they are indeed a transitory aberration."

A disappointing jobs report on Friday may have convinced the Fed to take a June rate hike off the table. The Fed may opt to wait until September or even December to increase its benchmark Fed Funds Rate.

Gold, which is unattached to interest rates or dividends, struggles to compete against high yield bearing assets in higher rate environments.

Elsewhere, silver for July delivery gained 0.186 or 1.14% to 16.483 a troy ounce.

Copper for July delivery rose by 0.001 or 0.04% to 2.919 a pound

Oil

Crude futures were mixed on Friday moving slightly lower on the week, following an inconsequential U.S. jobs report and an unexpected result in the UK general elections.

Supply data also remained in focus, amid further U.S. rig decline -- albeit at a slower pace than a precipitous fall earlier in the winter.

On the New York Mercantile Exchange, WTI crude for June delivery rose slightly by 0.45 or 0.76% to 59.39, after reaching a five-month high above $62 a barrel earlier this week. For the week, Texas Light Sweet crude inched lower after opening at $59.79 on Monday. WTI crude futures were relatively unchanged after oil services firm Baker Hughes(NYSE:BHI) released its weekly U.S. rig count on Friday afternoon.

Last week, the number of oil rigs in the U.S. fell by 11 to 668 marking the 22nd consecutive week of declines. The number of domestic oil rigs in the U.S. remained at its lowest level since September, 2010. The pace of decline, however, continues to slow. In April, rigs were eliminated on average by 33 per week after dipping by more than 80 on consecutive weeks in February. Last October, the rig count peaked above 1,600, after reaching 1,528 at this point last year.

Crude production, meanwhile, continues to level off amid a glut of supply. Last week, the U.S. produced approximately 9.369 million barrels per day down from roughly 9.422 million in mid-March. In turn, crude prices have spiked as inventory levels moved lower for the first time this year. Earlier in the spring it became increasing likely that the U.S. would reach full storage capacity at some point this month.

As a result of a "benign" U.S. employment report, the U.S. Dollar Index remained flat in U.S. afternoon trading at 94.73. The index measures the strength of the greenback versus a basket of six other major currencies.

On the Intercontinental Exchange (ICE), brent crude for June delivery fell 0.11 or 0.17% to 65.43. The spread between the international and U.S. domestic benchmarks of crude stood at 6.04, down from 6.57 on Thursday.

Dollar-denominated commodities such as brent become more expensive for foreign purchasers when the dollar appreciates.

GBP/USD gained 1.31% to 1.544 in U.S. afternoon trading, while EUR/USD was down 0.58% to 1.12.

Natural Gas (Thursday Report)

Natural gas futures reversed gains on Thursday, briefly hitting the lowest levels of the session after data showed that U.S. natural gas supplies rose more than expected last week.

On the New York Mercantile Exchange, natural gas for delivery in June inched down 2.1 cents, or 0.77%, to trade at $2.755 per million British thermal units during U.S. morning hours. Prices were at around $2.787 prior to the release of the supply data.

A day earlier, natural gas prices shed 0.4 cents, or 0.14%, to close at $2.776. Futures were likely to find support at $2.714 per million British thermal units, the low from May 1, and resistance at $2.824, the high from May 4.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended May 1 rose by 76 billion cubic feet, compared to expectations for an increase of 75 billion and following a build of 81 billion cubic feet in the preceding week.

Supplies rose by 68 billion cubic feet in the same week last year, while the five-year average change is an increase of 75 billion cubic feet.

Total U.S. natural gas storage stood at 1.786 trillion cubic feet as of last week. Stocks were 742 billion cubic feet higher than last year at this time and 67 billion cubic feet below the five-year average of 1.853 trillion cubic feet for this time of year.

Meanwhile, updated weather forecasting models called for warmer-than-average weather over much of the Midwest and Northeast, as well as the South in the first two weeks of May, which was likely to boost cooling demand.

Approximately 49% of U.S. households use natural gas for air conditioning, according to the Energy Department.

 









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