Investing.com Weekly Wrap-Up 15 May 2015

May 15th, 2015
in contributors, syndication, forex

U.S. stocks remain relatively flat, following soft economic data

by Investing.com Staff, Investing.com

U.S. stocks remained relatively flat on Friday one session after the major indices surged into record territory, amid continuing soft economic data.

The Dow Jones Industrial Average and NASDAQ Composite index each moved by less than 0.15% on the final day of trading this week, while the S&P Composite index inched up one day after surging to an all-time record closing high. The Dow gained 20.32 or 0.11% to 18,272.56 on the session, edging up by less than 1% for the week. While the NASDAQ lost 2.51 points or 0.05% on Friday, it still closed at 5,048.29 to remain above the symbolic 5,000 level for the second straight week.

Follow up:

The S&P 500 gained 1.63 or 0.08% to 2,122.73, as seven of 10 sectors closed in the green. Stocks in the Utilities and Consumer Services and sectors led, each closing higher by more than 0.65%. Stocks in the Utilities, Financial and Technology industries lagged, moving lower for the session.

Consumer confidence, one of the lone bright spot in the U.S. economy in recent weeks, appears to have peaked. On Friday, the University of Michigan reported that its Consumer Sentiment Index plunged to 88.6, far below low consensus estimates of a 93.5 reading. In terms of current conditions, the survey indicated a drop of 7.2% to 99.8, the lowest level since October. Consumer expectations are comparatively bleak, falling 7.3% from the last reading to 81.5, the worst level in five months.

The top performer on the Dow on Friday was Cisco Systems Inc (NASDAQ:CSCO), which gained 0.5 points or 1.72% to 29.55. The worst performer was Microsoft Corporation (NASDAQ:MSFT), which fell 0.43 or 0.87% to 48.30.

The biggest gainer on the NASDAQ was Bed Bath & Beyond Inc (NASDAQ:BBBY), which rose 3.70 or 5.31% to 73.35. Netflix Inc (NASDAQ:NFLX) surged 26.40 or 4.50% to 613.25, eclipsing the $600 level for the first time. On Friday, the Wall Street Journal reported that the company's discussions with several Chinese Broadcast Networks to bring the streaming service to the Asian nation are still in its early phases. Shares in Netflix are up a staggering 68% over the last 52 weeks. The worst performer was Keurig Green Mountain Inc (NASDAQ:GMCR) which plunged 8.82 or 8.55% to 94.26, after reports surfaced that the launch of its new cold brewing machine will be delayed.

The top performer on the S&P 500 was PEPCO Holdings Inc (NYSE:POM), which gained 2.19 or 8.83% to 27.00 after its $6.8 billion merger with Chicago-based energy generator and distributor Exelon Corporation (NYSE:EXC) was conditionally approved by the Maryland Public Service Commission. The deal has been approved by the Federal Energy Regulatory Commission, but still needs to be authorized by officials in the District of Columbia. Exelon, the largest operator of power plants in the nation, gained 0.96 or 2.86% to 34.50. Keurig was also the worst performer on the S&P 500, just below Symantec Corporation (NASDAQ:SYMC), which fell 1.42 or 5.48% to 24.48.

Shares in Avon Products (NYSE:AVP) fell by more than 1.5% one day after surging roughly 20%, following a hoax acquisition attempt by a nonexistent company claiming to be based in a remote island in the Indian Ocean. The Securities and Exchange Commission said Friday it is investigating the fake takeover bid, according to Bloomberg.

Forex

The euro continued its steady climb against the dollar on Friday extending its winning streak to a fourth consecutive session, as the greenback stumbled following another batch of soft economic data.

EUR/USD stood at 1.1446 at Friday's close, up 0.33%, rallying from session-lows of 1.1324 as currency traders locked into gains from earlier this week when the euro soared to a three-month high. The euro ended the week up 2.25% against its U.S. counterpart and has gained roughly 7% over the last month.

While EUR/USD is up nearly 9% after touching down to 12-year lows near 1.04 in mid-March, the euro is still down more than 5.15% against the dollar since the start of the year when it stood at 1.2104.

Consumer confidence, one of the lone bright spot in the U.S. economy in recent weeks, appears to have peaked. On Friday, the University of Michigan reported that its Consumer Sentiment Index plunged to 88.6, far below low consensus estimates of a 93.5 reading. In terms of current conditions, the survey indicated a drop of 7.2% to 99.8, the lowest level since October. Consumer expectations are comparatively bleak, falling 7.3% from the last reading to 81.5, the worst level in five months.

The downbeat survey comes days after the U.S. Census Bureau reported little change in consumer spending throughout the nation. U.S. retail sales remained flat in April below economists' forecasts of a 0.2 gain. Hawkish policy makers at the Federal Reserve had pointed to strong consumer sentiments and seasonally-affected drags in spending as signals of an improving economy. The downbeat data, however, could appease the doves on the Federal Open Market Committee (FOMC) in favor of a delayed interest rate hike.

Last month, the FOMC removed all calendar references to the timing of its first interest rate hike in nearly a decade. While San Francisco Fed president John Williams said earlier this week that a June rate hike still remains on the table, it is becoming increasingly likely that the Fed will that the Fed will wait until September or even December before raising its benchmark Fed Funds Rate above its current level of zero to 0.25%.

At the same time, the University of Michigan indicated that inflation expectations are going up in large part to increases in energy prices. Inflation expectations over the next year increased 0.3% to 2.9%, according to the consumer survey. The Fed would like to see inflation move toward its targeted goal of 2% annually before it increases interest rates.

Investors await the release of next week's Consumer Price Index (CPI) for further indications on the state of the economy. Although the CPI gained 0.2% in March after falling sharply in January, it was still 0.1% lower on a year-over-year basis. Bond markets typically rally when there are increases in the CPI.

Yields on U.S. 10-Year Treasuries plunged nine basis points to 2.148% on Friday, while yields on the 30-Year Treasuries plummeted 11 basis points to 2.935%. Earlier in the week, 10-year Treasuries soared to a six-month high at 2.36% and the 30-year moved above 3% for the first time this year amid a rout in the global bond markets.

In Europe, yields on the German 10-Year bunds fell eight basis points to 0.62%. Yields on Italian and Spanish 10-Year bonds, meanwhile, each fell more than eight basis points to 1.76% and 1.72% respectively. On Tuesday, a massive sell-off in the European bond markets pushed the yields on the sovereign debt above 1.8%. Bond prices fall when yields increase. Over the last month, yields on 10-year German, Spanish and Italian bonds are all up by more than 45 basis points.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, remained weak falling to a four-month low at 93.17.

CTFC Commitment of Traders

This week speculators were less bearish on the euro, yen, Canadian dollar and Mexican peso.

cot.2015.may.13

Gold

Gold fell slightly on Friday halting a three-day winning streak, as investors looked to lock into profits from a three-month high the previous session.

On the Comex division of the New York Mercantile Exchange, gold futures for June delivery lost 1.30 or 0.11% to 1,223.90 a troy ounce. Gold fluctuated between $1,210.80 and $1,224.00 an ounce on a choppy day of trading.

For the week, gold gained 2.81%, its largest weekly gain in at least a month.

Gold likely gained support at $1,211.90, the low from May. 14 and resistance at $1,236.40, the high from Feb. 17.

The precious metal rebounded from session-lows in U.S. morning trading following a wave of soft data. Consumer confidence, one of the lone bright spot in the U.S. economy in recent weeks, appears to have peaked. On Friday, the University of Michigan reported that its Consumer Sentiment Index plunged to 88.6, far below low consensus estimates of a 93.5 reading. In terms of current conditions, the survey indicated a drop of 7.2% to 99.8, the lowest level since October. Consumer expectations are comparatively bleak, falling 7.3% from the last reading to 81.5, the worst level in five months.

Gold pared earlier losses, gaining more than $10 an ounce following the disappointing figures. The downbeat survey comes days after the U.S. Census Bureau reported little change in consumer spending throughout the nation. U.S. retail sales remained flat in April below economists' forecasts of a 0.2 gain. A reading of department store sales for the month showed a sharp decline of 2.2%, while sales of electronics and appliances fell by 0.4%. Since last April, retail sales have edged up only 0.9%, the lowest level dating back to late 2009.

Hawkish policy makers at the Federal Reserve had pointed to strong consumer sentiments and seasonally-affected drags in spending as signals of an improving economy. The downbeat data, however, could appease the doves on the Federal Open Market Committee (FOMC) in favor of a delayed interest rate hike.

Last month, the FOMC removed all calendar references to the timing of its first interest rate hike in nearly a decade. While San Francisco Fed president John Williams said earlier this week that a June rate hike still remains on the table, it is becoming increasingly likely that the Fed will wait until September or even December before raising its benchmark Fed Funds Rate above its current level of zero to 0.25%.

Gold, which is not attached to dividends or interest rates, struggles to compete with high yield-bearing assets in periods of rising rates.

At the same time, the University of Michigan indicated that inflation expectations are going up in large part to increases in energy prices. Inflation expectations over the next year increased 0.3% to 2.9%, according to the consumer survey. The Fed would like to see inflation move toward its targeted goal of 2% annually before it increases interest rates.

Investors await the release of next week's Consumer Price Index for further indications on the state of the economy. Although the CPI gained 0.2% in March after falling sharply in January, it was still 0.1% lower on a year-over-year basis. Separately, the Personal Consumption Expenditure (PCE) price index for March was up by only 0.3% over the last 12 months.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, was relatively flat on Friday at 93.39.

Elsewhere, Silver for July delivery gained 0.078 or 0.45% to 17.543 an ounce.

Copper for July delivery fell 0.003 or 0.11% to 2.92 a pound.

Oil

Crude futures were mixed on Friday, as concerns of a supply glut prompted investors to question a recent upswing in prices.

On the New York Mercantile Exchange, WTI crude for June delivery fell 0.14 or 0.25% to $59.75 a barrel, extending a mild slump to its third straight session. Texas Light Sweet futures pared some of their losses from the U.S. morning session when it plunged more than 2% to a session-low of $58.40 before moving back toward $60 a barrel in afternoon trading.

For the week, WTI crude peaked at $61.85 days after soaring to a five-month high at $62.58 on May 6.

In April, U.S. crude futures surged more than 20% amid a slowdown in shale field production. WTI crude is still down substantially from its 12-month high last June when it moved above $107 a barrel.

The sharp reversal in recent weeks has spooked some private equity investors, who are betting on an imminent sell-off. Analysts at Blackstone (NYSE:BX) Group LP's distressed credit unit, for instance, are reportedly abandoning investments in several energy companies upon the belief that crude futures are about to turn lower.

On the Intercontinental Exchange (ICE), meanwhile, brent crude for July delivery gained 0.10 or 0.15% to 66.80. Investors turned their attention to July futures, which spiked above $70 on May 6, after June contracts expired earlier this week. Much like WTI, brent enjoyed a stellar month in April when prices rose by more than 15%.

The spread between the international and U.S. domestic benchmarks of crude stood at $7.05, above Thursday's level of 6.80.

Market players digested the conclusion of Thursday's Persian Gulf summit at Camp David when U.S. president Barack Obama tried to assuage concerns of Middle East allies stemming from a proposed Iranian nuclear pact. Speaking to reporters at the Maryland retreat, Obama reaffirmed the government's support of the Gulf partners by considering the use of military force to help aid their defense. Western powers are facing a June 30 deadline to reach a final agreement on a comprehensive deal with Iran.

If economic sanctions are lifted against Iran, the Gulf nation could nearly double its exports from a current level of 1.0 million barrels per day. An outpouring of Iranian oil may depress prices in a global market already saturated by oversupply.

Elsewhere, oil services firm Baker Hughes (NYSE:BHI) said in its weekly rig count that the number of U.S. oil rigs nationwide decreased by eight on the week to 660. The modest drop marked the 23rd consecutive weekly decline, as the rig total fell to its lowest level since August, 2010.

The pace of decline, however, continued to slow as observers keep a close eye on a prolonged production battle between the U.S and OPEC. In February, for instance, the rig count fell by more than 60 on consecutive weeks. The rig count still remains roughly 60% lower from its peak of 1,609 in October.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, was relatively flat on Friday at 93.39.

Dollar-denominated commodities such as crude become less expensive for foreign purchasers when the dollar weakens.

For additional perspective read Brent up, U.S. crude down as oil rally comes into question from Reuters.

Natural Gas (Thursday Report)

Natural gas futures were higher on Thursday, after data showed that U.S. natural gas supplies rose less-than-expected last week.

On the New York Mercantile Exchange, natural gas for delivery in June was up 2.33% to $3.033 per million British thermal units. Prices were at around $2.899 prior to the release of the supply data.

In its weekly report, the Energy Information Administration said natural gas storage in the week ended May 8 rose by 111 billion cubic feet, compared to expectations for an increase of 116 bcf.

Total U.S. natural gas storage stood at 1,897 bcf the EIA said. Stocks were 752 bcf higher than last year at this time and 38 bcf below the five-year average of 1,935 bcf for this time of year.

Meanwhile, updated weather forecasting models called for above average temperatures in Washington and New York, boosting the demand outlook from power plants.

EIA data shows that power plants account for approximately 32% of gas demand in the U.S. Demand for natural gas tends to fluctuate in the summer based on hot weather and air conditioning use.

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

 









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