Investing.com Weekly Wrap-Up 28 August 2015

August 28th, 2015
in contributors

U.S. stocks mixed in a tame conclusion to a wild week of volatility

by Investing.com Staff, Investing.com

U.S. stocks ended one of the most volatile weeks in recent memory with a relatively tame close on Friday, as comments from an influential Federal Reserve governor on the likelihood of a September interest rate hike pushed stocks slightly lower.

Speaking exclusively with CNBC, Fed vice chairman Stanley Fischer indicated that recent U.S. economic data had been impressive providing a compelling argument for short-term rates to head in a higher direction. Without explicitly stating that the U.S. central bank will raise its benchmark Federal Funds Rate next month, Fischer said the Fed could not wait for the case to be "overwhelming" before hiking rates above its current level of zero to 0.25%. Fischer also indicated that temporary headwinds that have caused recent volatility in global markets could recede quickly.

Follow up:

The Dow Jones Industrial Average fell mildly on Friday, while the NASDAQ Composite andS&P 500 Composite index posted slight gains to cap a roller coaster week of volatility among the major U.S. indices. U.S. stocks suffered their worst one-day decline in four years on Monday, before rallying in the middle of the week to complete their strongest two-day gain since the end of the Financial Crisis on Thursday. The Dow closed the week at 16,643.01 after losing 11.76 or 0.07% on the session, while the NASDAQ added 15.62 or 0.32% to close at 4,828.33.

The S&P 500, meanwhile, gained 1.21 or 0.06% to 4,828.33, as five of 10 sectors closed in the green. Stocks in the Energy and Basic Materials industries led, while stocks in the Healthcare, Financials and Utilities sectors lagged.

The top performer on the Dow was Chevron Corporation (NYSE:CVX), which gained 2.55 or 5.64% to 80.19, as crude oil futures extended a massive rally from Thursday's session when it surged by more than 10%. Over the past two days, U.S. crude futures have soared by more than 15% to above $45 a barrel. The worst performer was Pfizer Inc (NYSE:PFE), which fell 0.73 or 2.19% to 32.53.

The biggest gainer on the NASDAQ was Southern California-based videogame maker Activision Blizzard Inc (NASDAQ:ATVI), which rose 1.58 or 5.64% to 29.51 after making its debut on the S&P 500. The worst performer was Autodesk Inc (NASDAQ:ADSK), which fell 2.56 or 5.12% to 47.44, following its acquisition of Cloud-based software developer SeeControl.

On the S&P 500, the top performer was Alcoa Inc (NYSE:AA), which gained 0.50 or 5.64% to close at 9.36. Alcoa extended gains from one session earlier after a Federal judge strongly considered throwing out a 2013 lawsuit against the aluminum giant on Thursday related to the closure of a North Carolina hydroelectric dam several years earlier. The case revolves around whether Alcoa owns the clear title to the riverbed, where it built four dams - all of which could net the company billions of dollars if it decides to sell them in the near future. The worst performer was Gamestop a, which lost 3.97 or 8.59% to 42.23.

On the New York Stock Exchange, advancing issues outnumbered declining ones by a 2,034 to 1,108 margin.

Additional stock news from Reuters at Investing.com.

Forex

EUR/USD crashed below 1.12 on Friday capping a frenetic week of fluctuations, after market-moving comments from an influential member of the Federal Reserve on the increasing possibility of a September interest rate hike pushed the dollar broadly higher.

The currency pair wavered between 1.157 and 1.1310 on Friday before settling at 1.1187, up 0.0058 or 0.52% on the session. Over the last five days of trading, EUR/USD experienced one of its most volatile weeks of the year trading between a range of 1.11 and 1.17. After surging by more than 2% in Monday's session, the euro has fallen against the dollar in four consecutive sessions. For the week, EUR/USD closed lower by approximately 1.75%.

EUR/USD likely gained support at 1.1015, the low from August 18 and was met with resistance at 1.1713, the high from Aug. 24.

Following Fed Vice Vhairman Stanley Fisher;s remarks to CNBC (see beginning of this article), currency traders await a panel discussion by several influential central bankers on Saturday, including Fischer at a conference in Jackson Hole for further indications on how global inflation could impact the Fed's decision on hiking short-term interest rates next month. The three-day summit at the mountaintop resort in Wyoming will conclude on Saturday with the most anticipated event of the conference - a symposium that will also feature Bank of England governor Mark Carney and Reserve Bank of India governor Raghuram Rajan.

Fischer, a noted Dove, could provide some clarity on the Fed's relatively ambiguous interpretation of its short-term projections on inflationary growth. Last week's release of the July minutes from the Federal Open Market Committee's last meeting painted a picture of a sharply divided Fed regarding their views on inflation. The FOMC said by some objectives the inflation data was "not progressing" toward its targeted goal, according to the minutes. Other members, however, said that inflation conditions for a rate hike would be met or could be "met shortly."

The Consumer Price Index for July inched up 0.1% on a month over month basis, below consensus estimates of a 0.2% increase. The Core CPI, which strips out food and energy prices, also rose modestly by 0.1%, falling below analysts' expectations. The yearly reading, which is a preferred gauge of inflation by the Fed, increased by 1.8%. In every month over the last three years, Core CPI on a year-over-year basis has fallen below the Fed's target of 2%.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose more than 0.5% to an intraday high of 96.35, before falling back slightly to 96.15 in U.S. afternoon trading. Following Friday's considerable gains, the index closed higher for a fourth consecutive session.

CTFC Commitment of Traders

Speculators this week were less bearish on the Japanese yen, the euro and the S&P 500.

cot.2015.aug.21

Gold

Gold futures surged on Friday ending a four-day losing streak, as the Chinese equity crisis and the timing of a closely-watched interest rate hike from the Federal Reserve remained in focus.

On the Comex division of the New York Mercantile Exchange, gold for December delivery traded between $1,123.10 and $1,140.30 before settling at $1,134.70, up 12.00 or 1.07% on the session. Earlier in the week, gold reached a six-week high moving above $1,165 an ounce, before plunging more than 1% on two consecutive sessions. For the week, the precious metal closed down by roughly 2.5%.

Gold likely gained support at 1,117, the low from August 27 and was met with resistance at 1,169.80, the high from Aug. 24.

Metal traders await a panel discussion by several influential central bankers on Saturday at a conference in Jackson Hole for further indications on how global inflation could impact the Fed's decision on hiking short-term interest rates next month. The three-day summit at the mountaintop resort in Wyoming will conclude on Saturday with the most anticipated event of the conference - a symposium featuring Fed vice-chair Stanley Fischer, Bank of England governor Mark Carney and Reserve Bank of India governor Raghuram Rajan.

The Consumer Price Index for July inched up 0.1% on a month over month basis, below consensus estimates of a 0.2% increase. The Core CPI, which strips out food and energy prices, also rose modestly by 0.1%, falling below analysts' expectations. The yearly reading, which is a preferred gauge of inflation by the Fed, increased by 1.8%. In every month over the last three years, Core CPI on a year-over-year basis has fallen below the Fed's target of 2%.

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

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose more than 0.5% to an intraday high of 96.35, before falling back slightly to 96.20 in U.S. afternoon trading. The index is on pace for its fourth consecutive positive close.

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

In China, the Shanghai Composite Index closed approximately 5% higher, amid a flurry of last-minute gains shortly before the final bell. For the week, the index still lost nearly 8% as the People's Bank of China continues to look for ways to stem the worst sell-off in Chinese equities in more than a decade.

Silver for September delivery gained 0.088 or 0.61% to 14.505 an ounce.

Copper for September delivery rose 0.011 or 0.48% to 2.345 a pound.

Oil

U.S. crude futures extended a substantial rally one day after posting its strongest session in six years, as the fallout continued from reports that Venezuela could be pushing OPEC to hold an emergency meeting to reverse crashing energy prices throughout the world.

On the New York Mercantile Exchange, WTI crude for October delivery traded in a broad range between $41.80 and $45.88 a barrel, before closing at $45.25 up 2.69 or 6.33% on the session. It came one day after Texas Long Sweet futures surged more than 10% to move off six-year lows. After enjoying one of its strongest two-day moves in years, U.S. crude futures are now only down by roughly 3% over the last month of trading. Before the significant rebound, WTI crude had fallen by nearly 25% since late-July.

On the Intercontinental Exchange (ICE), brent crude for October delivery experienced similar gains. North Sea brent futures wavered between $46.64 and $50.97 a barrel, before settling at $50.13, up 2.59 or 5.41% on the session. The spread between the international and U.S. benchmarks of crude stood at $4.88, below Thursday's level of $5.00 at the close.

On Thursday, the Wall Street Journal reported that Venezuela has contacted OPEC officials, including president Mohammed al-Sada in an effort to devise a strategy to halt the second extended crude rout on the calendar year. Venezuela, which sits on the largest crude reserves in the world, is reportedly working alongside Russia to convene an emergency meeting between OPEC's 12 member states. Currently, the representatives of the world's largest oil cartel are not scheduled to meet until early-December. Crude proceeds from Venezuela's state-run oil companies account for 50% of its government revenue, 95% of its exports and 25% of its GDP, according to the U.S. Council on Foreign Relations.

Last November, Opec roiled global energy markets with a strategic decision to keep its production ceiling above 30 million barrels per day. As a result, crude prices plunged more than 50% amid a glut of oversupply worldwide. While Saudi Arabian output leveled off slightly last month, OPEC production remained near record-highs at above 31 million bpd.

Oil services firm Baker Hughes (NYSE:BHI) also said in its weekly rig count report on Friday afternoon that oil rigs throughout the U.S. inched up last week, marking its sixth consecutive weekly gain. For the week ending August 21, U.S. oil rigs rose by one to 675, representing the eighth increase over the last nine weeks. The rig count is still down markedly from its peak above 1,600 last October, following 25 consecutive weeks of declines earlier this year.

Elsewhere, production in Northern Africa was disrupted after Shell (LONDON:RDSa) announced the shutdown of two major pipelines in Nigeria. The closure affected the Trans Niger Pipeline (TNP) and the Nembe Creek Trunkline (NCT), affecting the shipment of approximately 330,000 barrels throughout the nation. A leak on the TNP and a reported theft of crude on the NCT prompted the closures, a Shell spokesman said.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose more than 0.5% to an intraday high of 96.35, before falling back slightly to 96.12 in U.S. afternoon trading. The index is on pace for its fourth consecutive positive close.

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

Natural Gas (Thursday Report)

Natural gas futures extended losses on Thursday, after data showed that U.S. natural gas supplies rose more than expected last week.

Natural gas for delivery in October on the New York Mercantile Exchange tumbled 4.4 cents, or 1.65%, to trade at $2.659 per million British thermal units during U.S. morning hours. Prices were at around $2.683 prior to the release of the supply data.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended August 21 rose by 69 billion cubic feet, above expectations for an increase of 59 billion.

That compared with builds of 53 billion cubic feet in the prior week, 77 billion cubic feet in the same week last year, while the five-year average change for the week was an increase of 61 billion cubic feet.

Total U.S. natural gas storage stood at 3.099 trillion cubic feet as of last week. Stocks were 480 billion cubic feet higher than last year at this time and 88 billion cubic feet above the five-year average of 3.011 trillion cubic feet for this time of year.

A day earlier, natural gas prices inched up 0.8 cents, or 0.3%, to end at $2.703, as market players weighed shifting weather forecasts to assess the outlook for U.S. demand and supply levels.

Updated weather forecasting models showed that most parts of the southern and western U.S. will be engulfed by hot temperatures in the coming days. However, cooler weather was expected across most parts of the Great Lakes, Northeast and Midwest-regions as the week progresses.

Demand for natural gas tends to fluctuate in the summer based on hot weather and air conditioning use. Natural gas accounts for about a quarter of U.S. electricity generation.









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