Investing.com Weekly Wrap-Up 16 October 2015

October 16th, 2015
in contributors, syndication, forex

U.S. stocks move higher, amid strong quarterly earnings from GE

by Investing.com Staff, Investing.com

U.S. stocks rose moderately on Friday, extending gains from a strong start to the month amid mixed quarterly earnings from a host of industrial giants as well as robust consumer sentiment data.

The Dow capped a solid week by gaining 75.96 or 0.44% to close on Friday at 17,217.71, while the NASDAQ Composite index added 16.59 or 0.34% to end the session at 4,886.69, its highest closing level in nearly a month.

Follow up:

Buoyed by a productive third quarter, shares in General Electric Company (N:GE) surged to its highest level since the peak of the Financial Crisis on Friday, as the company continues its major transition following the divestiture of its financial arm. While the multinational conglomerate provided a boost to the Dow Jones Industrial Average and theS&P 500 Composite index, the gains were limited by losses from Honeywell International Inc (N:HON) and WW Grainger Inc (N:GWW).

The S&P 500 Composite index, meanwhile, rose 9.22 or 0.46% to 2,033.08, as eight of its 10 sectors closed in the green. Stocks in the Consumer Goods, Health Care and Telecommunications industries led, each gaining at least 0.50% on the session. Stocks in the Basic Materials and Industrials sectors lagged.

During GE's third quarter, the company earned revenue of $31.68 billion on earnings of 0.25 per share, considerably above analysts' forecasts of $28.65 billion for the period. GE saw its profits spike by 9% to $2.51 billion, amid modest industrial revenue growth.

"The GE team had a good quarter and a slow growth in volatile environment," GE CEO Jeff Immelt said in a statement. "Meanwhile, growth markets are facing some headwinds in resource pricing and currency. Nonetheless, we're positioned to win some big fourth quarter deals in these markets in locomotives and power, aviation, and power conversion, which should support our growth objectives; and service provides a great buffer in times of uncertainty."

Honeywell shares, however, fell 1.49% to 97.03, after the New Jersey-based conglomerate topped earnings estimates for the quarter, but reported a decline in sales. Grainger, a Chicago-based industrial tool maker, also lost more than 6% to 207.65, after missing profit forecasts for the three-month period.

Shares in GE, the top performer on the Dow, gained 0.95 or 3.39% to close at 28.98. The worst performer was Caterpillar Inc (N:CAT), which fell 1.15 or 1.62% to 69.68. The biggest gainer on the NASDAQ was Mattel Inc (O:MAT), which rose 1.29 or 5.73% to 23.82, as investors covered shorts from a sell-off on Thursday in after-hours trading. One session earlier, the toy giant reported a 33% decline in profits from the third quarter, amid poor sales in its Barbie doll division.

The worst performer was Seagate Technology (O:STX), which lost 1.88 or 4.54% to 39.56, extending a 14% loss from the prior session. Shares in Seagate have fallen dramatically over the last two sessions, after the data storage manufacturer lowered its guidance due to pessimistic gross margin forecasts for the quarter.

Mattel (O:MAT) was also the top performer on the S&P 500, just ahead of GRMN which jumped 1.76 or 5.45% to close at 34.04. Garmin rallied from a poor performance on Thursday when the GPS navigation company downwardly revised its third quarter earnings' forecasts.

The worst performer was Quanta Services (N:PWR), which plummeted 7.45 or 28.42% to 18.76. Earlier on Friday, the company warned that its per-share earnings for the quarter could be more than 0.15 less than previous estimates.

On the New York Stock Exchange, advancing issues outnumbered declining ones by a 1,837-1,263 margin.

Additional stock news from Reuters at Investing.com.

Forex

EUR/USD fell mildly on Friday extending losses from one session earlier, as soft inflation data in the euro zone last month raised speculation on whether the European Central Bank could ramp up its comprehensive bond buying program at a critical meeting next week.

The currency pair traded in a tight range between 1.1335 and 1.1395, before settling at 1.1347, down 0.0040 or 0.35% on the session. EUR/USD has remained in a holding pattern over the last several weeks, devoid of any major fluctuations. Since September 21, the pair has traded between a level of 1.11 and 1.15, marking a span of 19 sessions. During that period, EUR/USD has failed to move 1% in either a positive or negative direction in a single trading day. As a result, the euro is only up modestly against the dollar over the last month - by a margin of approximately 0.75%.

EUR/USD likely gained support at 1.1133, the low from Oct.1 and was likely met with resistance at 1.1713, the high from Aug. 24.

On Friday morning, Eurostat reported that the Consumer Price Index in the euro zone fell 0.1% on an annual basis in September, in line with flash estimates. The persistent downturn in energy prices continued to weigh on inflationary pressures. Core CPI, which strips out volatile items such as energy, food and tobacco prices, remained 0.9% above its level from 12 months ago, unchanged from August.

The ECB could extend the scope of its €1.1 trillion quantitative easing program when it meets again next Thursday.

Meanwhile, currency traders continued to digest the release of weak U.S. inflation data on Thursday, when the U.S. Bureau of Labor Statistics said consumer prices fell by 0.2% in September, following a 0.1% decline a month earlier. The Fed Reserve would like to see inflation firm considerably before it raises short-term interest rates for the first time in nearly a decade.

Elsewhere, The University of Michigan's Consumer Sentiment Index surged more than five points to 92.1 for October, falling in the high end of a consensus range between 87.5 and 93.0. Last week, Federal Reserve Bank of Atlanta president Dennis Lockhart indicated that he will be watching consumer sentiment closely as he weighs whether the U.S. central bank should raise short-term rates before the end of the year.

A rate hike is viewed as bullish for the dollar, as foreign investors pile into the greenback in attempts to capitalize on higher yields.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.4% to an intraday high of 94.81. Earlier in the week, the index dipped below 94 to fall to a fresh monthly low, significantly below its intraday high of 96.64 on Oct. 1.

Yields on the U.S. 10-Year rose two basis points to 2.03%, completing the sharpest two-day increase in two weeks. Government bond yields move in an inverse direction as bond prices.

CTFC Commitment of Traders

Speculators this week were more bullish on gold.

cot.2015.oct.16

Gold

Gold futures fell mildly on Friday halting a five-day winning streak, as investors locked into profits one session after the precious metal soared to fresh three-month highs.

On the Comex division of the New York Mercantile Exchange, gold for December delivery traded in a tight range between $1,175.30 and $1,184.30 an ounce before settling at $1,182.00, down $5.50 or 0.46% on the day. Previously, gold had closed higher in each of the prior five sessions and nine of the last 10. On Thursday, gold surged above $1,190.00 an ounce to reach its highest level since late-June. For the week, gold gained approximately 2% in value.

Gold likely gained support at $1,154.90, the low from October 13 and was met with resistance at $1,204.00, the high from June 1.

The dollar remained relatively steady on Friday, following the release of mixed data in the U.S. The University of Michigan's Consumer Survey Center reported strong results from its semi-monthly index on Friday, confirming robust weekly figures on consumer sentiment earlier in the month. The university's Consumer Sentiment Index surged more than five points to 92.1 for October, falling in the high end of a consensus range between 87.5 and 93.0. Last week, Federal Reserve Bank of Atlanta president Dennis Lockhart indicated that he will be watching consumer sentiment closely as he weighs whether the U.S. central bank should raise short-term rates before the end of the year.

Separately, the Fed reported that its monthly index for industrial production fell by 0.2% in September, slightly above expectations of a 0.3% decline. It follows a disappointing month in August when industrial production slumped by 0.4%. Last month, the capacity utilization rate fell 0.3% to 77.5% from an upwardly revised level of 77.8%.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.3% to an intraday high of 94.75. Earlier in the week, the index dipped below 94 to fall to a fresh monthly low, significantly below its intraday high of 96.64 on Oct. 1. Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.

Elsewhere, the Consumer Price Index in the euro zone fell 0.1% on an annual basis in September, in line with flash estimates. Core CPI, which strips out volatile items such as energy, food and tobacco prices, remained 0.9% above its level from 12 months ago, unchanged from August.

Investors continued to digest the release of soft U.S. inflation data on Thursday, when the U.S. Bureau of Labor Statistics said consumer prices fell by 0.2% in September, following a 0.1% decline a month earlier. The Fed would like to see inflationary pressures firm considerably before it raises short-term interest rates for the first time in nearly a decade.

An interest rate hike is viewed as bearish for gold, which struggles to compete with high-yield bearing assets in rising rate environments.

Silver for December delivery lost 0.079 or 0.49% to 16.085 an ounce.

Copper for December delivery fell 0.019 or 0.77% to close at 2.404 a pound.

Oil

U.S. crude futures rallied on Friday to halt a four-day losing streak, as oil rigs nationwide fell to their lowest level in more than five years easing some concerns related to the glut of oversupply in global energy markets.

On the New York Mercantile Exchange, WTI crude for November delivery traded in a tight range between $46.18 and $47.49 a barrel before settling at $47.32, up 0.93 or 2.01% on the session. Previously, Texas Long Sweet futures plunged nearly 7% over the last four days after surging above $50 a barrel last week. More broadly, U.S. crude futures are up roughly 6.5% over the last month of trading.

On the Intercontinental Exchange (ICE), brent crude for December delivery wavered between $49.33 and $50.67 a barrel before closing on Friday at $50.53, up 0.80 or 1.60% on the day. Brent futures snapped a five-day losing streak dating back to the end of last week. During the period, North Brent Sea crude futures slumped approximately 8%.

Oil services firm Baker Hughes (N:BHI) said in its weekly oil rig count on Friday that U.S. oil rigs fell by 10 to 595 for the week ending on Oct. 9. It marked the seventh consecutive week of declines, as the rig count fell to its lowest level since July, 2010. By comparison, the rig count peaked over 1,500 at this time last year.

Energy traders also reacted to bearish forecasts from Schlumberger, the world's largest oilfield services company. On Friday, Schlumberger CEO Paul Kibsgaard said a recovery in oil drilling activity may not occur until 2017, one day after the company hinted that further jobs cuts could be forthcoming following the release of disappointing quarterly results. For Schlumberger's third quarter of 2015, the company saw its revenues tumble 33% to $8.47 billion, while its income from continuing operations slid nearly 50% to $989 million.

The lackluster results prompted Kibsgaard to caution that the company will likely "proceed with further overhead and capacity reductions." Schlumberger has already cut 20,000 jobs or 15% of its workforce since the start of the oil downturn last fall.

"The likely timing gap between the oil price recovery and the subsequent increase in oilfield services activity in combination with a more conservative spending outlook from our customers is causing us to now take further action," Kibsgaard said in a conference call on Friday.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.3% to an intraday high of 94.75. Earlier in the week, the index dipped below 94 to fall to a fresh monthly low, significantly below its intraday high of 96.64 on Oct. 1.

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

Natural Gas (Thursday Report)

Natural gas futures erased gains on Thursday to move away from a two-week high after data showed that U.S. natural gas supplies rose more than expected last week.

Natural gas for delivery in November on the New York Mercantile Exchange rallied to an intraday peak of $2.576 per million British thermal units, the most since September 30, before turning lower to trade at $2.502 during U.S. morning hours, down 1.6 cents, or 0.64%. Prices were at around $2.574 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 October 9 rose by 100 billion cubic feet, above expectations for an increase of 93 billion.

That compared with builds of 95 billion cubic feet in the prior week, 105 billion cubic feet in the same week last year, while the five-year average change for the week is an increase of 87 billion cubic feet.

Total U.S. natural gas storage stood at 3.733 trillion cubic feet. Stocks were 447 billion cubic feet higher than last year at this time and 168 billion cubic feet above the five-year average of 3.565 trillion cubic feet for this time of year.

A day earlier, natural gas prices tacked on 2.0 cents, or 0.8%, as investors bet that chilly weather across the eastern U.S. will boost early-winter demand for the heating fuel.

Updated weather-forecasting models called for unusually cold temperatures across the eastern half of the U.S. through October 21.

The heating season from November through March is the peak demand period for U.S. gas consumption.









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