posted on 13 November 2015
U.S. stocks fell sharply on Friday extending losses from earlier in the week, as a massive sell-off in the retail sector and crashing oil prices led to the largest weekly decline among the major indices in nearly three months.
The Dow Jones Industrial Average and the S&P 500 Composite index each fell by more than 1% on Friday, capping a tumultuous week for U.S. equities. The Dow lost 202.83 or 1.16% to close Friday's session at 17,245.24, while the S&P 500 dropped 22.93 or 1.12% to end the week at 2,023.04.
On the S&P 500, nine of 10 sectors closed in the red, as stocks in the Consumer Services and Technology industries lagged. With the considerable losses, the Dow and the S&P 500 both saw six-week winning streaks come to an end.
The NASDAQ Composite index also dipped more than 1% on Friday in spite of strong gains among biotech stocks. As a result, the NASDAQ slipped below the symbolic 5,000 level for the first time in three weeks, closing at 4,928.88, down 77.20 or 1.54% for the day.
A host of prominent retail companies including: Nordstrom Inc (N:JWN), JC Penney Company Inc Holding (N:JCP), Fossil Group Inc (O:FOSL) and Macy`s Inc (N:M) all fell considerably in Friday's session after lowering their full-year outlooks this week. It came as U.S. retail sales in October ticked up by only 0.1%, two-tenths below consensus estimates, ahead of the Holiday shopping season.
Investors also digested hawkish comments from Federal Reserve vice chairman Stanley Fischer on Thursday evening on rebounding inflation in 2016, which provided further indications that the U.S. central bank could raise short-term interest rates next month.
The top performers on the S&P 500 were Qorvo Inc (O:QRVO) which rose 23.23% to 55.55, NVIDIA Corporation (O:NVDA) which was up 13.86% to settle at 31.55 and Monster Beverage 1990 Corp (O:MNST) which gained 13.61% to close at 150.24.
The top performer on the Dow was EI du Pont de Nemours and Company (N:DD), which gained 0.96 or 1.44% to 67.07. Stocks in DuPont (N:DD) have surged by more than 25% over the last three months after the multinational chemical company fended off a takeover attempt by activist investor Nelson Peltz earlier in the spring. The worst performer was Cisco Systems Inc (O:CSCO) after the Silicon Valley-based networking equipment company offered weak forward guidance amid poor Asian sales outside of China due to currency headwinds. Shares in Cisco Systems (O:CSCO) plunged 1.71 or 6.13% to 26.13.
The biggest gainer on the NASDAQ was Mylan (O:MYL), which jumped 5.56 or 12.87% to 48.76, after reports surfaced that Perrigo rejected Netherlands' pharmaceutical company's $26 billion hostile takeover bid on Friday. The worst performer was Jd.Com Inc Adr (O:JD), which fell 2.04 or 7.09% to 26.74. Mylan was also the top performer on the S&P 500, just above Airgas Inc (N:ARG) which soared 7.17 or 7.58% to 101.76. Over the last year, shares in the Gas, Welding and Safety Supply company are still down by more than 15%.
Fossil ended Friday's session as the worst performer, plunging 18.62 or 36.50% to 32.39. Top retailers Fossil, Nordstrom (N:JWN), Kohl`s Corporation (N:KSS) and Ross Stores Inc(O:ROST) were all among the worst performers of the session.
On the New York Stock Exchange, declining issues outnumbered advancing ones by a 1,901 to 1,182 margin.
Additional stock news from Reuters at Investing.com.
The dollar remained broadly higher against the other major currencies on Friday, as strong U.S. consumer sentiment data offset a string of weaker U.S. reports released earlier and added to expectations for December rate hike by the Federal Reserve.
USD/JPY edged up 0.10% to 122.71.
In a preliminary report, the University of Michigan said its consumer sentiment index rose to 93.1 this month from 90.0 in October, compared to expectations for a reading of 91.5.
The report came shortly after data showed that U.S. retail sales ticked up 0.1% in October, compared to expectations for a 0.3% rise, after a 0.1% gain the previous month.
Core retail sales, which exclude automobiles, increased by 0.2%, disappointing expectations for a 0.4% gain.
Another report showed that U.S. producer price inflation fell 0.4% last month, confounding expectations for a 0.2% rise, after a 0.5% decline in September.
EUR/USD dropped 0.68% to 1.07542.
The single currency came under pressure after preliminary data earlier showed that euro zone gross domestic product rose 0.3% in the third quarter, missing expectations for a 0.4% gain, after a growth rate of 0.4% in the previous quarter.
Data also showed that German GDP rose 0.3% in the third quarter, in line with expectations and down from the previous quarter's growth rate of 0.4%.
French GDP also rose 0.3% in the three months to September, in line with expectations.
Meanwhile, USD/CAD advanced 0.41% to trade at fresh one-month highs of 1.3342.
The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was up 0.55% at 99.11, re-approaching Tuesday's seven-month highs of 99.60.
Speculators this week were were more bullish on the U.S. dollar. Other sentiment changes were quite subdued.
Gold futures remained near five-year lows from the previous session, amid a mixed bag of economic data and relatively hawkish comments from Federal Reserve vice chairman Stanley Fischer on the prospect of rebounding inflation, which strengthened the possibility of a December rate hike from the U.S. Central Bank.
On the Comex division of the New York Mercantile Exchange, gold for December delivery traded in a range between $1,079.00 and $1,088.00 an ounce before settling at $1,080.50, down 0.50 or 0.05% on the session. A day earlier, gold plunged to an intraday low of $1,073.40, en route to its 10th losing session over the previous 12 trading days. The precious metal tumbled to its lowest level since February, 2010, when it traded below $1,065 an ounce. The recent commodity rout among metal futures has exacerbated fears that gold could dip below $1,000, a level not seen since 2009 during the height of the Financial Crisis.
Since surging above $1,185 an ounce in mid-October, gold has plunged by nearly 9% in value.
Gold likely gained support at $1,078.60, the low from July 24 and was met with resistance at $1,189.00, the high from Oct. 14.
On Thursday evening after the close of trading, Fischer reiterated that long-term inflationwill move back toward the Fed's long-term goal of 2%, as transitory effects from a strong dollar and low energy prices continue to recede. Earlier this week, the dollar soared to a seven-month high as currency traders reacted to last week's stellar U.S. jobs report from October. Crude futures, meanwhile, slumped to near six-and-a-half year lows in Thursday's session amid further signs of a glut of oversupply on global energy markets. Inflation has remained below the Fed's long-term goal of 2% in every month over the last three years.
In September, the PCE Price Index inched up 0.2% on a yearly basis following a 0.3% gain a month earlier. The Core PCE Price Index, which strips out food and energy prices, rose by 1.3%, unchanged from August. The core index is the Fed's preferred gauge for long-term inflation.
"From the standpoint of the outlook, this transience means that some of the forces holding down inflation in 2015--particularly those due to a stronger dollar and lower energy prices --will begin to fade next year," Fischer said in a speech at the Fed's conference on Monetary Policy Implementation and Transmission in the Post-Crisis. "Consequently, overall PCE inflation is likely on this account alone to rebound next year to around 1-1/2 percent. And as long as inflation expectations remain well anchored, both core and overall inflation are likely to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate."
A rate hike is viewed as bearish for gold, which struggles to compete with high yield bearing assets.
Elsewhere, U.S. retail sales in October ticked up by 0.1%, two-tenths under consensus estimates due in part to sharp declines in electronic & appliance purchases and grocery sales. Core sales, minus auto and gas prices, increased by 0.3% after a flat reading in September. Producer prices, meanwhile, tumbled 0.3%, amid continued declines in the services industry. Business inventories, however, rose by a stronger than expected 0.3% last month.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, stood at 99.25 in U.S. afternoon trading, up 0.69% on the session. The index approached near seven-month highs from Monday's session. Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for December delivery lost 0.035 or 0.25% to close at 14.190 an ounce.
Copper for December delivery fell to a fresh six-year low at 2.151 a pound, before rebounding to 2.167 -- down 0.005 or 0.26% on the day.
U.S. crude futures fell sharply on Friday extending recent losses, as a slight increase in domestic oil rigs last week failed to offset bearish reports of record global stockpiles from the International Energy Agency.
On the New York Mercantile Exchange, WTI crude for December delivery traded between a range of $40.23 and $42.20 a barrel before settling at $40.70, down 1.08 or 2.57% on the day. For the majority of Friday's session, the front month contract for U.S. crude traded below $41 a barrel after slipping to its lowest level since late-August. The price for WTI crude is now approaching a six-and-a-half year low from Aug. 24 when U.S. crude futures traded at $37.75 a barrel. For the week, Texas Long Sweet futures fell by nearly 9% after closing down in four of five sessions. U.S. crude is also down by more than 16% since peaking above $48 a barrel in the middle of last week.
On the Intercontinental Exchange (ICE), brent crude for January delivery wavered between $44.16 and $45.45 before closing at 44.39, down 0.78 or 1.73% on the session. NorthBrent Sea crude is also in the midst of an extended slide after closing down on Friday for the seventh time in the last eight sessions. Over the last eight days of trading, brent futures have lost nearly 13% in value.
On Friday afternoon, oil services firm Baker Hughes (N:BHI) said in its weekly rig count that U.S. oil rigs increased by two to 574 last week for the week ending on Nov. 6. It marked the first build in domestic oil rigs in nearly three months. The U.S. oil rig count is still considerably below its level from last fall when it peaked at above 1,600.
Severe reductions in rig count levels typically provide indications that production could be on the verge of falling sharply.
The modest gains, however, failed to outweigh further signals from the International Energy Agency (IEA) of growing oversupply throughout the world. In its monthly report for October, the Paris-based IEA said global crude inventories have soared to nearly 3 billion barrels, amid record supply in Iraq, Russia and Saudi Arabia. The IEA also forecasts that non-OPEC supply will decline by 600,000 per day in 2016, as U.S. shale producers struggle to maintain output at lower prices. At such a rate, non-OPEC production could decline by its highest amount in more than two decades.
Crude prices have fallen more than 45% over the last year since OPEC roiled global markets with its decision to leave its production ceiling above 30 million barrels per day in an effort to maintain market share. Any major declines in U.S. shale production could provide signals that OPEC's strategy is prevailing.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, stood at 99.13 in U.S. afternoon trading, up 0.57% on the session. The index remained near seven-month highs from Monday's session. Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.
Natural gas futures were higher on Friday 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 December was up 2.70% to $2.317 per million British thermal units. Prices were at around $2.324 prior to the release of the supply data.
In its weekly report the Energy Information Administration said natural gas storage in the week ended November 6 rose by 49 billion cubic feet, compared to expectations for an increase of 51 bcf.
Total U.S. natural gas storage stood at 3,978 bcf the EIA said. Stocks were 373 bcf higher than last year at this time and 173 bcf above the five-year average of 3,805 bcf for this time of year.
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.
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