posted on 20 November 2015
U.S. stocks closed higher on Friday capping one of its strongest weeks of the year, amid significant rallies in retail sales, emerging markets and the aerospace sector.
Bolstered by a surge in Nike Inc (N:NKE) shares, the Dow Jones Industrial Average gained 91.20 or 0.51% to close at 17,823.95, finishing with one of its best weeks since February. The NASDAQ Composite index ended a bullish week by closing at 5,104.92, up 31.28 or 0.62% on the day, while the S&P 500 Composite index ticked up to finish with its top week of the year.
The S&P 500 gained 7.93 or 0.38% to 2,089.17, as seven of 10 sectors closed in the green. Stocks in the Technology, Health Care and Consumer Services industries led, each gaining at least 0.65% on the session. The S&P 500 needed to clear 2,089 to finished with its best weekly session for 2015.
The expiration of a wide range of options on the third Friday of the month also created some volatility on the session.
Shares in Nike jumped 6.67 or 5.30% to 132.45, as investors reacted to the company's $12 billion share repurchase plan unveiled on Thursday after the close of trading. The multinational sports apparel giant also declared a 14% dividend hike and outlined a 2-for-1 stock split during the announcement. The plan comes after Nike has seen its revenues soar due to double-digit growth in China, as well as subdued sales from Adidas (DE:ADSGN). Nike, the top performer on the Dow, soared to near all-time record highs on Friday.
The biggest gainer on the NASDAQ was Ross Stores Inc (O:ROST), which added 4.38 or 9.48% to 50.58 after the discount retailer reported a 7% increase in its revenue over the third quarter. The worst performer was BMRN, which fell 6.32 or 6.13% to 96.79. Shares in the California biotech company have fallen sharply over the last several days ahead of next week's FDA panel review of Drisapersen, its drug aimed at helping treat Duchenne Muscular Dystrophy.
Ross Stores (O:ROST) also finished as the top performer on the S&P 500, just ahead of Gap Inc (N:GPS), which gained 1.88 or 7.49% to 26.97. Gap shares rose considerably on Friday as investors covered short positions, following the release of disappointing third quarter data from the San Francisco-based retailer in Thursday's after-hours session. For the quarter, Gap's namesake brand reported same-store sales declines of 4%, while comparative store revenues at its Banana Republic division slumped by 12%.
The worst performer was Chipotle Mexican Grill Inc (N:CMG), which plunged nearly 11% to 544.43 after the Centers for Disease Control and Prevention expanded the scope of the restaurant chain's E-Coli outbreak on Friday. The E-Coli strain, according to the CDC, has now spread to Chipotle restaurants in California, New York and Minnesota. Last month, the company announced the closings of restaurants in Washington and Oregon due to the outbreak. Chipotle said on Friday that it is working with health officials to control the epidemic.
On the New York Stock Exchange, advancing issues outnumbered declining ones by a 1,809 to 1,269 margin.
Additional stock news from Reuters at Investing.com.
EUR/USD fell sharply on Friday continuing its push back to parity, amid further indications of policy divergence between the Federal Reserve and the European Central Bank.
The currency pair traded in a broad range between 1.0641 and 1.0738, before settling at 1.0648, down 0.0086 or 0.81% on the session. With the sharp losses EUR/USD dropped to near-seven month lows from earlier in the week. For the week, EUR/USD lost roughly 1.2% after closing in the red on three of five sessions. More broadly, the euro has lost nearly 6.5% against the dollar since mid-October when it nearly hit 1.15.
More than a decade has passed since the euro last fell to parity with the dollar.
EUR/USD likely gained support at 1.0615, the low from November 18 and was met with resistance at 1.1489 the high from Oct. 15.
In a closely watched speech at the Frankfurt European Banking Congress on Friday, ECB president Mario Draghi sent perhaps his strongest indications yet that the bank will approve further easing measures next month, likely by moving its deposit rate deeper into negative territory. At negative 0.20%, the rate is already at a record low. The minutes from the ECB's November meeting, released this week, showed that inflation in the euro zone remains well below the bank's target, in spite of numerous easing measures implemented by the bank in recent months to inject liquidity into the system.
In March, the ECB launched a comprehensive €60 billion a month asset purchasing program (APP) intended to run through September, 2016. Draghi has also hinted that the ECB could expand the scope of the quantitative easing program when its Governing Council meets again on Dec. 3.
"The level of the deposit facility rate can also empower the transmission of APP, not least by increasing the velocity of circulation of bank reserves," Draghi said in the speech. "If we decide that the current trajectory of our policy is not sufficient to achieve our objective, we will do what we must to raise inflation as quickly as possible. That is what our price stability mandate requires of us."
Elsewhere, currency traders digested further signals that the Federal Open Market Committee could raise short-term interest rates at its monetary policy meeting next month. On Friday morning, Federal Reserve Bank of St. Louis president James Bullard argued that he expects inflation to move back to the Fed's targeted goal of 2%, if the cost of oil stabilizes and other prices continue to increase at its current rate over the next year. Following last month's stellar U.S. jobs report, a host of FOMC members including Fed chair Janet Yellen have hinted that conditions in the economy have improved enough to justify a rate hike.
A rate hike is viewed as bullish for the dollar as foreign investors pile into the greenback in order 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, surged more than 0.50% on Friday to close at 99.65, near session highs. On Wednesday, the index reached as high as 99.97 on the final session of a four-day winning streak, jumping to its strongest level since mid-March.
Speculators this week were were more bullish on the U.S. dollar. Gold and Silver sentiment became less bullish.
Gold futures fell mildly on Friday in spite of a broadly stronger dollar, as the precious metal continues to hover near five-year lows ahead of next month's critical policy decision from the Federal Reserve, where the U.S. central bank is expected to raise short-term interest rates for the first time in nine years.
On the Comex division of the New York Mercantile Exchange, gold for December delivery traded between $1,075 and $1,087.00 an ounce before settling at $1,077.20, down 0.60 or 0.06% on the session. It came one session after gold bounced off five-year lows, surging by more than $12 an ounce from Wednesday's close, amid considerable short covering from investors. Earlier in the week, gold plunged below $1,065 to its lowest level since February, 2010, as commodity traders continue to brace for a likely rate hike when the Federal Open Market Committee meets next on Dec. 15-16.
Gold still needs to suffer another dramatic sell-off to slip below $1,000 an ounce, a level not seen since the depths of the Financial Crisis.
Gold likely gained support at $1,064.00, the low from Nov. 18 and was met with resistance at 1,110.70, the high from Nov. 5.
On Friday morning, Federal Reserve Bank of St. Louis president James Bullard argued that he expects inflation to move back to the Fed's targeted goal of 2%, if the cost of oil stabilizes and other prices continue to increase at its current rate over the next year. In a speech on the economy and monetary policy in Fort Smith, Arkansas, Bullard also warned that U.S. job growth may slow as the Fed begins policy normalization. A host of FOMC members have offered strong hints that it will raise short-term rates next month following a stellar U.S. jobs report in October.
In recent months, Bullard has been one of the top advocates on the Fed for lifting the target range on its benchmark Federal Funds Rate. The rate, which banks use on interbank overnight loans at the New York Fed, has remained at near-zero levels since December, 2008.
Bullard's speech came ahead of a series of appearances by New York Fed president William Dudley throughout Long Island on Friday. On Wednesday, the New York Fed said it is honing aspects of its tri-party Reverse Repurchase Agreements (RPP), a tool it uses to help control the Federal Funds Rate. Dudley also said Wednesday in an appearance at the Clearing House Payments System Risk Symposium in New York that he doesn't expect a major market reaction to an initial rate hike since the move has been so widely telegraphed.
A rate hike is viewed as bearish for gold which struggles to compete with high-yield bearing assets.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged more than 0.50% on Friday to an intraday high of 99.66. On Wednesday, the index reached as high as 99.97 on the final session of a four-day winning streak, jumping to its strongest level since mid-March.
Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for December delivery lost 0.102 or 0.72% to 14.120 an ounce.
Copper for December delivery plunged 0.022 or 1.05% to 2.055 a pound.
U.S. crude futures closed moderately higher on Friday, as the count of domestic oil rigs fell slightly last week resuming their trend downward after a brief impasse a week earlier.
On the New York Mercantile Exchange, WTI crude for January delivery traded in a range of $41.37 and $42.05 a barrel before settling at $41.88, up 0.15 or 0.35% on the session. After falling below $40 a barrel earlier this week for the first time in 10 weeks, U.S. crude futures rallied to close the week up by more than 2%. WTI crude is still near August lows when it fell to its lowest levels since the height of the Financial Crisis.
On the Intercontinental Exchange (ICE), brent crude for January delivery wavered between $44.07 and $45.50 before closing at $44.62, up 0.47 or 1.06% on the day. North Sea brent futures ended the week up 2.5%, after closing in the green in four of five sessions on the week. In afternoon trading, brent futures jumped to their highest level in more than a week.
Meanwhile, the spread between the international and U.S. domestic benchmarks of crude stood at $2.74, up from Thursday's level of $2.47 at the close of trading.
Both benchmarks have crashed by more than 40% over the last year since OPEC rattled global energy markets with its decision to leave its production ceiling above 30 million barrels per day. The strategy triggered a race with U.S. shale producers for market share, pushing prices sharply lower amid a glut of oversupply.
Crude futures surged on Friday afternoon after oil services firm Baker Hughes (N:BHI) said in its weekly rig count that U.S. oil rigs fell by 10 last week to 564. A week earlier, the rig count rose by two to 574, halting an extended streak that lasted nearly three months. The rig count nationwide is still down substantially from its level 12 months ago when it hovered near 1,500.
Investors have kept a close eye on the total of domestic oil rigs online, amid forecasts for sharp declines in U.S. output in 2016. Last week, production held steady at approximately 9.18 million barrels per day. In June, U.S. output surged above 9.6 million bpd, its highest level in more than 40 years.
Geopolitical concerns also remained in focus, after at least 170 hostages were kidnapped in an attack at a Mali hotel, which claimed the lives of 10 people, according to CNN. Two hours after the situation was resolved, no group immediately claimed responsibility for the mass-shooting, CNN reported. It came in the wake of last Friday's coordinated attacks in Paris, where at least 120 civilians were killed and at least 350 others were wounded.
In response, France, Russia and the U.S. launched a series of air strikes this week, targeting numerous oilfields in Eastern Syria controlled by the Islamic State. On Thursday, Reuters reported that some forms of Iraqi crude have been trading as low as $30 a barrel, amid near-record supply in the Gulf state. Earlier this year, ISIS generated around $40 million a month in oil revenue from black market sales in the region, according to U.S. Treasury Department estimates.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged more than 0.50% on Friday to an intraday high of 99.70. On Wednesday, the index reached as high as 99.97 on the final session of a four-day winning streak, jumping to its strongest level since mid-March.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.
Natural Gas (Thursday Report)
Natural gas futures turned higher on Thursday, after data showed natural gas supplies rose less than expected last week.
Natural gas for delivery in December on the New York Mercantile Exchange tacked on 2.6 cents, or 1.13%, to trade at $2.374 per million British thermal units during U.S. morning hours. Prices were at around $2.335 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 November 13 rose by 15 billion cubic feet, below expectations for an increase of 18 billion.
That compared with builds of 49 billion cubic feet in the prior week, 40 billion cubic feet in the same week last year, while the five-year average change for the week is an increase of 30 billion cubic feet.
Total U.S. natural gas storage stood at an all-time high of 4.000 trillion cubic feet, 10.1% higher than levels at this time a year ago and 5.2% above the five-year average for this time of year.
Last spring, supplies were 55% below the five-year average, indicating producers have more than made up for all of last winter's unusually strong demand.
A day earlier, natural gas prices lost 2.4 cents, or 1.01%, as forecasts for the next two weeks turned milder, dampening near-term demand expectations for the heating fuel.
Natural gas prices have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting outlooks on early-winter heating demand.
The heating season from November through March is the peak demand period for U.S. gas consumption.
Natural gas prices typically rise ahead of the winter as colder weather sparks heating demand. But a mild start to the winter heating season underlined concerns over a deepening supply glut, driving prices to multi-year lows near $2 per million British thermal units at the end of October.
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