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posted on 04 December 2015

Investing.com Weekly Wrap-Up 04 December 2015

Written by , Investing.com

U.S. stocks surge 2%, as strong jobs report bolsters case for rate hike

U.S. stocks soared more than 2% erasing all of their losses from the previous day's sell-off, as the release of a strong monthly jobs report possibly solidified an interest rate hike by the Federal Reserve later this month.

The Dow Jones Industrial Average surged 369.96 or 2.17% to 17,847.63, finishing with one of its strongest one-day moves in three months. It came one day after the Dow fell as much as 300 points after European Central Bank president Mario Draghi spooked markets worldwide by implementing limited easing measures at a closely-watched meeting. TheNASDAQ Composite index also posted solid gains on the day gaining 104.74 or 2.08% to 5,142.27.

On Friday morning, the U.S. Department of Labor reported that nonfarm payrolls in November increased by 211,000 on a monthly basis, following a robust report a month earlier that firmly placed December lift-off from the Fed on the table. Investors received further evidence of considerable improvements in the labor market when the Labor Department revised gains from October by 27,000 to 298,000. The unemployment rate remained steady at 5.0%.

The S&P 500 Composite index, meanwhile, added 42.07 or 2.05% to 2,091.69, as nine of 10 sectors closed in the green. Stocks in the Health Care, Financials and Telecommunications industries led, each gaining more than 2% on the session. Stocks in the energy sector lagged. The S&P closed the week with one of its best single day moves in nearly two months.

The top performer on the Dow was Apple Inc (O:AAPL), which gained 3.81 or 3.31% to 119.01, after iPhone supplier Avago Technologies topped analysts' forecasts with its per share earnings. The worst performer was Exxon Mobil Corporation (N:XOM), after OPEC failed to place a cap on its production ceiling at its semiannual meeting in Vienna. Had the world's largest oil cartel unveiled a plan to curb output, energy stocks potentially could have received a considerable boost with a resulting spike in crude prices. Shares in ExxonMobil (N:XOM) inched up 0.36% to 78.69.

The biggest gainer on the NASDAQ was semiconductor manufacturer Skyworks Solutions Inc (O:SWKS), which rose 4.63 or 5.55% to 88.07 following the reports surrounding Avago Technologies. The worst performer was Keurig Green Mountain Inc (O:GMCR), which fell 2.66 or 4.90% to 51.64. Shares in the major coffee company have plunged more than 60% over the last 12 months.

The top performer on the S&P 500 was Newmont Mining Corporation (N:NEM), which jumped 1.63 or 8.70% to close at 20.36, as global commodities rebounded on Friday. In the futures market, both gold and silver soared by more than 2% in Friday's session after the dollar rebounded from its biggest loss of the year on Thursday. The worst performer wasNRG Energy Inc (N:NRG), which plummeted more than 15% one day after CEO David Crane resigned in the face of the utility's persistent stock woes.

On the New York Stock Exchange, advancing issues outnumbered declining ones by a 2,010 to 1,052 margin.

Additional stock news from Reuters at Investing.com.

Forex

EUR/USD fell back slightly on Friday a session after posting its strongest one-day session in six years, amid a strong U.S. jobs report and dovish comments from European Central Bank president Mario Draghi.

The currency pair traded in a broad range between 1.0836 and 1.0956 on the session before settling at 1.0875, down 0.0067 or 0.61% on the day. On Thursday, the euro surged more than 3% against the greenback after the ECB spooked global currency markets by implementing only limited easing measures at a closely-watched meeting in Frankfurt. In Thursday's session, the euro reached its highest level since early-November, erasing an entire month of losses in a frenzied day of trading.

EUR/USD likely gained support at 1.0549, the low from December 2 and was met with resistance at 1.1473, the high from Oct. 15.

At a highly-anticipated meeting on Thursday, the ECB's governing council left several key interest rates unchanged and opted not to increase the pace of its €60 billion a month quantitative easing program as many analysts expected. Instead, Draghi defied market expectations by only modest changes to the bond buying program, including a plan to extend it by six months through March, 2017.

On Friday, Draghi backtracked by noting that the ECB could employ further stimulus measures if needed, prompting investors to pile back into the euro short positions they abandoned a session earlier. Some analysts anticipate that EUR/USD could fall into parity as early as the start of next year, amid further signals of divergence between the Federal Reserve and the ECB.

Also on Friday, the U.S. Department of Labor reported that nonfarm payrolls in November increased by 211,000 on a monthly basis, above consensus estimates for gains of 190,000. It followed a robust report a month earlier when nonfarm payrolls surged by 271,000, placing a December rate hike by the Fed squarely on the table. There were further indications of strength in the labor market on Friday when the Bureau of Labor Statistics upwardly revised the October reading by 27,000 to 298,000.

Fed chair Janet Yellen sent further hints that the U.S. central bank will raise rates in less than two weeks with hawkish comments at two public appearances earlier this week. While testifying before the Joint Economic Committee on Capitol Hill on Thursday morning, Yellen said the economy needs to add fewer than 100,000 jobs a month to absorb the losses of those who fell out of the labor market in recent years. The labor market already appeared on solid footing before Friday's release, averaging gains of more than 200,000 jobs a month.

The unemployment rate in November held steady at 5.0%, while average hourly earnings ticked up by 0.2%. Hourly wages, which have been persistently sluggish throughout the year, were expected to increase between 0.1 and 0.3% on the month. The U-6 unemployment rate, a broader measure of labor underutilization, inched up 0.1 to 9.9%. The rate, which measures workers that are marginally attached to the market, as well as workers that are not currently looking for employment, stood at 11.4% last year at this time. The measure is a preferred gauge by Yellen, as the chair of the Federal Reserve weighs the nation's employment outlook.

Although Yellen indicated in a speech on Wednesday before the Economic Club of Washington that U.S. inflation remains well-below the Fed's targeted goal, she emphasized that the Fed has seen considerable improvement in the economy and labor market. While Yellen sent strong signals that the Fed could be on the verge of approving its first rate hike in nearly a decade, she noted that unforeseen economic and financial developments over the next few days could sway its decision.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, jumped more than 0.75% to an intraday high of 98.62, before retreating to 98.27 at the close.

CTFC Commitment of Traders

Speculators this week were were more bearish on the euro. Gold sentiment became less bullish. Note: This data was collected Wednesday before the latest ECB policy announcement which produced a strong rally for the euro.

cot.2015.dec.04

Gold

Gold futures bounced off six-year lows in spite of a strong dollar, as an optimistic U.S. jobs report paved the way for the Federal Reserve to lift short-term interest rates later this month at a highly-anticipated meeting.

On the Comex division of the New York Mercantile Exchange, gold for February delivery traded in a broad range between $1,057.20 and $1,088.20 an ounce before settling at $1,083.40, up 22.20 or 2.09% on the session. With the sharp gains, gold enjoyed one of its strongest one-day move in two months, surging at one point to its highest levels since mid-November. Earlier this week, the precious metal fell to its lowest level since the Financial Crisis after the dollar reached 2015-yearly highs, amid signals of divergent monetary policies between the Fed and the European Central Bank. In spite of Friday's rally, gold is still down approximately 2.5% over the last month of trading.

Gold likely gained support at $1,046.20, the low from Dec. 3 and was met with resistance $1,110.70, the high from Nov. 7.

On Friday morning, the U.S. Department of Labor reported that non-farm payrolls in November increased by 211,000 on a monthly basis, above consensus estimates for gains of 190,000. It followed a robust report a month earlier when nonfarm payrolls surged by 271,000, placing a December rate hike by the Fed squarely on the table. There were further indications of strength in the labor market on Friday when the Bureau of Labor Statistics upwardly revised the October reading by 27,000 to 298,000.

Fed chair Janet Yellen sent further hints that the U.S. central bank will raise rates in less than two weeks with hawkish comments at two closely-watched public appearances earlier this week. While testifying before the Joint Economic Committee on Capitol Hill on Thursday morning, Yellen said the economy needs to add fewer than 100,000 jobs a month to absorb the losses of those who fell out of the labor market in recent years.

Even before Friday's release, data indicated that the U.S. labor market added more than 200,000 monthly jobs on average this year. The unemployment rate in November held steady at 5.0%, while average hourly earnings ticked up by 0.2%. Hourly wages, which have been persistently sluggish throughout the year, were expected to increase between 0.1 and 0.3% on the month. The average workweek per all U.S. employees remained unchanged at 34.5 hours.

The U-6 unemployment rate, a broader measure of labor underutilization, inched up 0.1 to 9.9%. The rate, which measures workers that are marginally attached to the market, as well as workers that are not currently looking for employment, stood at 11.4% last year at this time. By comparison, the rate peaked at above 17% during the Great Recession. The measure is a preferred gauge by Yellen, as the chair of the Federal Reserve weighs the nation's employment outlook.

Although Yellen indicated in a speech on Wednesday before the Economic Club of Washington that U.S. inflation remains well-below the Fed's targeted goal, she emphasized that the Fed has seen considerable improvement in the economy and labor market. While Yellen sent strong signals that the Fed could be on the verge of approving its first rate hike in nearly a decade, she noted that unforeseen economic and financial developments over the next few days could sway its decision.

A rate hike is viewed as bearish for gold, which is not attached to interest rates and struggles to compete with high-yield bearing assets. Still, commodity traders have had more than a month to price in a rate hike, as a host of Fed members telegraphed the increasing likelihood of lift-off throughout November.

Investors also reacted to OPEC's decision on Friday to leave its production ceiling unchanged at a contentious meeting in Vienna. As a result, crude prices are expected to remain stubbornly low amid a glut of oversupply on global energy markets.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, jumped more than 0.75% to an intraday high of 98.62. A day earlier, the dollar suffered its worst loss against the euro in six years. Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.

Silver for March delivery soared 0.458 or 3.25% to 14.535 an ounce.

Copper for March delivery gained 0.018 or 0.89% to 2.079 a pound.

Oil

Crude futures fell considerably on Friday, as OPEC declined to cap its production ceiling after the divided group was unable to agree on a strategy to curb the continuing oversupply on global energy markets at a contentious meeting in Vienna.

While Friday's decision was not unexpected, the ambiguous policy statement may create further instability on worldwide markets as the leaders left Austria seemingly without any strategy for rescuing prices from near-record lows. Instead, OPEC leaders demurred at the semiannual meeting, opting to wait at least six months to update its production quota when it meets next in June.

OPEC leaders appear hesitant to alter their strategy until a bevy of economic sanctions against Iran are lifted against the Gulf state next year. When the sanctions are fully eased, Iran is expected to boost its production by as much as 1 million barrels per day.

"The future of OPEC is as strong as ever," OPEC Secretary General Abdullah al-Badri said at a press conference, following the six-hour meeting. "We have to accommodate Iran one way or the other. Also, production changes from time to time so we decided to postpone this decision to the next OPEC meeting."

On the New York Mercantile Exchange, WTI crude for January delivery traded between $39.61 and $41.98 a barrel before settling at $39.98, down 1.08 or 2.64% on the session. With the sharp decline, U.S. crude futures shed most of their gains from Thursday's session triggered by a massive sell-off in the dollar. WTI crude has now closed lower in five of the last seven session. The front month contract for U.S. crude ended a choppy, volatile week down approximately 4%.

On the Intercontinental Exchange (ICE), brent crude for January delivery wavered between $42.69 and $44.81 a barrel before closing at $43.02, down 0.82 or 1.86% on the day. North Sea brent futures also ended the week down by more than 3%. The spread between the international and U.S. domestic benchmarks of crude stood at $3.04, above Thursday's level of $2.80 at the close of trading.

Both benchmarks are lingering near six-year lows, as global supply continues to severely outpace demand.

OPEC, which pumps approximately 35 to 40% of the world's total consumption, entered Friday's meeting with a production ceiling that hovered around 31.5 million barrels per day. The total is expected to increase over the next year after Indonesia officially re-joined the world's largest oil cartel, following a seven-year hiatus. The Southeast Asian nation produces roughly 910,000 barrels of oil per day.

Crude prices worldwide are down by more than 40% since OPEC roiled markets last November by maintaining its production at levels above 30 million barrels per day. The tactic was purportedly aimed at squeezing out high-priced U.S. shale producers, which struggle to maintain output when crude prices dip. Over the last year OPEC has altered its approach of favoring price control over production in an effort to regain market share. Crude prices, as a result, have tumbled amid excess supply throughout the world.

The cartel also reportedly tabled a proposal by Venezuela for a 5% reduction in output and failed to reach an agreement with non-OPEC member Russia on a joint effort to slash production.

"The world's dynamics have changed and we need to look at other parameters for sustaining prices," OPEC president Emmanuel Ibe Kachikwu said. "Even if we keep cutting production that doesn't solve any problems. We need to look to non-OPEC members also to join us in this stability drive."

"As OPEC grows as an organization it has to begin to look at cooperation, collaboration and cost efficiency. There are many ways to influence prices and that's what we've decided to do."

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, jumped more than 0.75% to an intraday high of 98.62. A day earlier, the dollar suffered its worst loss against the euro in six years.

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

Natural Gas (Thursday Report)

Natural gas futures were little changed on Thursday, despite data showing that natural gas supplies in the U.S. fell for the first time this season.

Natural gas for delivery in December on the New York Mercantile Exchange tacked on 0.6 cents, or 0.3%, to trade at $2.171 per million British thermal units during U.S. morning hours. Prices were at around $2.167 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 27 fell by 53 billion cubic feet, compared to expectations for a decline of 51 billion.

That compared with a build of 9 billion cubic feet in the prior week, a withdrawal of 22 billion cubic feet in the same week last year, while the five-year average change for the week is a drawdown of 50 billion cubic feet.

Total U.S. natural gas storage stood at 3.956 trillion cubic feet, 13.7% higher than levels at this time a year ago and 6.2% 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 6.6 cents, or 2.96%, after weather forecasts for early December pointed to mild temperatures, dampening near-term heating demand expectations.

Natural gas futures have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting outlooks on 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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