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posted on 25 December 2015

Investing.com Weekly Wrap-Up 25 December 2015

Written by , Investing.com

U.S. stocks mixed as Dow, S&P 500 retreat from Santa Claus rally

U.S. stocks were mixed on Thursday as the Dow Jones Industrial Average halted a 3-day winning streak, retreating from a considerable Santa Claus Rally from the previous session on the eve of the Christmas holiday.

The Dow fell 50.44 or 0.29% to 17,552.17, while the the S&P 500 Composite index lost 3.30 or 0.16% to 2,060.99, ending one of their strongest 3-day rallies of the year. TheNASDAQ Composite index gained 2.56 or 0.05% to 5,048.49 on a light day of volume among U.S. equities. The Dow crossed into negative territory for the year at the end of the session, while the NASDAQ is now slightly up for 2015. On the S&P 500, 9 of 10 sectors closed in the red, as stocks in the Energy, Telecommunications and Basic Materials industries lagged. Stocks in the Health Care sector, the lone industry to close in the green, led.

Energy and retail stocks remained in focus, as U.S. crude futures continued their bounce off multi-year lows and frenzied shoppers crowded malls nationwide for last-minute gifts. On Thursday, WTI crude was on track for its fourth straight winning session, hovering at two-week highs near $38 a barrel. A session earlier, Texas Long Sweet futures surged amid an unexpected draw in U.S. crude stockpiles last week. For the week, U.S. crude futures were on track to gain nearly 10% in value.

Investors also kept a close eye on retail stocks on the last day of shopping before the start of Christmas. A spike in online shopping has intensified pressure on shipping companies to deliver last-minute gifts on time, while brick and mortar shops have been forced to slash prices in order to attract more customers. A major storm throughout the Southern portions of the U.S. also contributed to mounting fears that thousands of customers might not receive their gifts in time for the holiday. Shares in FedEx Corporation (N:FDX) on Thursday lost roughly 0.70% to 149.65.

The top performer on the Dow was EI du Pont de Nemours and Company (N:DD), which gained 0.37 or 0.56% to 66.40. Shares in DuPont (N:DD) are down nearly 6% after the chemical giant announced a proposed $130 billion merger with Dow Chemical Company (N:DOW) earlier this month. Shares in Nike Inc (N:NKE) closed at 63.18, after the multinational athletic apparel giant completed a highly-anticipated stock split on Thursday. Nike capped a stellar year earlier this week when it topped analysts forecasts with both its earnings and revenues in the second quarter.

The biggest gainer on the NASDAQ was NXP Semiconductors NV (O:NXPI) which rose 1.89 or 2.24% to 86.42. Earlier this week, the Netherlands semiconductor company received secure product certification from China UnionPay, a top domestic bank card organization in the People's Republic of China. The worst performer was Incyte Corporation (O:INCY), which lost 1.60 or 1.45% to 108.92. Shares in the Delaware-based pharmaceutical company retreated, two days after experiencing large inflows of more than $31 million in Tuesday's session. The upticks on Tuesday were offset by more than $19 million in downticks on the session, according to reports.

The top performer on the S&P 500 was student loan provider Navient Cor (O:NAVI), which gaining 0.46 or 3.79% to 12.61. The worst performer was Fossil Group Inc (O:FOSL), which fell 0.91 or 2.37% to 37.54 For the year, shares in the North Texas-based retailer have slumped more than 65% amid considerably layoffs in its workforce.

On the New York Stock Exchange, advancing issues outnumbered declining ones by a 1,634 to 1,352 margin.

Additional stock news from Reuters at Investing.com.

Forex

EUR/USD rose considerably during an abbreviated session, as currency traders looked to capitalize on last-minute gains ahead of the Christmas holiday.

The currency pair traded between 1.0904 and 1.0966 before settling near session-highs at 1.0963, up 0.0052 or 0.47% on the session. EUR/USD has been relatively flat since last week's historic decision by the Federal Reserve to abandon a seven-year zero interest rate policy by approving its first rate hike in nearly a decade. The pair is also virtually unchanged since the European Central Bank rattled global foreign exchange markets on December 3 with an unexpected decision to approve only limited easing measures with its comprehensive asset-purchasing program. Following the shocking announcement by ECB president Mario Draghi, the euro surged more than 3% against the dollar on the session, one of its strongest one-day moves of the year.

EUR/USD likely gained support at 1.0538, the low from Dec. 3 and was met with resistance at 1.1496, the high from Oct. 15.

The U.S. Department of Labor's Bureau of Labor Statistics (BLS) said on Thursday that initial claims for state unemployment benefits fell by 5,000 to a seasonally-adjusted 267,000 for the week ending on Dec. 18. The number of initial claims dipped to near 45-year lows, falling to levels last seen in late-1973. Analysts expected new claims to decelerate slightly by 1,000 to 270,000 on the week. Last Wednesday, Fed chair Janet Yellen cited a tightening labor market that is nearing full employment as the primary factor in the Fed's decision to raise its benchmark Federal Funds Rate.

Investors continued to digest solid inflation data from Wednesday's session for further indications on when the Federal Open Market Committee (FOMC) could approve its next rate hike. On Wednesday morning, the U.S. Department of Commerce's Bureau of Economic Analysis (BEA) said the Personal Consumption Expenditure (PCE) price index increased by 0.4% on a yearly basis last month, above 0.2% annual gains in October.

The Core PCE index, which strips out volatile food and energy prices, inched up by 0.1% last month, in line with consensus estimates. Over the last year, core prices are up 1.3%, unchanged from October's reading. Core PCE prices, the Fed's preferred gauge for inflation, have fallen below its targeted goal of 2% for every month over the last three years. Yellen expects long-term inflation to move toward the Fed's targeted objective, as temporary factors from a stronger dollar and dwindling oil prices fade.

At last week's historic meeting, the FOMC projected that the upper-bound range for the Fed Funds Rate will increase a full percentage point to 1.5% by the end of 2016. The estimates imply that the FOMC could approve four modest rate hike throughout the course of next year. On Thursday, the CME Group's (O:CME) Fed Watch calculated the probability of a March rate hike at 50.3%, down from 53.6% a session earlier.

Yields on the U.S. 10-Year fell by one basis point to 2.24%, while yields on theGermany 10-Year gained a basis point to 0.63%.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell by more than 0.40% to an intraday low of 97.96, before settling at 98.02. Earlier this month, the index eclipsed 100.00 to reach its highest level in more than 12 months. With only a handful of sessions left in 2015, the euro is down by more than 9% versus the dollar since the start of the year.

EUR/USD has fallen sharply from its level of 1.2104 on New Year's Day, 2015, amid continuing signs of divergence between the Fed and the ECB.

CTFC Commitment of Traders

Speculators this week were were less bullish on the dollar in data taken before the Fed rate meeting. Gold and silver sentiment became less bullish bullish, while bullishness increased for oil.

cot.2015.dec.16

Gold

Gold posted modest gains on Thursday amid a weaker dollar, on a thin day of trading in the final session before the Christmas holiday.

On the Comex division of the New York Mercantile Exchange, gold for February delivery traded in a tight range between $1,069.30 and $1,076.40 an ounce, before settling at $1,076.10, up 8.00 or 0.75% on the session. Following several days of choppy, volatile trading last week marked by wild fluctuations in metal prices, gold has stabilized throughout the abbreviated week. The precious metal closed on Thursday only several percentage points below its level toward the end of last week after the Federal Reserve abandoned a seven-year zero interest rate policy by approving its first rate hike in nearly a decade.

Gold likely gained support at $1,046.20, the low from December 3 and was met with resistance at $1,179.10, the high from Oct. 20.

On Thursday, the U.S. Department of Labor's Bureau of Labor Statistics (BLS) said initial claims for state unemployment benefits fell by 5,000 to a seasonally-adjusted 267,000 for the week ending on Dec. 18. The number of initial claims dipped to near 45-year lows, falling to levels last seen in late-1973. Analysts expected new claims to decelerate slightly by 1,000 to 270,000 on the week. Last Wednesday, Fed chair Janet Yellen cited a tightening labor market that is nearing full employment as the primary factor in the Fed's decision to raise its benchmark Federal Funds Rate.

Investors continued to digest solid inflation data from Wednesday's session for further indications on when the Federal Open Market Committee (FOMC) could approve its next rate hike. On Wednesday morning, the U.S. Department of Commerce's Bureau of Economic Analysis (BEA) said the Personal Consumption Expenditure (PCE) price index increased by 0.4% on a yearly basis last month, above 0.2% annual gains in October. TheCore PCE index, which strips out volatile food and energy prices, inched up by 0.1% last month, in line with consensus estimates.

Over the last year, core prices are up 1.3%, unchanged from October's reading. Core PCE prices, the Fed's preferred gauge for inflation, have fallen below its targeted goal of 2% for every month over the last three years. Yellen expects long-term inflation to move toward the Fed's targeted objective, as temporary factors from a stronger dollar and dwindling oil prices fade.

At last week's historic meeting, the FOMC projected that the upper-bound range for the Fed Funds Rate will increase a full percentage point to 1.5% by the end of 2016. The estimates imply that the FOMC could approve four modest rate hike throughout the course of next year. On Thursday, the CME Group's (O:CME) Fed Watch calculated the probability of a March rate hike at 50.3%, down from 53.6% a session earlier.

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, fell by more than 0.40% to an intraday low of 97.96. Earlier this month, the index eclipsed 100.00 to reach its highest level in more than 12 months. Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.

With only four sessions remaining in 2015, gold is on pace to tumble nearly 9% on the calendar year, as it hovers around six-year lows. The precious metal has encountered severe headwinds over the course of the year from the Fed's policy shift, a sharply appreciating dollar and a perception that it has lost some of its appeal as a safe-haven asset.

Silver for March delivery rose 0.078 or 0.55% to close at 14.355 an ounce.

Copper for March delivery fell 0.003 or 0.13% to 2.122 a pound.

Oil

U.S. oil prices rallied for the fourth straight session on Thursday, taking its gains for the week to 10%, as an unexpected decline in domestic oil stockpiles boosted sentiment.

Crude oil for delivery in February on the New York Mercantile Exchange jumped 50 cents, or 1.33%, to trade at $38.00 a barrel during U.S. morning hours. It earlier touched $38.11, the most since December 9.

A day earlier, Nymex prices rallied $1.36, or 3.76%, after weekly supply data showed thatU.S. oil stockpiles fell 5.9 million barrels last week. Market analysts' expected a crude-stock gain of 1.1 million barrels.

Also Wednesday, industry research group Baker Hughes (N:BHI) said that the number of rigs drilling for oil in the U.S. decreased by three to 538 last week, the fifth decline over the past six weeks.

Nymex oil futures are up nearly 10% so far this week, but prices are still down approximately 30% so far this year amid worries over ample domestic supplies.

Trading volumes are expected to remain light as many traders already closed books before the end of the year, reducing liquidity in the market and increasing volatility. U.S. markets close early Thursday, Christmas Eve, and are shut Friday for Christmas Day.

Elsewhere, on the ICE Futures Exchange in London, Brent oil for February delivery tacked on 36 cents, or 0.95%, to trade at $37.72 a barrel. On Wednesday, prices rallied $1.25, or 3.46%, after falling to $35.98 earlier this week, a level not seen since July 2004.

Brent prices are on track to post an annual decline of 32% in 2015, as oversupply concerns dominated market sentiment for most of the year.

Oil futures have fallen sharply this month after the Organization of the Petroleum Exporting Countries failed to agree on output targets to reduce a glut of oversupply on global energy markets.

Global crude production is outpacing demand following a boom in U.S. shale oil and after a decision by OPEC last year not to cut production in order to defend market share.

Meanwhile, Brent's discount to the WTI crude contract stood at 28 cents, compared to a discount of 14 cents by close of trade on Wednesday.

U.S. crude has been firmer relative to Brent recently, on signs that the U.S. oil market is likely to grow tighter following Congress' decision to lift a 40-year old ban on domestic oil exports, while a global glut gets worse in 2016 due to soaring production in Saudi Arabia and Russia.

Oversupply issue will be exacerbated further once Iran returns to the global oil market early next year after western-imposed sanctions are lifted. Analysts say the country could quickly ramp up production by around 500,000 barrels, adding to the glut of oil that has sent prices tumbling.

Market experts predict Brent's premium over U.S. crude to flip into a discount in the coming weeks. The gap between the two benchmarks is down over 95% since its 2015 peak reached earlier in the year.

Natural Gas

Natural gas futures extended gains to hit a two-week high on Thursday, after data showed U.S. natural gas supplies in storage fell more than expected last week.

Natural gas for delivery in January on the New York Mercantile Exchange tacked on 4.9 cents, or 2.5%, to trade at $2.032 per million British thermal units during U.S. morning hours, the most since December 10. Prices were at around $2.016 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 December 18 fell by 32 billion cubic feet, more than expectations for a decline of 25 billion.

That compared with a drawdown of 34 billion cubic feet in the prior week, 49 billion cubic feet in the same week last year, while the five-year average change for the week is a decline of 140 billion cubic feet.

Total U.S. natural gas storage stood at 3.814 trillion cubic feet, 14.7% higher than levels at this time a year ago and 10.8% above the five-year average for this time of year.

Inventories of the gas are typically built up during the warm summer months and then drawn down in the winter as cold temperatures increase demand for the fuel.

On Wednesday, natural gas soared 9.5 cents, or 5.03%, after updated weather forecasting models pointed to cooler temperatures across the central U.S. in the coming days, following a warm spell which took prices to the lowest level since March 1999 last week. Prices fell to a 17-year low of $1.684 on December 18, as mild pre-winter weather took a toll on prices.

Natural gas typically rises ahead of the winter as colder weather sparks heating demand, yet an unusually mild start to winter due to the El Niño weather phenomenon has limited the amount of heating days.

Prices of the fuel are down nearly 30% so far this year, as weak demand and healthy stockpiles weighed.

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