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posted on 19 February 2016

Investing.com Weekly Wrap-Up 19 February 2016

Written by , Investing.com

U.S. stocks cap best week since November with mixed results on Friday

U.S. stocks were mixed on Friday amid sharp declines in oil prices, but ended the session with its strongest week since November as equities continue to stabilize from a global sell-off that gripped the markets over the first six weeks of the new year.

The Dow Jones Industrial Average fell 21.44 or 0.13% to 16,391.99, while the S&P 500 Composite index lost 0.05 or 0.01% to 1,917.78, as six of 10 sectors closed in the red. Stocks in the Consumer Services, Technology and Financials sectors led, while stocks in the Telecom, Utilities and Energy industries lagged. The NASDAQ Composite index, the session's overperformer, added 16.89 or 0.38% to close at 4,504.43. For the week, the NASDAQ surged more than 4%.

Investors also reacted to solid Consumer Price Index data in January, which could strengthen hawkish arguments for accelerated normalization by the Federal Reserve throughout the year. On Friday morning, the U.S. Department of Labor said its January CPI increased by 1.4% from the prior 12 months, gaining 0.7% from December's measure. A precipitous decline of nearly 3% in energy prices was softened by gains in medical care and rent prices. Separately, Federal Reserve Bank of Cleveland president Loretta Mester said at a speech in Sarasota, Florida, that the economy could be strong enough to handle more than one rate hike in the coming months.

The top performer on the Dow was Home Depot Inc (N:HD), which gained 1.72 or 1.43% to 121.69. Home Depot (N:HD) finished just ahead of American Express Company (N:AXP), which added 0.56 or 1.03% to 54.71. Earlier in the week, the struggling credit card company announced a plan to overhaul its management team and curtail its marketing activities in an effort to slash $1 billion in expenses. The worst performer was Intel Corporation (O:INTC), which lost 0.71 or 2.41% to 28.71. Intel (O:INTC) finished just below Boeing Company (N:BA), which fell 2.41 or 2.05% to 115.16. Shares in Boeing (N:BA) fell back two days after the jet manufacturer inked a deal with China's Okay Airlines on a $1.3 billion commitment for a dozen 737s aircrafts.

Shares in Apple Inc (O:AAPL) fell 0.23% to 96.04, after the U.S. Department of Justice filed a motion to compel the technology giant to unlock the phone of a terrorist accused of killing 14 people in a mass-shooting in San Bernardino, California last December. Shortly after, Republican presidential candidate Donald Trump urged voters to boycott the company until it hands over the phone to the FBI.

The biggest gainer on the NASDAQ was Applied Materials Inc (O:AMAT), which added 1.21 or 7.05% to 18.38. On Thursday, the semiconductor manufacturer reported stronger than expected earnings and outlook with its first quarter results. The worst performer was Seagate Technology (O:STX), which fell 1.77 or 5.35% to 31.34, erasing all of their gains from the prior sessions. Over the last year, shares in the Dublin-based electronic data storage solutions company are down nearly 50%.

Applied Materials (O:AMAT) was also the top performer on the S&P 500, just above TesoroCorporation (N:TSO) which added 3.52 or 5.13% to 72.16. Late in Friday's session, the American Petroleum Institute reported that U.S. crude stockpiles moved to their highest levels in January in 86 years. The worst performer was Southwestern Energy Company (N:SWN), which plummeted 1.40 or 16.49% to 7.09. Shares in Southwestern Energy have fallen more than 70% over the last 12 months.

On the New York Stock Exchange declining issues outnumbered advancing issues by a 1,556-1,474 margin.

Additional stock news from Reuters at Investing.com with more details on U.S. markets.

Forex

The dollar trimmed gains against the other major currencies on Friday, but the greenback remained supported after upbeat U.S. inflation data boosted optimism over the strength of the economy.

Data showed that the U.S. consumer price index was flat in January, compared to expectations for a 0.1% downtick and after a 0.1% fall the previous month. Year-on-year,consumer prices increased by 1.4% last month.

Core CPI, which excludes food and energy, rose 0.3% in January, more than the expected 0.2% gain and after an increase of 0.2% in December.

USD/JPY was down 0.32% at 112.919.

Demand for the safe-haven yen still remained supported as oil prices resumed their downward trend on Friday, a day after the Energy Information Administration said U.S. crude inventories rose by 2.1 million barrels last week, to a peak of 504.1 million barrels.

EUR/USD was steady at 1.1108, still close to a two-week low of 1.1067 hit earlier in the session.

Elsewhere, the dollar was higher against the pound, with GBP/USD down 0.43% at 1.4250 but turned lower against the Swiss franc, with USD/CHF slipping 0.19% to 0.9910.

Sentiment on the pound remained fragile as discussions regarding Britain's European Union membership continued in Brussels.

Earlier Friday, the U.K. Office for National Statistics said that retail sales rose 2.3% in January, beating expectations for a 0.8% gain. Year-on-year, retail sales climbed 5.2% last month.

Core retail sales, which exclude automobiles and fuel, increased by 2.3% in January, compared to expectations for an uptick of 0.7%.

A separate report showed that U.K. public sector net borrowing declined by £11.81 billion in January, confounding expectations for a drop of £13.95 billion.

Meanwhile, the Australian and New Zealand dollars were weaker, with AUD/USD down 0.94% at 0.7089 and with NZD/USD retreating 0.92% to 0.6584.

USD/CAD gained 0.69% to trade at 1.3822 after data showed that Canada's retail salesdropped 2.2% in December, confounding expectations for a 0.6% slip, after a 1.7% increase in November.

Core retail sales, which exclude automobiles, declibed by 1.6% in December, compared to expectations for a downtick of 0.5% and after a revised 1.0% drop.

A separate report showed that Canada's CPI ticked up 0.2% in January, beating expectations for a 0.1% downtick. Year-on-year, consumer prices gained 2.0% last month.

Core CPI, which excludes the eight most volatile items, ticked up 0.3% in January, more than the expected 0.2% rise, after a 0.4% slip in December.

The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was up 0.09% at 96.93, after rising to a two-week high of 97.18 earlier in the session.

CTFC Commitment of Traders

Speculators were less bullish on the U.S. dollar and oil this week. They were more bullish on gold, silver and the Japanese yen. Bearishness increased on the Mexican peso.

Note: This data closes on Wednesday so the last two days of trading are not reflected.

cot.2016.feb.17

Gold

Gold ticked up on Friday, extending gains from the previous two sessions, in spite of solid U.S. inflation data which bolstered hawkish arguments for accelerated monetary policy normalization by the Federal Reserve this year.

On the Comex division of the New York Mercantile Exchange, gold for April delivery wavered between $1,220 and $1,235.20 an ounce, before settling at $1,231.20, up 4.90 or 0.40% on the day. For the week, gold fell slightly by less than $3 an ounce, halting a four-week streak of weekly gains. The precious metal still remains near 12-months highs reached late last week when it surged above $1,260 an ounce. Since the start of the year, gold has surged by more than 15% or $50 an ounce and is on pace for one of its strongest quarters in 30 years.

Gold likely gained support at $1,063.20, the low from January 4 and was met with resistance at $1,260.80, the high from Feb. 11.

On Friday morning, the U.S. Department of Labor said its Consumer Price Index (CPI) for January increased by 1.4% from the prior 12 months, gaining 0.7% from December's measure. The Core CPI Index, which strips out volatile food and energy prices, also rose by 0.3% from the prior month, considerably above analysts' expectations of a 0.1% gain. On an annual basis, Core CPI increased by 2.2%, also above forecasts of 2.1%.

The headline reading, though, for monthly CPI remained flat, slightly above expectations for a decline of 0.1%. It came as energy prices crashed by nearly 3% on the month, dragged down by a 4.8% decline in monthly gasoline prices. On the upside, the services component surged by 3.0%, led by increases in medical care and prescription drug prices, while rent and owners' equivalent rent also moved higher.

In minutes from the Federal Open Market Committee's January meeting, released earlier this week, several dovish members said they wanted to see "direct evidence" that long-term inflation was moving toward the committee's objective before raising interest rates again. The Core PCE Index, the Fed's long-term gauge on inflation, has remained below its targeted goal of 2% for every month over the last three years. Following several weeks of significant global market volatility to open the year, the members noted that monetary policy was "less well positioned to respond effectively to shocks that reduce inflation than to upside shocks."

Though inflation has been restrained by temporary factors from a stronger dollar and the downturn in oil prices, Fed Cleveland president Loretta Mester noted on Friday that long-run inflation expectations have still been "relatively stable." In a speech on the economy and monetary policy at the Global Interdependence Center in Sarasota, Florida, Mester said she expects the Fed to continue to raise rates gradually if the economy remains strong. On Thursday, Fed San Francisco president John Williams described a gradual rate hike path as the "best course" of action for the FOMC.

Any rate hikes by the Fed this year are viewed as bearish for gold, which 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 more than 0.20% to an intraday low of 96.93. With several hours left in Friday's session, the index is on pace to close slightly higher for the week.

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

Silver for March delivery lost 0.027 or 0.17% to 15.405 an ounce.

Copper for March delivery gained 0.004 or 0.22% to 2.076 a pound.

Oil

U.S . crude futures fell sharply on Friday amid ongoing concerns related to excessive supply, but still ended the week up nearly 10% as the prospects of a potential output freeze from four top producers boosted prices from near 13-year lows.

On the New York Mercantile Exchange, WTI crude for April delivery wavered between $31.36 and $32.98 a barrel before settling at $31.74, down 1.20 or 3.69% on the day. Despite Friday's decline, U.S. crude futures have surged by more than 16% since falling to $26.05 a barrel on February 11, their lowest level since 2003.

On the Intercontinental Exchange, brent crude for April delivery traded between $32.69 and $34.45 a barrel, before closing at $33.02, down 1.26 or 3.68% on the session. After dipping below $30 a barrel briefly last week, North Brent Sea futures have rallied more than 8%.

Meanwhile, the spread between the international and U.S. domestic benchmarks of crude stood at $1.28 at Friday's close.

Oil prices retreated on Friday, as investors expressed skepticism that a deal brokered by Saudi Arabia, Russia and two other OPEC members to cap production at its January levels could be completed. On Friday morning, Russia deputy-energy minister Alexey Texler attempted to gain support for the deal by asserting that it could reduce global oversupply by as much as 1.8 million barrels per day (bpd). The pact, however, may require sufficient cooperation from Iran, which has been resistant to slashing production until its output returns to pre-sanction levels from 2007. While Iran oil minister Bijan Zanganeh said earlier this week that he supported any measure that would help stabilize global oil markets, he stopped short of committing to a freeze in Iranian production.

Saudi Arabia pumped 10.2 million barrels per day of oil in January, while Russian production for the month hit a post-Soviet high at 10.9 million bpd. Saudi crude output remains near a record-high of 10.5 million bpd from last summer.

"If other producers want to limit or agree to a freeze in terms of additional production, that may have an impact on the market, but Saudi Arabia is not prepared to cut production," Saudi Arabia foreign minister Adel al-Jubeir said in an interview with Agence France-Presse on Thursday.

Investors also continued to digest a bearish inventory report from the U.S. Energy Information Agency (EIA) from the previous session. For the week ending on February 12, U.S. commercial crude stockpiles rose by 2.1 million barrels to 504.1 million, remaining near historically-high levels. At the Cushing Oil Hub, the main delivery point for NYMEX oil, inventories increased by 36,000 on the week, raising fears that the nation's largest storage facility is nearing full capacity.

Elsewhere, oil-services firm Baker Hughes said in its weekly rig count that oil rigs in the U.S. fell by 29 last week to 439, marking the ninth straight week of weekly declines. The number of oil rigs in the U.S. has fallen by more than 600 over the last year.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.20% to an intraday low of 96.93. With several hours left in Friday's session, the index is on pace to close slightly higher for the week.

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

Natural Gas (Thursday Report)

U.S. natural gas futures struggled near the lowest level in two months in North America trade on Thursday, despite data showing that U.S. natural gas supplies in storage fell more than expected last week.

Natural gas for delivery in March on the New York Mercantile Exchange slumped 5.6 cents, or 2.88%, to trade at $1.886 per million British thermal units by 15:35 GMT, or 10:35AM ET, after falling to an intraday low of $1.867, a level not seen since December 18. Prices were at around $1.880 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 February 12 fell by 158 billion cubic feet, more than expectations for a decline of 154 billion.

That compares with draws of 70 billion cubic feet in the prior week, 110 billion cubic feet in the same week last year and a five-year average of around 176 billion.

Total U.S. natural gas storage stood at 2.706 trillion cubic feet, 19.7% higher than levels at this time a year ago and 20.5% above the five-year average for this time of year.

Some market experts worry there may be too much gas left in storage at the end of March when utilities traditionally start injecting the fuel back into storage for the next winter.

Meanwhile, updated weather forecasting models called for higher-than-normal temperatures later in February, dampening late-winter heating demand expectations.

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

Natural gas futures are down nearly 19% so far this year as a warmer-than-normal winter due to the El Niño weather pattern has limited the amount of heating days and reduced demand for the fuel.

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