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posted on 04 March 2016

Investing.com Weekly Wrap-Up 04 March 2016

Written by , Investing.com

U.S. stocks hit 2-month high, as strong job gains ease recession fears

U.S. stocks pared early gains on Friday, but still closed at their highest levels in two months as domestic nonfarm jobs rose sharply last month helping ease longstanding concerns that the economy could be on the verge of falling into recession.

The Dow Jones Industrial Average added 62.87 or 0.37% to 17,006.77, closing higher for the third-consecutive week, while the NASDAQ Composite index gained 9.60 or 0.20% to 4,717.02 after holding onto its gains in the final minutes of the session. The S&P 500Composite index, meanwhile, added 6.59 or 0.33% to 1,999.99, as seven of 10 sectors closed in the green.

On Friday morning, the U.S. Department of Labor reported that nonfarm payrolls soared by 242,000 in February, above consensus estimates of 190,000 and significantly higher than January's upwardly revised total of 172,000. The unemployment rate held steady at eight-year lows at 4.9%, while the labor force participation rate inched up to 62.9%. The robust job gains sent U.S. Stock Index futures higher in pre-market trading, before the major indices steadily moved lower throughout the session as analysts parsed the data from the critical report.

At the same time, investors reacted to slight declines in average hourly earnings last month, which prompted investors to push back their expectations for the timing of the Federal Reserve's next interest rate hike.

Stocks in the Basic Materials and Utilities industries led, each gaining more than 1% on the day. Energy stocks also closed moderately higher, as crude prices surged to a two-month high after oil rigs nationwide fell last week for the 11th consecutive week.

The top performer on the Dow was EI du Pont de Nemours and Company (NYSE:DD), which gained 1.27 or 2.05% to 63.18. DuPont finished just above Apple Inc (NASDAQ:AAPL), which added 1.51 or 1.49% to 103.01, as some of its top rivals including Alphabet Inc (NASDAQ:GOOGL), Amazon.com Inc (NASDAQ:AMZN) and eBay Inc (NASDAQ:EBAY) joined others such as Twitter Inc (NYSE:TWTR) and Facebook Inc(NASDAQ:FB) in supporting the tech giant in its court battle with the FBI. Attorneys from Apple (NASDAQ:AAPL) are scheduled to appear before a U.S. federal magistrate on March 22 to argue against a motion that could compel the company to unlock a phone that belonged to one of the suspects in the San Bernardino terror attacks. The worst performer was Home Depot Inc (NYSE:HD), which slumped 1.24 or 0.98% to 125.56.

The biggest gainer on the NASDAQ was SWKS, which soared 2.91 or 4.15% to 73.01, after AVGO topped analysts quarterly earnings forecasts and offered strong guidance for the second quarter. In a conference call on Friday, Broadcom (NASDAQ:BRCM) executives said they expect a "substantial increase" in iPhone 7 sales during the current quarter. Skyworks Solutions is one of the top chip suppliers on the market for Apple iPhones. The worst performer was Symantec (NASDAQ:SYMC), which fell 3.90 or 19.01% to 16.62, moving off six-week highs from the previous session. On Thursday, Symantec shares rose sharply after reports surfaced that the company will offer a dividend of 4.00 per share to investors of record on March 8.

The top performer on the S&P 500 was Chesapeake Energy Corporation (NYSE:CHK), which added 0.81 or 18.97% to 5.08. The Oklahoma City-based oil & gas company topped the S&P 500 for the third consecutive session, surging more than 95% since the close of trading on Tuesday. Former Chesapeake Energy (NYSE:CHK) CEO Aubrey McClendon was found dead in a fiery car accident on Wednesday morning, hours before he was scheduled to appear in court to face bid rigging charges related to a series of oil and land leases.

Chesapeake shares have posted one of their strongest three-day rallies in the history of the stock after the U.S. Department of Justice granted the company immunity on the condition they will disclose potential antitrust violations in the case. Symantec was also the worst performer on the S&P 500, just below H&R Block Inc (NYSE:HRB) which plunged 5.14 or 15.62% to 27.76.

On the New York Stock Exchange, advancing issues outnumbered declining ones by a 2,018-1,095 margin.

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

Forex

EUR/USD rose sharply on Friday moving above 1.10 for the first time in March, as investors dismissed the possibility of a March interest rate hike by the Federal Reserve after average hourly wages fell slightly last month.

The currency pair traded between 1.0905 and 1.1043, before settling at 1.1006, up 0.0049 or 0.45% on the session. After opening March at near three-week lows, the euro has closed higher against the dollar in each of the last three sessions. Previously, the euro tumbled nearly 4% against its American counterpart amid strong indications that the European Central Bank will use nearly all of the tools at its disposal next week to help bolster weak economic growth throughout the euro zone.

While Friday's monthly jobs report from the U.S. Department of Labor could mostly be characterized as positive, investors focused on a slight decrease in average hourly earnings by 0.1% in February following robust gains of 0.5% a month earlier. It marked the first decline in hourly wages for a single month since the end of 2014. For all employees on private nonfarm payrolls, average hourly earnings fell 0.03 to $25.35 following gains of 0.12 in January. Wages among nonsupervisory employees and workers in private-sector production were unchanged at $21.32 an hour. On an annual basis, average hourly earnings rose by 2.2%, falling by 0.3% from the previous month after a host of state minimum wage increases went into effect at the start of the year.

Over the last several years, the Federal Open Market Committee has expressed significant concerns related to the slow pace of wage growth, as the U.S. economy continues to recover from the Great Recession. The disappointing reading could compel the U.S. central bank to delay the timing of its next interest rate hike beyond the first half of 2016. At the end of last year, the FOMC raised the target range of its benchmark interest rate by 25 basis points to 0.25 and 0.50%, ending a seven-year zero interest rate policy.

The CME Group's (NASDAQ:CME) Fed Watch tool lowered the probability of an interest rate hike at the FOMC's meeting on March 15-16 to 1.9% on Friday, down from 29.6% a day earlier. There is still a 32% chance the FOMC will raise rates in June, according to the CME, up from 4.2% a month ago.

Nonfarm payrolls, meanwhile, soared by 242,000 in February, above consensus estimates of 190,000 and significantly higher than January's upwardly revised total of 172,000. The Labor Department reported employment gains in Health Care, Social Assistance and Food Services and Drinking Places, while recording losses in the struggling mining sector. Since December, the U.S. economy has added an average of 225,000 jobs per month.

The unemployment rate remained steady at 4.9%, one month after falling to its lowest level in eight years. The U-6 unemployment rate, which measures the level of workers that are marginally attached to the labor market, fell 0.2 to 9.7%. By comparison, the Fed's preferred gauge of U.S. unemployment, peaked at 18% in 2010 at the end of the Financial Crisis.

Investors turn their attention to the ECB's monetary policy meeting next Thursday in Frankfurt, where its Governing Council is widely expected to approve a wide range of stimulus measures. When the central bank last met in January, it held its benchmark interest rate at a record-low of 0.05. Next week, the ECB could lower its deposit and margin facility rates, while increasing the scope of its €60 billion a month bond buying program.

Yields on the U.S. 10-Year rose four basis points to 1.87%, while yields on theGermany 10-Year soared seven basis points to 0.24%. Yields on both government bonds are down by more than 10 basis points over the last year. On Friday, yields on 10-year Treasuries reached an intraday high of 1.902%, considerably above their low from Feb. 11 when they slid to 1.53%.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.40% to an intraday low of 97.03, before rallying to 97.25 at the close.

Any rate hikes by the Fed this year are viewed as bullish for the dollar, as investors pile into the greenback to capitalize on higher yields.

CTFC Commitment of Traders

Speculators were more bullish on oil, gold and the Japanese yen, while becoming more bearish on the euro and the British pound. The bearishness on the S&P 500 decreased this week.

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

cot.2016.mar.02

Gold

Gold surged on Friday reaching its highest level in 13 months, as market players wagered that the Federal Reserve will slow the pace of its tightening cycle after average hourly wages stagnated last month.

On the Comex division of the New York Mercantile Exchange, gold for April delivery traded in a broad range between $1,251.30 and $1,280.60 an ounce, before settling at 1,270.90, up 12.70 or 1.01% on the day. At session highs, gold futures reached their highest level since early-February of last year. After enjoying 10% gains last month, gold remains on pace for its strongest quarter in three decades.

Gold likely gained support at $1,063.20, the low from January 4 and was met with resistance at $1,280.60, the high from Feb. 3, 2015.

While Friday's monthly jobs report from the U.S. Department of Labor could mostly be characterized as positive, investors focused on a slight decrease in average hourly earnings by 0.1% in February following robust gains of 0.5% a month earlier. It marked the first decline in hourly wages for a single month since the end of 2014. For all employees on private nonfarm payrolls, average hourly earnings fell 0.03 to $25.35 following gains of 0.12 in January. Wages among nonsupervisory employees and workers in private-sector production were unchanged at $21.32 an hour. On an annual basis, average hourly earnings rose by 2.2%, falling by 0.3% from the previous month after a host of state minimum wage increases went into effect at the start of the year.

Over the last several years, the Federal Open Market Committee has expressed significant concerns related to the slow pace of wage growth, as the U.S. economy continues to recover from the Great Recession. The disappointing reading could compel the U.S. central bank to delay the timing of its next interest rate hike beyond the first half of 2016. At the end of last year, the FOMC raised the target range of its benchmark interest rate by 25 basis points to 0.25 and 0.50%, ending a seven-year zero interest rate policy.

The CME Group's (NASDAQ:CME) Fed Watch tool lowered the probability of an interest rate hike at the FOMC's meeting on March 15-16 to zero on Friday, down from 29.6% a day earlier. The CME also reduced the odds of a June rate increase from 29.6% on Thursday to 25.7% following the release.

Any rate hikes this year are viewed as bearish for gold, which struggles to compete with high yield bearing assets in rising rate environments.

Nonfarm payrolls, meanwhile, soared by 242,000 in February, above consensus estimates of 190,000 and significantly higher than January's upwardly revised total of 172,000. The Labor Department reported employment gains in Health Care, Social Assistance and Food Services and Drinking Places, while recording losses in the struggling mining sector. Since December, the U.S. economy has added an average of 225,000 jobs per month.

The unemployment rate remained steady at 4.9%, one month after falling to its lowest level in eight years. The U-6 unemployment rate, which measures the level of workers that are marginally attached to the labor market, fell 0.2 to 9.7%. By comparison, the Fed's preferred gauge of U.S. unemployment, peaked at 18% in 2010 at the end of the Financial Crisis.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.35% to an intraday low of 97.03, before rallying to 97.35 in U.S. afternoon trading.

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

Silver for March delivery soared 0.574 or 3.73% to 15.705 an ounce.

Copper for March jumped 0.065 or 2.92% to close at 2.273 a pound.

Oil

Crude futures closed slightly lower on a volatile, see-saw day of trading, reacted to a sharp decline in U.S. oil rigs last week and comments from Venezuela's oil minister on a meeting next month between OPEC and Non-OPEC members that could result in an output freeze by four major producers.

On the New York Mercantile Exchange, WTI crude for April delivery wavered between $32.67 and $34.66 a barrel before settling at $32.78, down 0.29 or 0.88% on the day. Although WTI crude halted a three-day winning streak, it still closed higher for the second consecutive week. Since falling to 13-year lows at $26.05 on February 11, U.S. crudefutures have rebounded by approximately 15%.

On the Intercontinental Exchange, brent crude for April delivery traded between $34.73 and $36.99 a barrel before closing at $35.10, down 0.19 or 0.54% on the session. At session-highs, North Brent sea futures reached their highest level since early-January. Brent futures are up by roughly 10% since briefly dropping below $30 a barrel in mid-February.

Meanwhile, the spread between the international and U.S. benchmarks of crude stood at $2.32, above Thursday's level of $1.99 at the close of trading.

Investors on Friday continued to react to comments from Eulogio Del Pino, a day after the Venezuelan oil minister reiterated that OPEC will host a meeting next month to discuss a potential production freeze among a group of major exporters. The summit, Del Pino, told broadcast network Telesur, will include 10 nations, including Saudi Arabia, Russia and Qatar. The aforementioned trio, as well as Venezuela, agreed in principle to an agreement last week, in which the four nations have pledged to limit their production this year to levels reached in January.

The pact could help stabilize cascading oil prices, which have tumbled more than 70% as top producers have saturated the market with a glut of oversupply in an effort to dominate market share. Crude futures have also crashed more than $40 a barrel since OPEC rattled markets in November, 2014, by maintaining its production ceiling above 30 million barrels per day as part of an apparent strategy to crowd out high-cost U.S. shale producers.

Earlier this week, Russia energy minister Alexander Novak cautioned that the low price cycle could last through 2017 if the so-called Doha Agreement is not adopted by the four nations. It followed bearish remarks from Saudi Arabian counterpart Ali al-Naimi, who emphatically told an audience at the CERAWeek Energy Conference in Houston that the kingdom will not lower production from its January total. Both Russia and Saudi Arabia are pumping oil at near-record levels, above 10 million barrels per day.

Oil services firm Baker Hughes said Friday that U.S. oil rigs fell by 13 to 400 for the week ending on Feb. 19, marking the 10th straight week of such declines. The U.S. oil rig count is at its lowest level since December, 2009. The U.S. Energy Information Administration (EIA) said on Wednesday that production dipped by 33,000 to 9.102 million last week, falling for the fifth consecutive week.

While U.S. shale producers have demonstrated resiliency over the last 15 months by drilling efficiently, major reductions in the rig count are viewed as a lagging indicator of falling production.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged more than 0.80% to an intraday high of 98.29. The index reached its highest level in nearly three weeks.

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 bounced off 17-year lows in North American trade on Thursday, after data showed U.S. natural gas supplies in storage fell more than expected last week.

Natural gas for delivery in April on the New York Mercantile Exchange fell to an intraday low of $1.633 per million British thermal units, a level not seen since February 1999, before recovering to trade at $1.667 by 15:35GMT, or 10:35AM ET, down 1.1 cents, or 0.66%. Prices were at around $1.648 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 26 declined by 48 billion cubic feet, more than expectations for a decline of 41 billion.

That compares with draws of 117 billion cubic feet in the prior week, 198 billion cubic feet in the same week last year and a five-year average of around 138 billion.

Total U.S. natural gas storage stood at 2.536 trillion cubic feet, 31.3% higher than levels at this time a year ago and 26.3% 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.

A day earlier, natural gas futures sank 6.4 cents, or 3.67%, as weather models kept pointing to higher-than-normal temperatures during the first ten days of March, dampening late-winter heating demand.

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

Natural gas futures are down nearly 31% 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.

Elsewhere on the Nymex, crude oil for delivery in April shed 3 cents, or 0.11%, to trade at $34.63 a barrel, while heating oil for April delivery inched up 0.36% to trade at $1.110 per gallon.

Natural gas futures are down nearly 23% 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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