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posted on 11 March 2016

Investing.com Weekly Wrap-up 11 March 2016

Written by , Investing.com

U.S. stocks close higher for fourth straight week, as oil triggers surge

U.S. stocks rose broadly on Friday closing higher for their fourth consecutive week, as crude soared to its highest level on the calendar year and investors felt the ripple effects from the European Central Bank's decision to implement a wide range of easing measures in order to stimulate growth throughout the zone

The Dow Jones Industrial Average surged 218.18 or 1.28% to 17,213.31, closing at near session-highs. At one point on Friday, the Dow reached its highest level since January 6.

The NASDAQ Composite index gained 86.31 or 1.85% to 4,748.47, while the S&P 500Composite index added 32.62 or 1.64% to 2,022.19. On the S&P 500, all 10 sectors closed in the green, as stocks in the Energy, Financials and Health Care industries led. In total, seven sectors closed at least 1% or higher in Friday's session. For the week, the S&P 500 rose by more than 1%.

On Friday, U.S. crude futures hit their highest level since early-December after the Paris-based International Energy Agency (IEA) said in a monthly report that it expects Non-OPEC supply to decline by 750,000 in 2016, up from previous estimates of 600,000. Shortly thereafter, crude held onto the gains after Baker Hughes said the number of oil rigs in the U.S. last week fell by nine to 480, its lowest level on record. At session-highs, WTI crude hit $41.03 a barrel on Friday, its highest amount since December 3. See complete report in seeparate section later, below.

The Dow Jones Industrial Average surged 218.18 or 1.28% to 17,213.31, closing at near session-highs. At one point on Friday, the Dow reached its highest level since January 6. The NASDAQ Composite index gained 86.31 or 1.85% to 4,748.47, while the S&P 500Composite index added 32.62 or 1.64% to 2,022.19. On the S&P 500, all 10 sectors closed in the green, as stocks in the Energy, Financials and Health Care industries led. In total, seven sectors closed at least 1% or higher in Friday's session. For the week, the S&P 500 rose by more than 1%.

The top performer on the Dow was Pfizer Inc (NYSE:PFE) (NYSE:PFE), which jumped 0.89 or 2.99% to 30.48 after the U.S. Food and Drug Administration (FDA) approved the expanded use of Xalkori, the company's drug developed to treat lung cancer. The drug is being marketed to treat non-small cell lung cancer for patients with ROS1 gene mutations. The worst performer was Wal-Mart Stores Inc (NYSE:WMT), which lost 0.33 or 0.49% to 67.08. Wal-Mart (NYSE:WMT) finished just below Procter & Gamble Company (NYSE:PG), which fell 0.37 or 0.45% to 81.91, after its chief rival Colgate-Palmolive Company (NYSE:CL) increased its quarterly dividend by 3% to 0.39.

The biggest gainer on the NASDAQ was Biomarin Pharmaceutical Inc (NASDAQ:BMRN), which added 4.55 or 5.44% to 88.15. The worst performer was Mattel Inc (NASDAQ:MAT), which lost 0.60 or 1.77% to 33.03. Despite the mild losses, shares in the toy giant are up nearly 30% over the last year as sales among its iconic Barbie line have recovered in recent months.

The top performer on the S&P 500 was Devon Energy Corporation (NYSE:DVN), which gained 2.36 or 10.50% to 24.84. As oil prices have fallen precipitously over the last year, shares in Devon Energy (NYSE:DVN) have tumbled more than 63%. The worst performer was PEPCO Holdings Inc (NYSE:POM), which lost 1.83 or 7.55% to 22.42. It came after the people's council for the District of Columbia rejected the latest merger between Exelon (NYSE:EXC) and Pepco, the public utility supplying electric power to the city of Washington D.C.

On the New York Stock Exchange, advancing issues outnumbered declining ones by a 2,652-488 margin.

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

Forex

EUR/USD retreated from three-week highs reached in the previous session, as currency traders responded to the aftershocks of the European Central Bank's decision to implement widespread easing measures at a critical meeting in the previous session.

The currency pair traded in a broad range between 1.1080 and 1.1210, before settling at 1.1148, down 0.26% on the session. On Thursday, the euro surged more than 1.6% against the dollar, following hawkish comments from ECB president Mario Draghi, enjoying one of their strongest one-day moves in three months. EUR/USD has closed over 1.11 in each of the last two sessions. Before Thursday's surge, the pair last eclipsed the threshold on February 22.

EUR/USD likely gained support at 1.0709, the low from January 5 and was met with resistance at 1.1378, the high from Feb. 11.

The sharp sell-off came one day after the ECB's Governing Council approved a comprehensive stimulus package at Thursday's meeting in a last-ditched attempt to stave off threats of deflation and bolster investor sentiment. The ECB lowered its marginal lending rate by 0.05 to 0.25% and cut its main refinance rate by 0.05% to a new record-low of zero. The Governing Council also pushed its deposit rate deeper into negative territory, by cutting it 0.1 to Minus-0.4%.

At the same time, the central bank increased the size of monthly purchases with its bond-buying program by €20 billion to 80 billion a month and extended the program by several months through March, 2017. The ECB launched the comprehensive Quantitative Easing program last March in order to increase the amount of money supply available for banks to lend money to businesses and individuals. In addition, the ECB introduced a new series of Long Term Refinancing Operations (LTROs) on Thursday and announced that it will be purchasing non-financial corporate debt issued by companies established in the euro zone.

Also on Friday, data released by the U.S. Commodity Futures Trading Commission showed that net long positions in the U.S. dollar declined from $7.45 billion to $6.88 billion last week. It marked the fourth consecutive week that net longs in the greenback dipped under $10 billion.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose mildly by 0.18% to 96.23. Since nearing 12-month highs in early-February, the dollar has slumped more than 3.4%.

Investors turn their attention to an interest rate decision by the Federal Reserve next Wednesday, following the completion of the Federal Open Market Committee's (FOMC) two-day March meeting. While the FOMC is widely expected to leave its benchmark Federal Funds Rates unchanged, the U.S. central bank could provide guidance on its pace of tightening over the next several months. In December, the FOMC abandoned a seven-year zero interest rate policy by raising the Fed Funds Rate 25 basis points to a target range between 0.25 and 0.50%.

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

Yields on the U.S. 10-Year rose by five basis points to 1.98%. Since falling below 1.75% in early-February, yields on U.S. 10-year Treasuries have increased have moved higher in four consecutive weeks, representing their longest winning streak since May, 2013.

CTFC Commitment of Traders

Speculators were more bullish on oil, gold, copper and the Japanese yen, while becoming more bearish on the euro and the British pound. Bearishness on the S&P 500 increased this week. Bullishness on the Australian dollar increased.

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

cot.2016.mar.09

Gold

Gold fell from near 13-month highs on Friday, amid heavy profit taking, as investors brace for potential divergence among major central banks, after the European Central Bank used nearly all of the tools at its disposal at a closely-watched meeting to stimulate flagging growth throughout the euro zone.

On the Comex division of the New York Mercantile Exchange, gold for April delivery traded in a broad range between $1,255.50 and $1,283.70 an ounce before settling at $1,260.30, down 12.50 or 0.98% on the session. On a volatile week of trading, gold closed virtually flat. Despite the considerable losses on Friday, gold is still up by more than 17% since the start of the new year. The precious metal remains on pace for one of its strongest opening quarters in 30 years.

Gold likely gained support at $1,063.20, the low from January 4 and was met with resistance at $1,284.70, the high from Feb. 3, 2015.

The sharp sell-off came one day after the ECB's Governing Council approved a wide range of easing measures at Thursday's meeting in a last-ditched attempt to stave off threats of deflation and bolster investor sentiment. The ECB lowered its marginal lending rate by 0.05 to 0.25% and cut its main refinance rate by 0.05% to a new record-low of zero. The Governing Council also pushed its deposit rate deeper into negative territory, by cutting it 0.1 to Minus-0.4%.

At the same time, the central bank increased the size of monthly purchases with its bond-buying program by €20 billion to €80 billion a month and extended the program by several months through March, 2017. The ECB launched the comprehensive Quantitative Easing program last March in order to increase the amount of money supply available for banks to lend money to businesses and individuals.

In addition, the ECB introduced a new series of Long Term Refinancing Operations (LTROs) on Thursday and announced that it will be purchasing non-financial corporate debt issued by companies established in the euro zone. Gold fluctuated wildly in Thursday's session, falling more than $10 an ounce following the ECB's monetary policy statement. The yellow metal then rallied sharply after ECB president Mario Draghi noted in a press conference that he does not see any need to lower rates any further if economic conditions stabilize.

Investors turn their attention to an interest rate decision by the Federal Reserve next Wednesday, following the completion of the Federal Open Market Committee's (FOMC) two-day March meeting. While the FOMC is widely expected to leave its benchmark Federal Funds Rates unchanged, the U.S. central bank could provide guidance on its pace of tightening over the next several months. In December, the FOMC abandoned a seven-year zero interest rate policy.

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, was relatively flat in U.S. afternoon trading at 96.14, down 0.05% on the session. The index, which is down more than 2% over the last two months, fell to fresh three-and-a-half-week lows on Thursday.

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

Elsewhere, the Shanghai Composite Index inched up 5.58 or 0.20% to 2,810.31, but still closed lower for the week by roughly 2.5%. On Friday, the People's Bank of China injected 20 billion yuan ($3.1 million) into the economy through reverse repo purchases, boosting its total to 85 billion on the week.

China is the world's largest producer of gold and the world's second-largest consumer behind India.

Silver for March delivery added 0.099 or 0.64% to 15.645 an ounce.

Copper for March delivery gained 0.021 or 0.95% to 2.241 a pound.

Oil

U.S. crude futures jumped to their highest level on the calendar year, extending their month-long rally from multi-year lows, as the domestic rig count last week fell to its lowest level on record.

On the New York Mercantile Exchange, WTI crude for April delivery traded in a broad range between $37.92 and $39.02 a barrel, before settling at 38.50, up 0.66 or 1.74% on the session. At session-highs, the front month contract for U.S. crude reached its highest level since early-December. Over the last month, WTI crude has soared more than 35%, rallying sharply from 13-year lows from mid-February.

On the Intercontinental Exchange (ICE), brent crude for May delivery wavered between $40.02 and $41.03 a barrel, before closing at 40.40, up 0.35 or 0.87% on the session. North Sea crude futures are also trading near 2-month highs after surging more than 27% over the last four weeks.

On Friday afternoon, oil services firm Baker Hughes said the total number of U.S. oil rigsfell by nine to 480 for the week ending on March 4. Previously, the lowest total on record came on April 23, 1999 when the rig count total dipped to 488. Separately, the total of active U.S. oil drilling rigs fell by six to 386, marking the 12th consecutive week of weekly declines.

Major reductions in the number of oil rigs nationwide typically provide lagging indications that production is about to level off. Last week, U.S. crude production ticked up by 1,000 barrels per day to 9.078 million bpd, halting a skid of six consecutive weekly declines. Last June, U.S. crude output hovered around 9.6 million bpd, its highest level in at least 40 years.

Crude prices have plummeted more than 50% since OPEC roiled global markets in November, 2014, with a strategic decision to maintain its production ceiling above 30 million barrels per day. The tactic triggered a prolonged battle with U.S. shale producers for market share, flooding global energy markets with excessive supply.

Elsewhere, crude received further upside support on Friday after the Paris-based International Energy Agency (IEA) provided indications that the prolonged rout in oil may have hit a bottom. In a monthly forecast, the IEA said that non-OPEC output would decline by 750,000 bpd in 2016, up from previous estimates of 600,000.

"There are clear signs that market forces...are working their magic and higher-cost producers are cutting output," the IEA said in the report.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, was relatively flat in U.S. afternoon trading at 96.14, down 0.05% on the session. The index, which is down more than 2% over the last two months, fell to fresh three-and-a-half-week lows on Thursday.

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 turned lower in North American trade on Thursday, reversing gains after data showed U.S. natural gas supplies in storage fell broadly in line with market expectations last week.

Natural gas for delivery in April on the New York Mercantile Exchange shed 1.6 cents, or 0.91%, to trade at $1.736 per million British thermal units by 15:35GMT, or 10:35AM ET. Prices were at around $1.788 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 March 4 declined by 57 billion cubic feet, in line with expectations.

That compares with draws of 48 billion cubic feet in the prior week, 43 billion cubic feet in the same week last year and a five-year average of around 71 billion.

Total U.S. natural gas storage stood at 2.479 trillion cubic feet, 36.8% higher than levels at this time a year ago and 29.4% 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 advanced 4.0 cents, or 2.34%, as traders closed out bets on lower prices after futures held above key support levels.

Futures are up nearly 8% since falling to $1.611 last Friday, a level not seen since August 1998, as a failure to break below $1.610 prompted market players to cover short positions amid bullish chart signals.

Meanwhile, updated weather forecasting models continued to call for much warmer-than-normal weather through the middle of March, dampening late-winter heating demand. The above-average weather is expected to continue through most of the month.

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

Natural gas futures are down nearly 30% so far this year as weak winter heating demand, near-record production and record-high storage levels dragged down prices.

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