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posted on 01 April 2016

Investing.com Weekly Wrap-Up 01 April 2016

Written by , Investing.com

U.S. stocks kick off quarter with solid gains, amid strong jobs report

U.S. stocks rose considerably on Friday as an optimistic March jobs report provided signals of an improving domestic economy, while investors shrugged off sharp declines in crude futures demonstrating indications that equities could be on the verge of decoupling from volatile oil prices.

The Dow Jones Industrial Average gained 107.66 or 0.61% to 17,792.75, while theS&P 500 Composite index added 13.04 or 0.63% to 2,072.78, kicking off the second quarter on the right foot. The NASDAQ Composite index, meanwhile, rose 44.69 or 0.92% to 4,914.54 after receiving a considerable boost from the slumping biotech sector.

On the S&P 500, eight of 10 industries closed in the green, as stocks in the Health Care, Technology and Consumer Goods sectors led. Stocks in the energy industry lagged, plunging more than 1.45% on the session.

Volatility remained low, as the S&P 500 VIX index fell roughly 3% to an intraday low of 13.41, its lowest level year to date.

The top performer on the Dow was Goldman Sachs Group Inc (NYSE:GS), which added 2.99 or 1.90% to 159.97. Goldman Sachs (NYSE:GS), one of the world's largest banks, is coming off a disappointing quarter when it tumbled by more than 10%, ending the period as one of the worst stocks on the Dow. The worst performer was Chevron Corporation (NYSE:CVX), which fell 0.82 or 0.86% to 3.84. Energy stocks struggled on Friday after reports surfaced that Saudi Arabia will not agree to a comprehensive production freeze later this month unless Iran also pledges to cap its output.

The biggest gainer on the NASDAQ was Regeneron Pharmaceuticals Inc (NASDAQ:REGN), which surged 47.55 or 13.19% to 407.99. For the session, Biomarin Pharmaceutical Inc (NASDAQ:BMRN), Amgen Inc (NASDAQ:AMGN), Alexion Pharmaceuticals Inc (NASDAQ:ALXN) and Gilead Sciences Inc (NASDAQ:GILD) also jumped more than 2%, as the NASDAQ Biotech Sector ETF rallied sharply. It came amid indications of a spike in long call options during the second quarter, after the sector plunged nearly 28% over the first three months of the year. The worst performer was Marriott International (NASDAQ:MAR), which fell 4.04 or 5.68% to 67.14, one day after Chinese insurer Angbang dropped a $14 billion acquisition of Starwood Hotels & Resorts Worldwide (NYSE:HOT). The abandoned bid clears the way for the Starwood board to vote on a $13.2 billion merger with Marriott on April 8.

Shares in Tesla Motors Inc (NASDAQ:TSLA) jumped 7.72 or 3.36% to 237.49, following the successful launch of its new Model 3 electric car on Thursday night. On Friday, the company announced that it has received 200,000 orders in the first 24 hours since the car entered the market.

"You will not be able to buy a better car for $35,000," Tesla CEO Elon Musk said during Thursday's unveiling of the model.

Regeneron was also the top performer on the S&P 500, just ahead of Mallinckrodt(NYSE:MNK) which added 3.05 or 4.98% to 64.33. Shares in Regeneron ended the week up roughly 9%, due primarily to reports that its late-stage Eczema drug has met expectations. The worst performer was Chesapeake Energy Corporation (NYSE:CHK), which slumped 0.28 or 6.80% to 3.84. Shares in the Oklahoma City-based oil and natural gas company are down more than 70% over the last year.

On the New York Stock Exchange, declining issues outnumbered advancing ones by a 1,600 to 1,481 margin.

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

Forex

EUR/USD inched up on Friday posting its fifth consecutive winning session, as currency traders mostly shrugged off a positive U.S. jobs report days after Federal Reserve chair Janet Yellen said the U.S. central bank would take a cautious approach to the timing of its next interest rate hike.

The currency pair traded in a broad range between 1.1338 and 1.1437, before settling at 1.1389, up 0.008 or 0.07% on the session. The euro hit fresh 5-month highs on Friday morning, before the dollar trimmed losses after the release of the mostly upbeat data. In the last month alone, the euro has surged nearly 5% against its American counterpart, as longstanding concerns related to a sharp divergence in monetary policies has faded.

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

On Friday morning, the U.S. Department of Labor's Bureau of Labor Statistics (BLS) saidnonfarm payrolls rose by 215,000 in March, slightly above consensus estimates of 210,000 and extending encouraging gains from February when the labor market added an upwardly revised 245,000 nonfarm positions. The gains were concentrated in Retail Trade, Construction and Health Care, which all exhibited considerable increases over the month. After adding 48,000 jobs in March, the Retail Trade sector has grown by more than 375,000 during the last year.

U.S. labor secretary Thomas Perez said in a statement:

"The remarkable U.S. recovery continues, as total nonfarm employment increased by 215,000 in March. Beginning just a year after President Obama inherited the worst economic crisis in generations, businesses have been adding jobs at an extended, record-setting clip: a total of 14.4 million jobs over the last 73 consecutive months of private-sector job growth."

"There are so many reasons to be bullish about our economic future, but we can't become complacent about the challenges that remain. Continued weakness in manufacturing, for example, is a reminder that we must keep working to restore balance to the economy, to ensure that the recovery benefits people in all communities, up and down the income spectrum."

Although the unemployment rate inched up by 0.1 to 5.0%, it still remains near eight-year lows from the previous two months. The U-6 unemployment rate, which factors in workers marginally attached to the labor force, as well as part-time workers, rose slightly to 9.8%. By comparison, the U-6 rate stood at 10.9% last March and reached as high as 18.0% at the height of the Great Recession. The reading is the Fed's preferred gauge for unemployment, as it judges the strength of the labor market.

Notably, average hourly earnings jumped by 0.3% one month after slumping by 0.1% in February. The labor force participation rate also increased by 0.1 to 63%, while the average work week held steady at 34.4 hours.

The CME Group's (NASDAQ:CME) Fed Watch tool increased the probability of a June interest rate hike to 25.0% on Friday from 19.0% on the previous day. Last month, there was a 77% chance the Fed would raise short-term rates at least once before July, according to the CME Group. Earlier this week, Yellen said the Federal Open Market Committee (FOMC) will likely raise rates gradually in light of heightened global economic and financial risks. The FOMC has left its benchmark Federal Funds Rate at a targeted range between 0.25 and 0.50% in each of its first two meetings this year.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.10% to an intraday high of 95.10, before falling back to 94.59 in U.S. afternoon trading. The index remains near five-month lows.

One day after falling to five-week lows, yields on the U.S. 10-Year were flat at 1.77%.

CTFC Commitment of Traders

Speculators had little change of sentiment over the past week. The S&P 500 sentiment was slightly less bearish and gold slightly more bullish.

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

cot.2016.mar.23

Gold

Gold fell sharply, suffering one of its strongest one-day loss in a month, as an optimistic U.S. March jobs report signaled strong improvements in the labor market, likely pushing a June interest rate hike by the Federal Reserve back on the table.

On the Comex division of the New York Mercantile Exchange, gold for June delivery traded in a broad range between $1,210.30 and $1,236.90 an ounce, before settling at $1,218.30, down 17.30 or 1.40% on the session. At session-lows, gold dropped to near six-week lows on Friday morning. Gold is coming off its strongest quarter in 30 years when it surged nearly 15%, as a China-led global economic rout sent investors scurrying into the safe haven asset.

Gold likely gained support at $1,063.20, the low from January 4 and was met with resistance at $1,280.70, the high from Mar. 11.

On Friday morning, the U.S. Department of Labor's Bureau of Labor Statistics (BLS) said nonfarm payrolls rose by 215,000 in March, slightly above consensus estimates of 210,000 and extending encouraging gains from February when the labor market added an upwardly revised 245,000 nonfarm positions. The gains were concentrated in Retail Trade, Construction and Health Care, which all exhibited considerable increases over the month. After adding 48,000 jobs in March, the Retail Trade sector has grown by more than 375,000 during the last year.

Although the unemployment rate inched up by 0.1 to 5.0%, it still remains near eight-year lows from the previous two months. The U-6 unemployment rate, which factors in workers marginally attached to the labor force, as well as part-time workers, rose slightly to 9.8%. By comparison, the U-6 rate stood at 10.9% last March and reached as high as 18.0% at the height of the Great Recession. The reading is the Fed's preferred gauge for unemployment, as it judges the strength of the labor market.

Notably, average hourly earnings jumped by 0.3% one month after slumping by 0.1% in February. The labor force participation rate also increased by 0.1 to 63%, while the average work week held steady at 34.4 hours.

The CME Group's (NASDAQ:CME) Fed Watch tool increased the probability of a June interest rate hike to 25.7% on Friday from 19.0% on the previous day. Last month, there was a 77% chance the Fed would raise short-term rates at least once before July, according to the CME Group. Earlier this week, Fed chair Janet Yellen said the Federal Open Market Committee (FOMC) would remain cautious with future interest rate hikes in light of heightened global economic and financial risks. The FOMC has left its benchmark Federal Funds Rate at a targeted range between 0.25 and 0.50% in each of its first two meetings this year.

Any rate hikes 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, gained more than 0.10% to an intraday high of 95.10, before falling back to 94.59 in U.S. afternoon trading. The index remains near five-month lows.

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

Silver for May delivery plunged 0.534 or 3.45% to $14.930 an ounce.

Copper for May delivery fell 0.020 or 0.92% to 2.163 a pound.

Oil

Crude futures plunged more than 4%, closing near session-lows, as energy traders reacted to reports that Saudi Arabia will only freeze production at a closely-watched meeting this month if Iran decides to cap output as well.

On the New York Mercantile Exchange, WTI crude for May delivery traded in a broad range between $36.73 and $38.48 a barrel, before settling at $36.79, down 1.55 or 4.04% on the session. At session lows, U.S. crude futures fell to its lowest level since mid-March, dropping below $37 a barrel for the first time since March 16. WTI crude is coming off its strongest month in nearly a year when it surged more than 13%, amid strong indications that Saudi Arabia, Russia and two other OPEC producers will freeze output at their respective January levels when the nations meet at an April 17 summit in Doha.

On the Intercontinental Exchange (ICE), brent crude for June delivery wavered between $38.56 and $40.43, before closing at $38.68, down 1.63 or 4.04% on the trading day. NorthBrent Sea futures slipped under $39 a barrel for the first time in more than two weeks.

Both the international and U.S. domestic benchmarks of crude are up considerably since touching down to fresh multi-year lows in early-February.

Crude futures fell sharply on Friday after Mohammed Bin Salman, Saudi's deputy crown prince stubbornly insisted that the kingdom will resist any agreement to cap its output unless the pact is also signed by their Iranian rivals. While Iran has agreed to attend the OPEC-Non OPEC later this month in Qatar, Iranian officials are hesitant to limit production until it returns to pre-sanction levels from 2007. A Bloomberg survey released on Thursday found that Iran pumped 3.2 million bpd in March, its highest level since May, 2012.

Bin Salman said in an exclusive interview with Bloomberg:

"If all countries agree to freeze production, we're ready. If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door."

Despite the recent rally, crude futures are down more than 40% since November, 2014, when OPEC rattled global energy markets with a strategic decision to maintain its production ceiling above 30 million barrels per day. Last month, a Reuters survey found that OPEC increased production by 100,000 barrels per day in March to 32.47 million bpd. As markets worldwide remain awash in excessive supply, oil prices have fallen sharply below their peak of $115 a barrel from June, 2014.

Separately, oil services firm Baker Hughes said the U.S. oil rig count fell by 10 to 362 this week, falling to its lowest level since November, 2009. The combined oil and gas rig count dropped by 14 to 450, remaining near record lows hit last month. Considerable declines in the number of oil rigs nationwide typically provide lagging indications that production could be on the verge of slowing.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.10% to an intraday high of 95.10, before falling back to 94.60 in U.S. afternoon trading. The index remains near five-month lows.

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, retreating from seven-week highs after data showed U.S. natural gas supplies in storage fell more than expected last week.

Natural gas for delivery in May on the New York Mercantile Exchange jumped to an intraday peak of $2.028 per million British thermal units, a level not seen since February 11, before trading at $1.974 by 14:47GMT, or 10:47AM ET, down 2.2 cents, or 1.1%. Prices were at around $2.014 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 25 fell by 25 billion cubic feet, compared to expectations for a decline of 22 billion.

That compares with a build of 15 billion cubic feet in the prior week and a five-year average decline of around 25 billion for this time of year.

Total U.S. natural gas storage stood at 2.468 trillion cubic feet, 40.6% higher than levels at this time a year ago and 34.2% above the five-year average for this time of year.

Some market experts worry that stockpiles at the end of March will hit at an all-time high of around 2.5 trillion cubic feet, topping the end-of-withdrawal-season high of 2.472 set at the end of March in 2012.

A day earlier, natural gas futures tacked on 1.5 cents, or 0.76%, amid increased demand expectations.

Midwestern and Northeastern temperatures are expected to fall below normal into the first week in April amid a late season cold front, while a fast warm-up in the west is expected to drive cooling demand.

Natural gas prices have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting outlooks on late-winter heating demand.

Gas use typically hits a seasonal low with spring's mild temperatures, before warmer weather increases demand for gas-fired electricity generation to power air conditioning.

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 22% so far this year as weak winter heating demand, near-record production and record-high storage levels dragged down prices.

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