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posted on 22 April 2016

Investing.com Weekly Wrap-Up 22 April 2016

Written by , Investing.com

U.S. stocks mixed as Microsoft, Alphabet weigh on major indices

U.S. stocks were relatively flat on Friday, as considerable declines among Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc (NASDAQ:GOOGL) and several other major technology companies offset across the board gains following a strong batch of quarterly earnings.

The Dow Jones Industrial Average gained 21.23 or 0.12% to 18,003.75, while the S&P 500Composite index inched up 0.10 or 0.01% to 2,091.58, as both indices remained near 2016-yearly highs. The NASDAQ Composite index, meanwhile, dipped 39.66 or 0.80% to 4,906.23, finishing as the session's underperformer.

On the S&P 500, eight of 10 sectors closed in the green as stocks in the Energy, Utilities and Financials led. Stocks in the Technology industry lagged, falling nearly 2% on the session. U.S. crude futures closed above $43 a barrel, ending the week up approximately 8%. As a result, stocks in the energy sector closed up on Friday by more than 1.3%.

The top performer on the Dow was Coca-Cola Company (NYSE:KO), which added 0.96 or 2.19% to 44.62. Coca-Cola finished just above The Travelers Companies Inc (NYSE:TRV), which bounced from lows during Thursday's session when the insurance giant ended the day as the worst stock among the 30 Dow components. On Thursday, Travelers' fell sharply after the company said its profits slumped 17% over the first quarter due primary to a slew of catastrophic storms in Texas over the first three months of the year.

The worst performer was Microsoft Corporation (NASDAQ:MSFT), which tumbled 3.96 or 7.10% to 51.82. It came one day after the Redmond, Washington-based company narrowly missed analysts' quarterly forecasts, amid worse than expected results from its Cloud-based business. With the considerable losses, Microsoft shaved off 25 points from the Dow.

The biggest gainer on the NASDAQ was Endo International PLC (NASDAQ:ENDP), which extended sharp gains from the previous after analysts at JMP Securities initiated coverage in the specialty pharmaceutical company with a favorable rating. Shares in Endo International soared 2.04 or 6.41% to 33.87, building on gains from Thursday when it surged as much as 12%. Microsoft Corporation (NASDAQ:MSFT) also finished as the worst performer on the NASDAQ, just below Alphabet, which plunged 42.10 or 5.40% to 737.90. At one point, Google slipped below its 200-day moving average, while suffering one of its worst days in three years. After the close of trading on Thursday, Google missed analysts' quarterly earnings forecasts amid heavy foreign exchange and equity investment losses.

The top performer on the S&P 500 was Southwestern Energy Company (NYSE:SWN), which jumped 1.57 or 14.71% to 12.24. For the week, energy stocks soared by approximately 5%. Microsoft was the worst performer on the S&P 500, as well, just below Perrigo Company, which lost 7.18 or 5.58% to 121.50. Perrigo shares took a hit after theWall Street Journal reported that Valeant is finalizing a contract with Perrigo CEO Joseph Papa for the same position.

On the New York Stock Exchange, advancing issues outnumbered declines ones by a 2,135-908 margin.

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

Forex

EUR/USD fell to its lowest level in nearly a month on Friday, as foreign exchange traders digested dovish indications from Mario Draghi of further interest rate cuts by the European Central Bank in the coming months.

The currency pair traded between 1.1218 and 1.1309, before settling at 1.1227, down 0.0063 or 0.56% on the session. The euro fell against the dollar for the third straight trading day, closing below 1.13 for the fifth time in the last seven sessions. With the sharp losses, the euro fell to the lowest level versus the dollar since March 29. The dollar closed higher against the euro for the second straight week.

Despite the recent downturn, the euro is still up against its American counterpart by more than 3.3% since the start of the year.

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.

Investors continued to react to dovish comments from European Central Bank president Mario Draghi on Thursday regarding the likelihood of future easing measures from the central bank. It came after the ECB's Governing Council left its benchmark interest rate for the euro zone at a record-low of zero and its deposit rate unchanged at Minus-0.4%. More critically, Draghi noted that the ECB could continue to hold interest rates at comparative low levels beyond the expiration of a comprehensive EUR 80 billion a month Quantitative Easing program in March, 2017.

The decision came days before the start of the Federal Open Market Committee's (FOMC) two-day meeting on April 26-27. At the meeting, the Federal Reserve is widely expected to leave its benchmark Federal Funds Rate at a targeted range between 0.25 and 0.50%. The Fed has left short-term interest rates unchanged in each of its first two meetings this year.

This week, the majority of respondents in a poll taken by Reuters expect the Fed to hold rates firm at the meeting before approving a rate hike in June. Of 80 economists polled in the survey, more than two-thirds agreed that the FOMC will lift the Fed Funds Rate by 25 basis points in June to 0.50-0.75%. Another 20% believe the FOMC will implement its first rate hike of the year in September.

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

Elsewhere, U.S. president Barack Obama sent stark warnings to British voters on the potential trade ramifications that could ensue if they support a departure from the European Union at a highly-anticipated referendum on June 23. While addressing reporters in London at a joint news conference with UK prime minister David Cameron, Obama emphasized that the outcome of the "Brexit referendum" is a matter of "deep interest" to the U.S. Obama said:

"The United States wants a strong United Kingdom as a partner and the United Kingdom is at its best when it is helping to lead a strong Europe. Some of the folks on the other side have been ascribing to the United States certain actions we will take if the U.K. does leave the EU. Maybe at some point down the line there might be a UK-US trade agreement but it won't happen any time soon."

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged more than 0.5% to an intraday high of 95.15, its highest level in a week. The index, which closed at 95.11, is still down more than 1.5% over the last two months.

CTFC Commitment of Traders

Speculators had still another week with little change of sentiment. The S&P 500 sentiment was modestly less bearish, while bullishness increased slightly for the yen and bearishness decreased slightly for the euro. Extreme bullishness continued for both oil and gold, and bullishness increased for silver.

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

cot.2016.april.20

Gold

Gold fell sharply on Friday, amid a considerable sell-off late in the session, as a persistently sluggish dollar surged to one-week highs weighing on the yellow metal.

On the Comex division of the New York Mercantile Exchange, gold for June delivery traded in a tight range between $1,241.90 and $1,254.10 an ounce before settling at 1235.10, down 15.20 or -1.22%% on the day. After eclipsing $1,270 on Thursday to reach its highest level in more than a month, gold posted its second consecutive losing session. Consequently, Gold closed lower for the second time in three weeks. Despite Friday's significant losses, the precious metal is still up more than 16% since the start of the year and is on pace for one of its strongest opening halves in more than a decade.

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.

Metal traders continued to digest relatively dovish comments from European Central Bank president Mario Draghi on Thursday regarding the likelihood of future easing measures from the central bank. It came after the ECB's Governing Council left its benchmark interest rate for the euro zone at a record-low of zero and its deposit rate unchanged at Minus-0.4%. More critically, Draghi noted that the ECB could continue to hold interest rates at comparative low levels beyond the expiration of a comprehensive €80 billion a month Quantitative Easing program in March, 2017.

The decision came days before the start of the Federal Open Market Committee's (FOMC) two-day meeting on April 26-27. At the meeting, the Federal Reserve is widely expected to leave its benchmark Federal Funds Rate at a targeted range between 0.25 and 0.50%. The Fed has left short-term interest rates unchanged in each of its first two meetings this year. This week, the majority of respondents in a poll taken by Reuters expect the Fed to hold rates firm at the meeting, before approving a rate hike in June. Of the 80 economists polled in the survey, more than two-thirds agreed that the FOMC will lift the Fed Funds Rate by 25 basis points in June to 0.50-0.75%. Another 20% believe the FOMC will implement its first rate hike of the year in September.

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.

Elsewhere, factory conditions in the U.S. remain soft as the PMI Manufacturing Index flash reading for April fell 0.6 to 50.8, sharply below analysts' expectations of 52.0. Any reading above 50.0 provides indications of monthly growth. Nevertheless, April's flash reading represents its lowest level since the start of the recovery of global financial markets.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged more than 0.5% to an intraday high of 95.15, its highest level in a week. The index is still down more than 1.5% over the last two months.

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

Yields on the U.S. 10-Year reached an intraday high of 1.897%, hitting its highest level in three weeks for a second consecutive session.

Silver for May delivery lost 0.215 or 1.26% to $16.875 an ounce, falling off from near 11-month highs from earlier in the week.

Copper for May delivery gained 0.013 or 0.58% to close at $2.264 a pound.

Oil

Crude futures pared earlier gains but still remained near monthly highs, as the dollar firmed on Friday and oil rig counts throughout the U.S. fell mildly last week to hit a fresh record-low.

On the New York Mercantile Exchange, WTI crude for June delivery traded in a broad range between $43.11 and $44.45 a barrel, before settling at $43.77, up 0.59 or 1.37% on the session. U.S. crude futures have responded to a stretch of four consecutive losses from last week with a subsequent four-day winning streak dating back to Tuesday's session. On the Intercontinental Exchange (ICE), brent crude for June delivery wavered between $44.30 and $45.89 a barrel, before closing at $45.13, up 0.60 or 1.35% on the session.

Both WTI and Brent ended the week near 2016-yearly highs after surging at least 4% over the last five days. The latest upswing is viewed as somewhat of a surprise by analysts, following Sunday's failure by 18 major producers to come terms on a comprehensive agreement, which could have resulted in an output freeze among OPEC and Non-OPEC producers. The collapse in talks, however, was accompanied by a three-day worker strike in Kuwait, which bolstered oil prices worldwide.

The spread between the U.S. and international benchmarks of crude stood at $1.36, above Thursday's level of $1.28 at the close of trading.

Oil prices worldwide are up by more than 40% since falling to 12-year lows in mid-February. Crude futures have now closed higher in each of the last three weeks.

On Friday afternoon, oil services firm Baker Hughes said in its weekly rig count report that U.S. oil rigs last week fell by eight to 343. The domestic oil rig count in the U.S. has now fallen in 15 of the last 16 weeks. Over the last year, oil rigs nationwide have declined by 360 and are down by approximately 1,600 since the height of the Financial Crisis. Meanwhile, gas rigs inched down by one to 88, pulling the combined rig count to 431, down by nine on the week.

Any considerable declines in the domestic rig count typically provide lagging indicators that U.S. production is about to level off.

The U.S. Energy Information Administration (EIA) said Wednesday that U.S. production fell by 24,000 bpd to 8.953 million barrels per day last week, dropping to a fresh 18-month low. Despite the recent upturn, crude prices are still down by more than 50% from their level in June, 2014 when they peaked at $115 a barrel.

While some analysts expect Non-OPEC production growth to fall this year by its highest amount in 25 years, global supply still outstrips demand by more than 1 million barrels per day. Earlier this week, French investment bank Natixis said it expect U.S. production to fall by more than 0.5-0.6 million bpd this year if prices remain below $50 a barrel. A report from Natixis analyst Abhishek Deshpande included the following:

"We would expect producers in the US taking every opportunity to aggressively hedge as soon as there is opportunity when oil prices recover for short periods of time due to either outages or geopolitical risks. With cash-flow negative, there is only so long before we would see more bankruptcies, along with market consolidation and increased M&A. On one hand, there is the increased likelihood of US production declining slightly faster than anticipated in our analysis - perhaps helping markets balance structurally - but it would still take until the end of 2016 or even early 2017 for that to happen."

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged more than 0.5% to an intraday high of 95.15, its highest level in a week. The index is still down more than 1.5% over the last two months.

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

Crude pares earlier gains but still posts third straight weekly increase

Natural Gas (Thursday Report)

U.S. natural gas prices moved higher on Thursday, despite data showing that stockpiles rose more than expected last week, as risk sentiment remained supported by higher oil prices.

On the New York Mercantile Exchange, natural gas for delivery in May was up 0.63% to $2.081 per million British thermal units. Prices were at around $2.075 prior to the release of the supply data.

In its weekly report, the Energy Information Administration said natural gas storage in the week ended April 15 rose by 7 billion cubic feet, compared to expectations for an increase of 4 bcf.

Total U.S. natural gas storage stood at 2,484 bcf the EIA said. Stocks were 881 bcf higher than last year at this time and 811 bcf above the five-year average of 1,673 bcf for this time of year.

Oil prices were moving lower after the report, but sentiment remained supported as crude rose to its highest level since November earlier Thursday, after the International Energy Agency said 2016 would see the biggest fall in non-OPEC production in a generation.

The recovery in oil prices drove global stocks and commodity markets higher.

A warmer-than-normal 2015-2016 winter in the U.S. reduced demand for natural gas as an indoor-heating fuel.

Sluggish demand combined with record high production levels has pushed the natural-gas market into oversupply. Stockpiles are currently standing at more than 50% above their five-year average for this time of year.

The demand outlook is expected to moderate with spring's mild temperatures, before warmer weather increases demand for gas-fired electricity generation to power air conditioning, but analysts don't expect the glut of natural gas to shrink until next winter or later.

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