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posted on 29 April 2016

Investing.com Weekly Wrap-Up 29 April 2016

Written by , Investing.com

U.S. stocks post slight losses as Dow, S&P end April flat for the month

U.S. stocks fell slightly on Friday, ending April with one of their worst weeks since early-February as a sell-off in the technology and health care sectors, as well as a wave of soft economic data weighed on the major indices.

The Dow Jones Industrial Average lost 57.12 or 0.32% to 17,773.64, while the S&P 500 Composite index fell 10.51 or 0.51% to 2,065.30, each closing lower despite a late rally in the final hour of the session. At session-lows, both indices moved into negative territory for the month before recovering to close the month fractionally higher. On the S&P 500, six of 10 sectors closed in the red.

The SPDR XLV Health Care Sector ETF fell sharply, as Gilead Sciences Inc (NASDAQ:GILD) shares plunged more than 9% to 88.21 following worse than expected quarterly earnings. Shares in Valeant Pharmaceuticals International Inc (NYSE:VRX) also plummeted more than 5% to 33.37, after the embattled pharmaceutical company released its delayed annual report ahead of a deadline from U.S. federal regulators. In the report, Valeant disclosed that state officials in North Carolina have launched an investigation into the company's marketing and pricing practices. Valeant also noted that seven members of its Board of Directors have opted not to seek re-election later this year.

Stocks in the Utilities sector led, gaining more than 0.5% on the session, as inventors turned to high-dividend, defensive plays.

The NASDAQ Composite index, meanwhile, fell 29.93 or 0.62% to 4,775.36, suffering its seventh consecutive losing session. A batch of disappointing quarterly results from Apple Inc (NASDAQ:AAPL), Alphabet Inc (NASDAQ:GOOGL) and Microsoft Corporation (NASDAQ:MSFT) dragged down the NASDAQ throughout the week, after the trio of tech giants severely missed earnings forecasts. Apple shares continued their descent on Friday, one day after billionaire investor Carl Icahn announced that he was exiting his position in the world's largest company due to heightened concerns with iPhone growth prospects in China. Consequently, the NASDAQ ended April down by more than 3%.

Adding to investor jitters, consumer confidence in the U.S. slumped to a 7-month low whileCore PCE inflation fell slightly in March, potentially lowering the chances of a June interest rate hike by the Federal Reserve. The downbeat data also pushed the dollar to its lowest level since last July, bolstering commodity prices worldwide.

The VIX Volatility jumped more than two points to two-month highs at 17.09, before paring some of the gains late on Friday. For the week, the VIX jumped by more than 11%. Gold, which is viewed as a safe-haven for investors in periods of heightened economic instability, soared more than $25 an ounce to touch 15-month highs.

The top performer on the Dow was Home Depot Inc (NYSE:HD), which gained 1.16 or 0.87% to 133.89. The worst performer was Wal-Mart Stores Inc (NYSE:WMT), which fell 2.04 or 2.96% to 66.87. Shares in the world's largest retailer are still down by more than 12% over the last year.

The biggest gainer on the NASDAQ was Monster Beverage (NASDAQ:MNST), which surged more than 12% to 144.22. Earlier on Friday, the energy soft-drink company reported stronger than expected quarterly earnings, reaping the benefits from a comprehensive distribution deal with Coca-Cola Company (NYSE:KO). Amazon.com Inc (NASDAQ:AMZN) jumped 57.59 or 9.57% to 659.59 after reporting gains for the fourth straight quarter on Friday. Seagate Technology (NASDAQ:STX) fell 5.13 or 19.07% to 21.77, after the data storage company provided lower revenue guidance and flat gross margin growth following weaker than expected earnings.

On the New York Stock Exchange, declining issues outnumbered advancing ones by a 1,736-1,296 margin.

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

Forex

EUR/USD rose sharply on Friday extending a five-day winning session, as stronger than expected GDP figures in the euro zone were met with soft consumer spending data in the U.S., sending the euro soaring to seven-month highs against the dollar.

The currency pair traded in a broad range between 1.1349 and 1.1459, before settling at 1.1454, up 0.0102 or 0.90% on the session. With the considerable gains, the euro reached its highest level against the dollar since October 15. The euro ended April up by roughly 0.65% against its American counterpart.

EUR/USD likely gained support at 1.0538, the low from December 3 and was met with resistance at 1.1625, the high from Aug. 25.

The dollar moved lower in overnight trading after the People's Bank of China (PBOC) jolted foreign exchange markets by fixing the yuan 0.56% higher against the dollar, its strongest one-day move since 2005 when it decoupled with the dollar. The move came in the wake of two closely-watched central bank meetings earlier this week when the Federal Reserve and the Bank of Japan both stood pat by leaving their benchmark interest rates unchanged.

In European morning trading, Eurostat announced that GDP in the euro zone during the first quarter rose by 1.6%, above consensus forecasts of 1.4%. It came as unemployment throughout the zone fell by 0.2 to 10.2%, below analysts' expectations of 10.2%. In April, inflation in the euro area fell by 0.2%, slightly below consensus estimates of a 0.1% decline, one month after March's flat reading.

The greenback extended its slide following the release of soft economic data in the U.S. On Friday morning, the Commerce Department said its Personal Consumption Expenditures (PCE) Price Index in March rose by 0.8% on an annual basis, down slightly from February's annual gains of 1.0%. The Core PCE Index, meanwhile, increased by 1.6%, also lower compared with the previous month's level of 1.7%. Core PCE inflation, which strips out volatile food and energy prices, is the Fed's preferred gauge for inflation. The dollar then hit session-lows after the University of Michigan said consumer sentiment in April fell 0.7 to 89.0, dropping to a seven-month low. Analysts expected to see gains of 0.7 to 90.4.

While core inflation surged to its highest annual level since 2012 in January, it has still remained below the Fed's 2% objective for every month over the last three years. Hawkish members of the Fed have sent some indications they could support an interest rate hike in June if they receive signals that inflation is firming over the next two months. 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.

Dallas Fed president Rob Kaplan said on Friday that he could support further monetary policy in June or July if the U.S. economy shows signs of improvement during the second quarter. Addressing reporters on the sidelines of an OMFIF event in London, Kaplan noted that the UK's referendum on a departure from the European Union could impact the timing of the Fed's next rate hike. A potential Brexit could create a "sudden depreciation," in the pound, Kaplan said, creating a ripple effect throughout the global economy.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.60% to an intraday low of 92.98, its lowest level since last July. The index, which settled at 93.03, is down 7% since the start of December.

CTFC Commitment of Traders

This week speculators were less bearish on the euro and the British pound; they were more bullish on on the Australian dollar, Canadian dollar, gold and silver.

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

cot.2016.april.20

Gold

Gold surged to its highest level since early-2015 as investors sought shelter in the safe-haven asset, amid a considerable sell-off on global equity markets and downbeat U.S. consumer spending data which sent the dollar spiraling to nine-month lows.

On the Comex division of the New York Mercantile Exchange, gold for June delivery traded in a broad range between $1,267.00 and $1,298.95 an ounce before settling at $1,293.15, up $26.75 or 2.11% on the session. At session-highs, gold tested the $1,300 threshold, a level it last cleared on January, 22, 2015. With the massive surge, gold closed April with its fifth straight winning session, ending the month up by more than $50 an ounce. More broadly, the precious metal has soared approximately 22% since the start of the year and is on pace for one of its strongest first halves in decades.

Gold likely gained support at $1,063.20, the low from January 4 and was met with resistance at $1,322.10, the high from August 8, 2014.

Gold continued its ascent in overnight trading after markets in China recoiled in response to sharp declines late on Thursday afternoon on Wall Street. Also on Friday, the People's Bank of China (PBOC) jolted markets by fixing the yuan 0.56% higher against the dollar, its strongest one-day move since 2005 when it decoupled with the dollar. The move came in the wake of two closely-watched central bank meetings earlier this week when the Federal Reserve and the Bank of Japan both stood pat by leaving their benchmark interest rates unchanged. It also sent shockwaves throughout euro zone equity markets, as theEuro Stoxx 600, the Germany Dax and France's CAC Index all closed down by more than 2%.

Shortly thereafter, the dollar resumed its recent slide following the release of soft economic data in the U.S. On Friday morning, the Commerce Department said its Personal Consumption Expenditures (PCE) Price Index in March rose by 0.8% on an annual basis, down slightly from February's annual gains of 1.0%. The Core PCE Index, meanwhile, increased by 1.6%, also lower compared with the previous month's level of 1.7%. Core PCE inflation, which strips out volatile food and energy prices, is the Fed's preferred gauge for inflation. The dollar then hit session-lows after the University of Michigan said consumer sentiment in April fell 0.7 to 89.0, dropping to a seven-month low. Analysts expected to see gains of 0.7 to 90.4.

While core inflation surged to its highest annual level since 2012 in January, it has still remained below the Fed's 2% objective for every month over the last three years. Hawkish members of the Fed have sent some indications they could support an interest rate hike in June if they receive signals that inflation is firming over the next two months. 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.

In addition, oil prices also retreated from 2016-yearly highs after a Reuters' survey reported near-record supply from OPEC in April. The energy-driven sell-off dragged down the major indices, as the Dow Jones Industrial Average and the S&P 500 Composite index erased all of their monthly gains.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.60% to an intraday low of 92.98, its lowest level since last July. EUR/USD jumped more than 0.85% to 1.1496, its highest level since mid-October, amid stronger than expected GDP data in the euro zone. USD/JPY, meanwhile, fell to an 18-month low at 106.68, extending losses from the previous session when it suffered its worst one-day loss in seven years. Major fluctuations in the global foreign exchange market spur demand in gold, as risk-averse currency traders pile into the safe-haven asset due to heightened volatility.

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

Silver for May delivery jumped 0.262 or 1.44% to $17.825 an ounce.

Copper for May delivery rose by 0.050 or 2.22% to 2.281 a pound.

Oil

Crude futures fell back slightly from fresh yearly-highs after a survey from Reuters on Friday showed that OPEC production in April reached near-record highs, reiterating concerns related to the massive supply glut on global energy markets.

On the New York Mercantile Exchange, WTI crude for June delivery traded in a broad range between $45.24 and $46.77 a barrel, before settling at $45.91, down 0.12 or 0.26% on the session. The front month contract for U.S. crude futures ended April up by more than 17%, extending its considerably rally from multi-year lows in mid-February. Since plunging to 13-year lows on Feb. 11, WTI crude has surged approximately 65%.

On the Intercontinental Exchange (ICE), brent crude for July delivery wavered between $46.77 and $48.28 a barrel, before closing at $47.34, down 0.43 or 0.90% on the session. While the rebound in North Brent Sea futures has not been as pronounced as its U.S. counterpart, brent futures are still up by roughly 50% since crashing below $30 in mid-February. Both the international and U.S. benchmarks of crude rose sharply on the month, despite the collapse of talks at a Doha summit on April 17 aimed at achieving a comprehensive production freeze among OPEC and Non-OPEC producers.

On Friday, a Reuters survey found that OPEC increased production by 170,000 barrels per day from 32.47 million to 32.64 million bpd, according to shipping data and oil company sources. The total nearly matched January's level of 32.65 million, following the return of Indonesia to the 13-member oil cartel. In April, significant gains from Iran and Iraq more than offset a lack of production in Kuwait which was restrained by a three-day worker strike last week.

Currently, Iranian output hovers around 3.40 million bpd approaching levels from 2011 before a host of Western Powers levied widespread economic sanctions against the Persian Gulf state. Since the sanctions were eased near the start of the year, Iran has reportedly ramped up production by more than 1 million bpd with a goal of reaching 4 million by June. Iran has been hesitant to take part in a coordinated production freeze with main rival Saudi Arabia and others until its production returns to pre-sanction levels. Saudi output, meanwhile, fell slightly by 30,000 bpd to 10.15 million bpd, according to the Reuters survey. In Iraq, supply growth continued to accelerate as exports from its southern Basra region approach record-highs.

Elsewhere, investors shrugged off a bullish report from Baker Hughes on Friday afternoon after the oil services firm reported that U.S. oil rigs last week dropped by 11 to 332 last week to hit a fresh six-year low. The rig count has moved lower in each of the last six weeks. Major reductions among U.S. oil rigs typically provide lagging indication that domestic production is about to level off.

Further losses were cushioned by a weak dollar, which fell sharply following the release of soft U.S. consumer spending data. The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.60% to an intraday low of 92.98, its lowest level since last July.

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

Natural Gas (Wednesday Report)

U.S. natural gas futures fell for the third straight day on Wednesday, as traders looked ahead to fresh weekly information on U.S. gas inventories to gauge the strength of demand for the fuel.

The U.S. Energy Information Administration's storage report slated for release on Thursday is expected to show a build of approximately 70 billion cubic feet for the week ending April 22.

That compares with a gain of 7 billion cubic feet in the prior week and a five-year average rise of around 52 billion cubic feet.

Total U.S. natural gas storage stood at 2.484 trillion cubic feet as of last week, according to the U.S. Energy Information Administration, 35.4% higher than levels at this time a year ago and 32.7% above the five-year average for this time of year.

Natural gas for delivery in June on the New York Mercantile Exchange lost 3.2 cents, or 1.48%, to trade at $2.127 per million British thermal units by 13:40GMT, or 9:40AM ET.

A day earlier, natural gas futures slumped 2.8 cents, or 1.28%, as forecasts for fading heat in the eastern and central U.S. drove down prices.

Updated weather forecasting models pointed to mostly average or below normal temperatures in the lower 48 states through May 1. Natural gas prices have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting outlooks on spring gas 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.

Natural gas futures are up almost 22% since hitting a 20-year low of $1.611 in early March. Despite recent gains, prices are still down nearly 6% so far this year as weak winter heating demand, near-record production and record-high storage levels dragged down prices.

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