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posted on 24 June 2016

Investing.com Weekly Wrap-Up 24 June 2016

Written by , Investing Daily

U.S. stocks lower at close of trade; Dow Jones Industrial Average down 3.39%

U.S. stocks were lower after the close on Friday, as losses in the Financials, Basic Materials and Technology sectors led shares lower.

At the close in NYSE, the Dow Jones Industrial Average fell 3.39% to hit a new 3-months low, while the S&P 500 index declined 3.60%, and the NASDAQ Composite index declined 4.12%.

The best performers of the session on the Dow Jones Industrial Average were Wal-Mart Stores Inc (NYSE:WMT), which fell 0.19% or 0.14 points to trade at 71.96 at the close. Meanwhile, Verizon Communications Inc (NYSE:VZ) fell 0.44% or 0.24 points to end at 54.43 and UnitedHealth Group Incorporated (NYSE:UNH) was down 1.36% or 1.90 points to 137.29 in late trade.

The worst performers of the session were Goldman Sachs Group Inc (NYSE:GS), which fell 7.07% or 10.80 points to trade at 141.86 at the close. JPMorgan Chase & Co (NYSE:JPM) declined 6.95% or 4.45 points to end at 59.60 and Caterpillar Inc (NYSE:CAT) was down 6.64% or 5.19 points to 73.03.

The top performers on the S&P 500 were Newmont Mining Corporation (NYSE:NEM) which rose 5.09% to 37.19, Hormel Foods Corporation (NYSE:HRL) which was up 2.17% to settle at 35.34 and Consolidated Edison Inc (NYSE:ED) which gained 2.02% to close at 78.41.

The worst performers were Invesco Plc (NYSE:IVZ) which was down 13.67% to 25.57 in late trade, Lincoln National Corporation (NYSE:LNC) which lost 13.30% to settle at 38.47 and Delphi Automotive plc (NYSE:DLPH) which was down 12.22% to 62.07 at the close.

The top performers on the NASDAQ Composite were Biostar Pharmaceuticals Inc (NASDAQ:BSPM) which rose 30.58% to 4.2700, Micronet Enertec Technologies Inc (NASDAQ:MICT) which was up 27.16% to settle at 2.047 and Skullcandy Inc (NASDAQ:SKUL) which gained 23.08% to close at 5.760.

The worst performers were Zais Group Holdings Inc (NASDAQ:ZAIS) which was down 25.37% to 3.000 in late trade, Ultrapetrol Ltd (NASDAQ:ULTR) which lost 19.12% to settle at 0.3316 and PhotoMedex Inc (NASDAQ:PHMD) which was down 17.24% to 0.2400 at the close.

Falling stocks outnumbered advancing ones on the New York Stock Exchange by 2719 to 594 and 14 ended unchanged; on the Nasdaq Stock Exchange, 2204 fell and 405 advanced, while 33 ended unchanged.

Shares in Newmont Mining Corporation (NYSE:NEM) rose to 3-years highs; rising 5.09% or 1.80 to 37.19. Shares in Consolidated Edison Inc (NYSE:ED) rose to all time highs; gaining 2.02% or 1.55 to 78.41.

The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was up 43.65% to 24.78 a new 3-months high.

Gold for August delivery was up 4.52% or 57.15 to $1320.25 a troy ounce. Elsewhere in commodities trading, Crude oil for delivery in August fell 4.97% or 2.49 to hit $47.62 a barrel, while the August Brent oil contract fell 4.87% or 2.48 to trade at $48.43 a barrel.

EUR/USD was down 2.46% to 1.1103, while USD/JPY fell 3.53% to 102.42.

The US Dollar Index was up 2.52% at 95.68.

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

Forex

GBP/USD pared some losses after crashing more than 10% to 31-year lows, as the Bank of England and other top central banks tried to soothe markets in the wake of a historic decision by voters in the U.K. to leave the European Union.

The currency pair traded in a broad range between 1.3231 and 1.4651 before settling at 1.3683, down 0.1194 or 8.03% on the session. With the crippling losses, the British Pound erased all of its gained from the previous week when it rose sharply against the dollar amid indications that a potential Brexit could be averted. The Pound Sterling is now down by more than 7% against its American counterpart since the start of the year when it opened above 1.47.

In London, U.K. prime minister David Cameron announced intentions to step down by October after the final tally in the controversial referendum showed that the Leave campaign prevailed by a 52-48% margin. While top global central bankers convened in Basel to execute an emergency contingency plan, Bank of England governor Mark Carney said the Bank has set aside £250 billion of additional liquidity and will act if necessary to help support the British economy.

"Inevitably, there will be a period of uncertainty and adjustment following this result," Carney said on Friday morning. "It will take some time for the United Kingdom to establish new relationships with Europe and the rest of the world, some market and economic volatility can be expected as this process unfolds. But we are well prepared for this...The Bank will not hesitate to take additional measures as required as those markets adjust and the UK economy moves forward."

The precipitous fall in the Pound draws parallels to Black Wednesday on September 16, 1992 when the U.K. opted out of the EU's Exchange Rate Mechanism (ERM). For the session, GBP/USD plunged 4.5% to 1.76 before falling to 1.69 in the subsequent week, down nearly 10% for the period. Investor George Soros, who reportedly made a profit of $1 billion betting against the Pound, said earlier this week that the Pound Sterling could tumble as much as 20% if the Brexit vote prevailed.

Moody's, one of the top three credit rating agencies in the world, downgraded the U.K.'s bond rating from stable to negative in response to the Brexit results. In reaching its decision, Moody's cited weaker domestic economic growth and the possibility for reduced fiscal strength from the government.

Yields on the UK 10-Year plunged 29 basis points to 1.08, while yields on theGermany 10-Year fell 14 basis points to Negative-0.05%, after falling to fresh record-lows earlier in the session. In the U.S., yields on 10-Year Treasuries dropped 19 basis points to 1.56%, hovering near their lowest level on record.

Meanwhile, the Federal Reserve said in a statement on Friday morning that it is carefully monitoring market developments in cooperation with other central banks, in response to the results of the referendum. On Tuesday, Fed chair Janet Yellen told members of the U.S. Senate Banking Committee that a U.K. departure from the EU could have serious repercussions for financial markets worldwide.

"The Federal Reserve is prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the U.S. economy," the U.S. central bank said in a statement.

Last week, the Federal Open Market Committee (FOMC) said the potential of a victory by the Leave campaign played a role in its decision to leave interest rates unchanged at its June monetary policy meeting. The FOMC has held the target range of its benchmark Federal Funds Rate steady at a level between 0.25 and 0.50% in each of its four meetings this year.

The CME Group's (NASDAQ:CME) Fed Watch tool responded to Friday's market developments by taking a September rate hike off the table. The CME Group also said there is a 17.8% probability the FOMC could raise the Fed Funds Rate to 0.50-0.75% in December, down from 42.6% one day earlier. In addition, the CME Group said there is a 12.7% chance the FOMC could lower rates to the zero-bound range in September. Last December, the FOMC halted a seven-year zero interest rate policy by raising short-term rates for the first time in nearly a decade.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose more than 2.5% to a three-month high at 96.70, before falling back to 95.63 at the close. The index posted its strongest one-day move in more than five years.

CTFC Commitment of Traders

Note: This data closes on Wednesday so the last two days of trading, and especially Brexit, are not reflected. The big moves in all markets today (Friday) have undoubtedly produced shifts in trader sentiment.

cot.2016.jun.22

Gold

Gold retreated from 27-month highs but remained supported as a safe-haven asset on Friday, as leading central banks rushed to soothe global markets following asurprising decision by voters in the U.K. to approve a referendum that paves the way for a British departure from the European Union.

On the Comex division of the New York Mercantile Exchange, Gold for August delivery closed at $1,319.75, up $56.55 or 4.48% on the session. At session-highs, the front month contract for Gold surged nearly $100 an ounce to $1,362.45, its highest level since March, 2014 after major broadcasting networks called for a resounding victory by the Leave campaign just after 1:00 a.m. Eastern Standard Time. Had the precious metal held onto the gains, Gold would have posted its strongest one-day session since the Financial Crisis.

Gold likely gained support at $1,247.30, the low from June 8 and was met with resistance at $1,344.00, the high from February 26, 2014.

In London, U.K. prime minister David Cameron announced intentions to step down by October after U.K. voters decided to leave the EU by a 52-48% margin. Hours earlier as a Leave vote became increasingly likely, the Pound fell as much as 10% against the U.S. dollar to an intraday low of 1.3231, its lowest level in three decades. While top global central bankers convened in Basel to execute an emergency contingency plan, Bank of England governor Mark Carney said the Bank has set aside £250 billion of additional liquidity and will act if necessary to help support the British economy.

"Inevitably, there will be a period of uncertainty and adjustment following this result," Carney said on Friday morning. "There will be no initial change in the way our people can travel, in the way our goods can move or the way our services can be sold."

"It will take some time for the United Kingdom to establish new relationships with Europe and the rest of the world, some market and economic volatility can be expected as this process unfolds. But we are well prepared for this...The Bank will not hesitate to take additional measures as required as those markets adjust and the UK economy moves forward."

As investors exited from their positions in the Pound and euro area financial stocks, they engaged in a flight to safety to Gold, low-risk government bonds and safe-haven currencies such as the Japanese Yen, Swiss Franc and the U.S. Dollar. At one point, USD/JPYplunged to 99.02, its lowest level since November, 2013, before rallying to 102.28 (down 3.66%). In Tokyo, Bank of Japan governor Haruhiko Kuroda said the Finance Ministry willmonitor currency fluctuations more carefully, while the BOJ had swap lines in place to offer liquidity, if needed.

Meanwhile, EUR/CHF fell to a 10-month low at 1.0623, before paring the losses when the Swiss National Bank (SNB) confirmed that it intervened in foreign exchange markets and sold the safe-haven Franc to help stabilize the currency. Earlier, the Swiss Franc staged its strongest one-day rally since the SNB removed its currency peg to the euro last January.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose more than 2.5% to a three-month high at 96.70, before falling back to 95.59 in U.S. afternoon trading. The index posted its strongest one-day move in more than five years.

On Friday morning, the Federal Reserve said that it is carefully monitoring market developments in cooperation with other central banks, in the wake of the results of the U.K. referendum. It came days after Fed chair Janet Yellen told lawmakers on Capitol Hill that a U.K. departure from the EU could have serious repercussions for financial markets worldwide.

"The Federal Reserve is prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the U.S. economy," the U.S. central bank said in a statement.

Last week, the Federal Open Market Committee (FOMC) said the potential of a victory by the Leave campaign played a role in its decision to leave interest rates unchanged at its June monetary policy meeting. The FOMC has held the target range of its benchmark Federal Funds Rate at a level between 0.25 and 0.50% in each of its four meetings this year.

The CME Group's (NASDAQ:CME) Fed Watch tool responded to Friday's market developments by taking a September rate hike off the table. The CME Group also said there is a 20.9% probability the FOMC could raise the Fed Funds Rate to 0.50-0.75% in December, down from 42.6% one day earlier. In addition, the CME Group said there is a 10.5% chance the FOMC could lower rates to the zero-bound range in September. Last December, the FOMC halted a seven-year zero interest rate policy by raising short-term rates for the first time in nearly a decade.

Investors who are bullish on Gold are in favor of a gradual tightening of monetary policy by the Fed. Gold, which is not attached to interest rates, struggles to compete with high-yield bearing assets in rising rate environments.

Silver for July delivery surged 0.402 or 2.32% to $17.765 an ounce.

Copper for July delivery fell 0.051 or 2.38% to $2.111 a pound.

Oil

Crude futures closed near one-month lows amid extreme volatility, as markets reacted to a surprising decision by voters in Britain to approve a referendum that could trigger the U.K.'s departure from the European Union.

On the New York Mercantile Exchange, WTI crude for August delivery traded between $46.75 and $50.44 a barrel before closing at $47.64, down 2.47 or 4.93% on the session. On the Intercontinental Exchange (ICE), brent crude for August delivery wavered between $47.55 and $51.19 a barrel, before settling at $48.38, down $2.53 or 4.97% on the day. After rallying slightly in the U.S. morning session, crude settled near session-lows as selling pressure intensified in the final minutes before the close. The U.S. crude settlement was delayed slightly following the late swing in prices, Reuters reported.

As the Leave campaign took a resounding lead in the wee hours of Friday morning, both the international and U.S. benchmarks of crude tumbled more than 6%, falling to their lowest levels since mid-May. With the considerable losses, the front month contract for crude erased all of their gains from the last week when they surged more than $4 a barrel.

On Friday morning, U.K. prime minister David Cameron announced intentions to step downby October after polls showed that the Exit camp prevailed by a 52-48% margin. Leading up to the historic referendum, a host of major oil companies issued stark warnings on the dire implications of a UK departure. Besides complicating the free travel arrangements by UK workers employed by euro area oil companies, oil executives have expressed concern on the impact of heightened trade barriers between the UK and other top countries in the the EU. Consequently, large sums of UK oil workers could require non-EU citizenship to work abroad, a development, which could increase operating costs for top energy companies.

Other industry insiders, such as former BP (LON:BP) CEO John Browne, said in the final hours before polls closed that the cost of uncertainty from leaving could be so high that the U.K. may never recover. In late-May, The Telegraph reported that North Sea brent oil created an annual loss for U.K. taxpayers for the first time since the Treasury began maintaining an oil balance sheet in 1968. Leading economists also warned that a Brexit vote could tip the euro area into recession, dampening demand for oil.

Elsewhere, oil services firm Baker Hughes said in its weekly rig count report that U.S. oil rigs fell by seven to 330, marking its first decline in four weeks. The combined oil and gas rig count fell by three to 421.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, rose more than 2.5% to a three-month high at 96.70, before falling back to 95.59 in U.S. afternoon trading. The index posted its strongest one-day move in more than five years.

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 declined in North America trade on Thursday, after data showed that natural gas supplies in storage in the U.S. rose more than expected last week.

Natural gas for delivery in July on the New York Mercantile Exchange shed 3.1 cent, or 1.2%, to trade at $2.645 per million British thermal units by 14:32GMT, or 10:32AM ET. Prices were at around $2.681 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 June 17 rose by 62 billion cubic feet, above forecasts for an increase of 58 billion.

That compared with builds of 69 billion cubic feet in the prior week, 73 billion a year earlier and a five-year average of 88 billion cubic feet.

Total U.S. natural gas storage stood at 3.103 trillion cubic feet, 19.9% higher than levels at this time a year ago and 21.9% above the five-year average for this time of year.

Unless intense summer heat boosts demand from power plants, stockpiles will test physical storage limits of 4.3 trillion cubic feet at the end of October.

Meanwhile, updated weather forecasting models continued to show above-normal temperatures across most parts of the U.S. over the next two weeks.

Natural gas prices are up nearly 40% since late May as expectations have grown that hot summer weather will lead to heavy demand.

Demand for natural gas tends to rise in the summer months as warmer temperatures increase the need for gas-fired electricity to power air conditioning.

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