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posted on 01 July 2016

Investing.com Weekly Wrap-Up 01 July 2016

Written by , Investing.com

U.S. stocks post 4th straight win as Dow, S&P complete best week in 2016

U.S. stocks moved higher for a fourth consecutive session, as global bond yields hit fresh record-lows while investors continued to pile into safe-haven assets in the wake of last week's surprising Brexit outcome.

The Dow Jones Industrial Average inched up 19.17 or 0.11% to 17,949.17, while theS&P 500 gained 4.90 or 0.19% to 2,102.95, as the indices completed their strongest week since November. With the continued gains, both the Dow and S&P 500 have erased approximately 90% of their Brexit-inspired sell-offs triggered from last week's market shock.

On the S&P 500, eight of 10 sectors closed in the green, as stocks in Energy, Telecommunications and Consumer Services industries led. Stocks in the Financials and Utilities sectors lagged, each falling more than 0.05% on the session.

The NASDAQ Composite index, meanwhile, added 19.90 or 0.41% to close at 4,862.57, after receiving a boost from the slumping biotech sector. The NASDAQ is coming off a disappointing first half when it slumped 3.5%, due primarily to signals of slowing growth among a number of major large-cap stocks.

The top performer on the Dow was Home Depot Inc (NYSE:HD), which added 1.93 or 1.51% to 129.62. It came amid favorable ratings from analysts due to the home improvement chain store's lack of international exposure beyond Canada and Mexico. Home Depot (NYSE:HD) shares are up more than 15% over the last year. The worst performer was JPMorgan Chase & Co (NYSE:JPM), which fell 0.88 or 1.42% to 61.26. Earlier, JP Morgan declared in a filing with the U.S. Securities and Exchange Commission (SEC) that the bank will reduce the exercise price on warrant options to $42.13 a share at the close of business next Wednesday.

The biggest gainer on the NASDAQ was Endo International PLC (NASDAQ:ENDP), which added 1.39 or 8.92% to 16.98. Over the last year, shares in the specialty pharmaceutical company have tumbled more than 75% due to widespread pricing concerns in the drug industry. The worst performer was Micron Technology Inc (NASDAQ:MU), which plunged 1.26 or 9.16% to 12.50. On Thursday, the Idaho-based semiconductor company announced plans to eliminate approximately 2,400 worldwide jobs after its quarterly sales slumped 25%.

On the S&P 500, the biggest performer was Harley-Davidson Inc (NYSE:HOG), which surged 9.04 or 19.96% to 54.34 after rumors surfaced that private equity firm KKR & Co. may express interest in acquiring the popular motorcycle company. Micron was also the worst performer on the S&P 500, just below Williams Companies Inc (NYSE:WMB), which fell 1.06 or 4.88% to 20.58. On Thursday, nearly half of the company's Board of Directors tendered resignations after a planned $20 billion merger with ETE collapsed.

Shares in Hershey Company (NYSE:HSY) fell 1.59 or 1.35% to 111.95 one day after the Chocolate giant rejected a $23 billion acquisition bid from Mondelez International Inc(NASDAQ:MDLZ). On Thursday, Hershey shares surged more than 15%, holding onto gains amid speculation that Mondelez could amend its offer.

On the New York Stock Exchange, advancing issues outnumbered declining ones by a 1,916-1,081 margin.

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

Forex

GBP/USD inched down on Friday remaining near 31-year lows, as the Pound capped its most tumultuous week in history in the wake of the shocking decision from U.K. voters to approve a measure paving the way for a departure from the European Union.

The currency pair traded between 1.3247 and 1.3350, down 0.0082 or 0.37% on the session. After briefly moving above 1.50 against the U.S. dollar in the final hours of Brexit polling last Thursday, the Pound Sterling has tumbled approximately 10% against the greenback over the last week. In Monday's session, the Pound plummeted to an intraday low of 1.3118 against its American counterpart, its lowest level since September, 1985.

GBP/USD likely gained support at 1.3118, the low from June 27 and was met with resistance at 1.5020, the high from June 24.

Maintaining his current hard line stance, France president Francois Hollande reiterated his position that the results of last week's historic referendum can not be reversed. Appearing alongside David Cameron in Northern France after appearing at a ceremony to commemorate the Battle of the Somme, Hollande remained adamant that the U.K. will have to face the consequences of the unexpected decision. In addition, Hollande urged leaders that a swift resolution to the Brexit developments would help diminish the uncertainty that has gripped the euro area over the last week.

"Being in the European Union has advantages. And that's what the British are starting to understand," Hollande said. "Those who were tempted by the Brexit are starting to think it over...The faster it goes, the better it will be for them."

Hollande's comments came one day after Bank of England governor Mark Carney noted that the BOE will likely approve further easing measures at some point this summer to help safeguard the economy. Earlier this week, Cameron said he would leave the task of whether to invoke Article 50 of the Lisbon Treaty to his successor. Cameron is expected to step down by September 2.

Elsewhere, Fed governor Stanley Fischer cautioned that it could be some time before the U.S. central bank will be able to determine the long-term effects of the Brexit referendum on monetary policy. In the meantime, Fischer said he is hopeful the Fed can continue tightening at a "slow, very gradual" pace amid signals of an improved economy. The Federal Open Market Committee (FOMC) will re-assess the implications of the Brexit vote on the timing of its next rate hike when it meets again on July 26-27, he added. Fischer said in an interview with CNBC:

"We are going to have to wait and see. It clearly is a huge event for the U.K. and it's an important event for Europe. Our direct trade with Britain is not going to make a huge difference to us, but it could set off -- there are a lot of things that will follow from Brexit for Europe, for the United Kingdom, and those are the things we will have to be thinking about."

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.25% to an intraday low of 95.23, before rallying slightly to 95.72 at the close of U.S. afternoon trading. The index dropped by nearly 3% over the first half.

Yields on the U.S. 10-Year fell three basis points to 1.44%, while yields on the U.K. 10-Year were unchanged at 0.86%. Both remained near all-time record-lows.

CTFC Commitment of Traders

Note: This data closes on Wednesday so the last two days of trading are not reflected. There were was very little change in investor sentiment this week.

cot.2016.jun.29

Gold

Gold rose sharply on Friday hovering near 27-month highs, as soft manufacturing data in China and further indications of a delayed interest rate hike by the Federal Reserve bolstered the yellow metal.

On the Comex division of the New York Mercantile Exchange, Gold for August delivery traded between $1,323.00 and $1,344.25 an ounce, up $18.40 or 1.39% on the session. Over the last week, Gold has surged more than 5% as investors have piled into the safe-haven asset in the wake of a surprising decision by U.K. voters to support a measure paving the way for Britain's departure from the European Union. On Thursday, Gold ended the first six months of 2016 up nearly 25%, completing one of its strongest first halves on record.

Gold likely gained support at $1,247.30, the low from June 8 and was met with resistance at $1,355.60, the high from June 24.

In China, the Caixin Manufacturing Purchasing Managers' Index dropped by 0.6 to 48.6 in June, falling at its swiftest pace in four months. It came as new orders moved lower for the month and companies in the sector cut staffing levels at a solid pace. Analysts expected to see a reading of 49.1 At the same time, the government's official Manufacturing PMI ticked down by 0.1 to 50.0, falling to its lowest level since February's reading of 49.0. Any reading under 50.0 provides signals of contraction in the industry. The Chinese government's official reading serves as a gauge for activity among large and state-owned companies in the sector. China is the world's largest producer of gold and the second-largest consumer of the precious metal behind India.

Elsewhere, Fed governor Stanley Fischer cautioned that it could be some time before theU.S. central bank will be able to determine the long-term effects of the Brexit referendum on monetary policy. In the meantime, Fischer said he is hopeful the Fed can continue tightening at a "slow, very gradual" pace amid signals of an improved economy. Read more on Fischer's statements in the preceding section (Forex).

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.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.25% to an intraday low of 95.23, before rallying slightly to 95.48 in U.S. afternoon trading. The index dropped by nearly 3% over the first half. Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.

Silver for August delivery soared 0.977 or 5.25% to $19.600 an ounce. The front month contract for Silver surged approximately 10% for the week, posting its strongest weekly move in nearly three years. Silver is now approaching its highest level since August, 2014.

Copper for September delivery gained 0.025 or 1.12% to $2.22 a pound.

Oil

Crude futures inched up on Friday in relatively quiet pre-holiday trade, as the U.S. oil rig count rose sharply last week, hitting its highest level since late-April.

On the New York Mercantile Exchange, WTI crude for August delivery traded between $47.91 and $49.08 a barrel before closing at $49.02, up 0.69 or 1.43% on the session. On the Intercontinental Exchange (ICE), brent crude for September delivery wavered between $49.26 and $50.42 a barrel, before settling at $50.39, up 0.68 or 1.37% on the day. Crude futures accelerated gains in the final hour to close near session highs.

Both the international and U.S. benchmarks of crude have moved slightly higher over the last week since U.K. voters shocked markets worldwide by approving a measure that paves the way for Britain's departure from the European Union. On Thursday, crude ended the second quarter up by nearly 25% -- its strongest three-month period in seven years.

In U.S. afternoon trading, oil services firm Baker Hughes said that U.S. oil rigs increased by 11 to 341 for the week ending on June 24, reaching their highest level since April 22. With the sharp gains, domestic oil rigs in the U.S. moved higher for the fourth time in five weeks. At the same time, natural gas rigs inched up by one to 90, helping push the overall count up to 431.

The continued gains in the nationwide rig count provide leading indications that U.S. producers are ready to return online as prices stabilize near $50 a barrel. Despite the recent upswing in prices, crude futures are still down sharply from their level in November, 2014, when OPEC rattled global markets with a strategic decision to maintain its production ceiling above 30 million barrels per day. The tactic triggered a prolonged battle between the U.S. and OPEC for market share, depressing prices amid a glut of oversupply.

Elsewhere, investors continued to closely monitor labor negotiations in Norway where top oil companies and labor unions engaged in heated talks to avoid a work stoppage. If the sides are unable to reach a deal by Saturday's deadline workers at five Norwegian oil fieldscould strike immediately, resulting in an estimated 6% decline in production, according to the Norwegian Oil and Gas Association.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.25% to an intraday low of 95.23, before rallying slightly to 95.48 in U.S. afternoon trading. The index dropped by nearly 3% over the first half.

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 held on to solid gains in North America trade on Thursday, after data showed that natural gas supplies in storage in the U.S. rose less than expected last week.

Natural gas for delivery in August on the New York Mercantile Exchange jumped 3.3 cent, or 1.15%, to trade at $2.896 per million British thermal units by 14:33GMT, or 10:33AM ET. Prices were at around $2.913 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 24 rose by 37 billion cubic feet, below forecasts for an increase of 45 billion.

That compared with builds of 62 billion cubic feet in the prior week, 73 billion a year earlier and a five-year average of 78 billion cubic feet.

Total U.S. natural gas storage stood at 3.140 trillion cubic feet, 18.5% higher than levels at this time a year ago and 20.3% above the five-year average for this time of year.

A day earlier, gas futures rallied to $2.974, the most since May 2015, as hot summer temperatures across most parts of the U.S. raised expectations for power generation demand to meet air conditioning needs.

Updated weather forecasting models suggested that temperatures may be hotter than normal throughout most of the contiguous U.S. from July 8 through July 12.

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.

Natural gas prices are up nearly 45% since late May as expectations have grown that hot summer weather will lead to heavy 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.

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