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posted on 22 July 2016

Investing.com Weekly Wrap-Up 22 July 2016

Written by , Investing.com

U.S. stocks inch up, as Wall Street closes higher for 4th straight week

U.S. stocks re-entered record territory on Friday, completing their fourth straight week of positive gains, as strong performances by a pair of telecom giants, outweighed losses from General Electric (NYSE:GE) following subdued quarterly earnings from the multinational conglomerate.

The Dow Jones Industrial Average gained 53.62 or 0.29% to 18,570.85, while the S&P 500 Composite index added 9.86 or 0.46% to 2,175.03, as U.S. equities stayed on pace for their strongest month since March.

The indices have remained in record territory for the majority of the last two weeks, as signals of slowing growth in the euro area and Japan, as well as plunging global bond yields have sent investors fleeing to safety into stocks on Wall Street. The S&P 500 ended the week at its highest closing level on record. The NASDAQ Composite index, meanwhile, rose by 26.26 or 0.52% to 5,100.16, moving approximately 2% from hitting a record-high.

On the S&P 500, nine of 10 sectors closed in the green as stocks in the Telecommunications, Utilities and Financials industries led. The telecom sector received a boost from AT&T Inc (NYSE:T) and Verizon Communications Inc (NYSE:VZ), which both gained more than 1% on the session. On Thursday evening, AT&T narrowly topped analysts' forecasts with its second quarter earnings, while increasing consolidated revenues by 22% to $40.5 billion for the three-month period ending in late-June. It came as the Dallas-based company reported a spike of 2.1 million wireless adds, 1.4 million of which came from the U.S.

Midway through the second quarter results period, approximately 3% of S&P 500 companies are reporting year-over-year earnings decreases, far below expectations for an aggregate decline of 4.5%, according to Reuters. Next week, roughly 40% of S&P 500 companies are set to report their quarterly earnings.

The top performer on the Dow was Visa Inc (NYSE:V), which added 1.12 or 1.42% to 79.91. Visa finished just ahead of Microsoft Corporation (NASDAQ:MSFT), which gained 0.77 or 1.38% to 56.57. Earlier this week, Microsoft topped analysts' earnings and revenue estimates after sales among its closely-watched cloud product more than doubled on the quarter. Microsoft shares are up roughly 6% since the Redmond, Washington-based company released their second quarter results on Tuesday night.

The worst performer was GE, which fell 0.53 or 1.63% to 32.06 in Friday's session, after failing to appease investor sentiments on Friday in spite of beating consensus forecasts with its quarterly results. Although GE's revenues rose sharply in the second quarter on an annual basis, investors placed closer attention to weakness in the locomotive and oil-field equipment segment, where orders fell 16%, ex-acquistion and currency shifts. GE had been one of the top components on the Dow since last May when it last hit all-time record highs.

The biggest gainer on the NASDAQ was Vodafone Group (LON:VOD) PLC (NASDAQ:VOD), which added 1.23 or 4.09% to 31.34. Shares in Vodafone are still down nearly 20% over the last year, including 10% during the last three months. The worst performer was Skyworks Solutions Inc (NASDAQ:SWKS), which tumbled 6.11 or 8.62% to 64.81. Shares in the Skyworks Solutions plummeted one day after the semiconductor manufacturer said its profits fell 9% last quarter on an annual basis. Skyworks Solutions, one of the top suppliers for the iPhone, reportedly has seen its revenues dented as Apple Inc (NASDAQ:AAPL) looks to reduce its channel inventory ahead of the iPhone 7 launch, according to a report from Fool.com.

On the New York Stock Exchange, advancing issues outnumbered declining ones by a 1,958-996 margin.

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

Forex

The U.S. Dollar Index surged to fresh four-month highs on Friday, amid mounting concerns of a recession in the U.K. and improved manufacturing conditions at home, ahead of next week's two-day Federal Reserve meeting.

The index catapulted to a session-high of 97.59 on Friday, before closing the U.S. afternoon session at 97.41, up 0.47 or 0.48% on the day. With the sharp gains, the index reached its highest level since March 10 - the last time it cleared the 98 threshold. Over the four weeks that have passed since last month's historic Brexit referendum, the index has jumped more than 4%, erasing all of the losses from a downbeat spring. The Dollar is virtually flat since mid-December when the Federal Reserve ended a seven-year zero interest rate policy byapproving its first rate hike in nearly a decade.

The greenback rose considerably against the British Pound in overnight trading after Markit reported that the British economy shrank at its quickest pace since early-2009, as economists digested the release of the first batch of Post-Brexit data since last month's surprising decision. Markit's U.K. Flash Composite PMI index for July fell 4.5 points to 47.7, exacerbating fears of an imminent recession throughout Britain.

As a result, GBP/USD slid more than 1% to an intraday low of 1.3079, falling back to near 1-week lows. Since voters in the U.K. spooked markets with their decision to leave the European Union on June 24, the Pound Sterling has tumbled nearly 12% against the Dollar.

Currency traders also closely parsed U.S. manufacturing data on Friday after the flash reading for July's PMI Manufacturing Index bounded up by more than a full point to 52.9, soaring to its highest level in nine months. The unexpected rise was driven by a flood of new orders, as new business volume expanded at the fastest pace since October, 2015.

EUR/USD fell more than 0.50% to an intraday low of 1.0956, holding onto most of the losses on Friday afternoon as reports surfaced of a mass shooting at a shopping mall in Munich. As of early Friday evening, the shooting left at least eight dead, while police conducted a manhunt for the suspect. The euro settled at 1.0976, down 0.45% on the session.

Investors await next week's Federal Open Market Committee (FOMC) July meeting for further indications on the timing of the U.S. central bank's next rate hike. On Friday, Fed Future Rates from the CME Group's (NASDAQ:CME) Fed Watch tool placed the odds of a single rate hike in 2016 at just under 50%.

Yields on the U.S. 10-Year rose one basis point to 1.57%, while yields on theGermany 10-Year fell one basis point to Minus-0.03%. Yields on both 10-year government bonds are down by more than 75 basis points over the last year.

CTFC Commitment of Traders

This week bearishness increased again on the pound and euro. Bullishness surged for the S&P 500. Bullishness deceased for gold and crude oil.

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.jul.20

Gold

Gold fell sharply on Friday, erasing most of its gains from the previous day's rally, as strong U.S. economic data bolstered a resurgent dollar, potentially increasing the likelihood that the Federal Reserve will raise interest rates before the end of the year.

On the Comex division of the New York Mercantile Exchange, Gold for August delivery traded between $1,319.00 and $1,333.45 an ounce before settling at $1,323.15, down 7.85 or 0.59% on the session. Gold closed Friday's session near three-week lows, ending the week with its second consecutive weekly decline. Although Gold has retreated from 28-month highs from earlier in July, the precious metal is still up by nearly 25% year-to-date.

Gold likely gained support at $1,253.70, the low from June 24 and was met with resistance at $1,368.60, the high from July 7.

The U.S. Dollar continued its upward climb on Friday, amid broad signals that conditions in the struggling manufacturing sector have bottomed. On Friday, the flash reading for July's PMI Manufacturing Index surged more than a full point to 52.9, soaring to its highest level in nine months. The unexpected rise was driven by a flood of new orders, as new business volume expanded at the fastest pace since October, 2015. At the same time, the dollar rose considerably against the British Pound after Markit reported that the British economy shrank at its quickest pace since early-2009, as economists digested the release of the first batch of Post-Brexit data since last month's surprising decision.

Markit's U.K. Flash Composite PMI index for July fell 4.5 points to 47.7, exacerbating fears of an imminent recession throughout Britain. Activity in the Services industry also fell considerably, as the U.K. Services PMI Index plunged 4.9 points to 47.4 from its level in June. As a result, GBP/USD slid more than 1% to an intraday low of 1.3079, falling back to near 1-week lows. Since voters in the U.K. spooked markets with their decision to leave the European Union on June 24, the Pound Sterling has tumbled nearly 12% against the Dollar.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged more than 0.50% to an intraday high of 97.59, reaching its highest level since March 10. Dollar-denominated commodities such as gold become more expensive for foreign investors when the dollar appreciates. The Dollar is virtually flat since mid-December when the Federal Reserve ended a seven-year zero interest rate policy by approving its first rate hike in nearly a decade.

Investors await next week's Federal Open Market Committee (FOMC) July meeting for further indications on the timing of the U.S. central bank's next rate hike. On Friday, Fed Future Rates from the CME Group's (NASDAQ:CME) Fed Watch tool placed the odds of a single rate hike in 2016 at just under 50%. Any rate hikes by the FOMC this year are viewed as bearish for gold, which struggles to compete versus high-yield bearing assets in periods of raising rate environments.

Silver for September delivery lost 0.133 or 0.68% to 19.678 an ounce.

Copper for September delivery fell 0.026 or 1.13% to 2.233 a pound.

Oil

Crude futures pared some losses after crashing to near two-month lows on Friday, as U.S. rig counts rose for a fourth consecutive week, dampening some optimism that the longstanding supply glut on global energy markets could be on the verge of leveling off.

On the New York Mercantile Exchange, WTI crude for September delivery traded between $43.74 and $44.95 a barrel before closing at $44.23, down 0.52 or 1.16% on the session. On the Intercontinental Exchange (ICE), brent crude for September delivery wavered between $45.17 and $46.50 a barrel, before settling at $45.73, down 0.46 or 1.00% on the day. Both WTI and Brent futures fell by approximately 3% on the week.

Crude futures rallied somewhat in the final hour of Friday's session after reports surfaced of a mass shooting at a shopping mall in Munich. The shooting comes roughly a week after a terrorist deliberately drove a truck into a Bastille Day crowd in Nice, killing 84 people and injuring at least 300 others. Oil prices typically move higher in periods of heightened geopolitical instability.

Meanwhile, the spread between the international and U.S. benchmarks of crude stood at $1.50, up slightly from Thursday's level of $1.45 at the close of trading.

On Friday afternoon, oil services company Baker Hughes said the number of active oil rigs throughout the U.S. rose by 14 to 371, increasing for the fourth consecutive week and moving higher for the seventh time over the last eight weeks. The total rig count jumped by 15 to 462, as U.S. gas rigs fell by one to 91. During the first week of June, the overall count moved higher for the first time in 2016 ending a 41-week drought.

A rising rig count provides lagging indications that producers could be ready to return online, even as oil prices remain sharply below their peak of $115 a barrel two summers ago. Despite the recent downturn, U.S. crude prices have still surged approximately 60% since touching down to 13-year lows at $26.05 a barrel on February 11.

It comes as high-cost domestic shale producers have shown surprising resilience in removing inefficient rigs in an attempt to regain market share from OPEC competitors such as Saudi Arabia and Iran. Global oil prices have fallen precipitously since OPEC rattled markets in November, 2014, by abandoning a strategy for price stabilization in favor of capturing a larger share of the global marketplace.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged more than 0.50% to an intraday high of 97.59, reaching its highest level since March 10. Dollar-denominated commodities such as crude become more expensive for foreign investors when the dollar appreciates.

Natural Gas (Thursday Report)

U.S. natural gas futures edged higher 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 tacked on 3.6 cents, or 1.35%, to trade at $2.694 per million British thermal units by 13:32GMT, or 9:32AM ET. Prices were at around $2.662 prior to the release of the supply data after falling to a session low of $2.625, a level not seen since June 24.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended July 15 rose by 34 billion cubic feet, below forecasts for an increase of 39 billion.

That compared with an increase of 64 billion cubic feet in the prior week, 59 billion a year earlier and a five-year average of 61 billion cubic feet.

Total U.S. natural gas storage stood at 3.277 trillion cubic feet, 14.4% higher than levels at this time a year ago and 17.1% 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.

Natural gas prices are down more than 10% since reaching a 13-month high on July 1 amid speculation that July heat won't prevent stockpiles from reaching a record before the winter.

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