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posted on 29 July 2016

Investing.com Weekly Wrap-Up 29 July 2016

Written by , Investing.com

U.S. stocks remain flat, ending July in near-record territory

U.S. stocks remained stuck in a tight, range-bound trade on Friday, continuing a trend of sideways trading that has persisted over the last two weeks, as the major indices ended July in near record-territory.

The Dow Jones Industrial average fell 24.11 or 0.13% to 18,432.24, suffering its fifth consecutive losing session. The Dow was dragged down by Exxon Mobil Corporation (NYSE:XOM), which fell more than 1% on the day after reporting its worst quarterly profits in 17 years.

For an eight-day period earlier in the month, the Dow hit all-time and record closing highs on every session during the streak, as jittery investors in the euro area sought safety in U.S. equities. Overall, the Dow surged approximately 3% on the month.

The NASDAQ Composite index gained 7.15 or 0.14% to 5,162.13 on Friday, closing at a 52-week high. The NASDAQ has received a boost in recent days from stellar earnings among leading large-cap stocks such as Alphabet Inc (NASDAQ:GOOGL), Amazon.com Inc (NASDAQ:AMZN) and Facebook Inc (NASDAQ:FB). In the last month, stocks in the technology sector have jumped nearly 8%. The S&P 500 Composite index, meanwhile, added 3.54 or 0.16% to 2,173.60, ending the session at a record closing high.

On the S&P 500, seven of 10 sectors closed in the green as stocks in the Telecom, Consumer Goods and Utilities industries led. Stocks in the Industrials, Financials and Consumer Services sectors lagged, each closing lower for the session. On the month, every sector on the S&P 500 closed higher with the exception of the Energy industry.

The top performer on the Dow was Procter & Gamble Company (NYSE:PG), which gained 0.70 or 0.83% to 85.51. Shares in the consumer products giant are up roughly 6% over the last 52-weeks. Exxon finished as the worst performer in the wake of its anemic second quarter, plunging 1.70 or 1.88% to 88.50. Earlier, ExxonMobil reported earnings of $1.7 billion or 0.41 per share, missing earnings' forecasts by a wide margin. For the quarter, Exxon's net profits tumbled 59% on an annual basis due to the low cost of oil and declining capital expenditures. Investors continue to express significant concerns with Exxon's short-term prospects, after oil prices fell 13% in July erasing all of their gains from the previous three months.

The biggest gainer on the NASDAQ was Regeneron Pharmaceuticals Inc (NASDAQ:REGN), which added 14.08 or 3.43% to 425.12. During the week, shares in the pharmaceutical manufacturer jumped 8% amid strong valuation and growth prospects in its Eylea treatment for Macular Degeneration, as well as its PCSK9 inhibitor Praluent. The worst performer was Stericycle Inc (NASDAQ:SRCL), which plunged 15.66 or 14.78% to 90.27. Earlier, the medical waste company opted to lower its forward guidance market, citing strong foreign exchange headwinds and mounting competition in the industry.

On the New York Stock Exchange, advancing issues outnumbered declining ones by a 1,871-1,117 margin.

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

Forex

The dollar dropped to four-week lows against the other major currencies on Friday, after the release of weak U.S. second quarter growth data dampened optimism over the strength of the economy following the Federal Reserve's positive outlook earlier in the week.

The Bureau of Economic Analysis earlier said U.S. gross domestic product rose 1.2% in the second quarter, disappointing expectations for a 2.6% increase. The U.S. economy grew 0.8% in the first quarter, whose figure was revised from a previously estimated growth rate of 1.1%.

The downbeat data came after the Fed said on Wednesday that "near-term risks to the economic outlook have diminished" and that the labor market has "strengthened", after it left interest rates unchanged at the conclusion of its two-day policy meeting.

U.S. employment costs rose 0.6% in the last quarter, in line with expectations, while real consumer spending increased by 4.2% in the three months to June, after an upwardly revised 1.6% gain in the previous quarter.

Also Friday, the University of Michigan said in a revised report that its consumer sentiment index rose to 90.0 in July from 89.5 the previous month, confounding expectations for an increase to 90.5.

Another report showed that the Chicago purchasing managers' index ticked down to 55.8 this month from 56.8 in June, compared to expectations for a fall to 54.0.

USD/JPY plummeted 2.47% to trade at a three-week low of 102.66.

The yen strengthened broadly after the Bank of Japan announced at the conclusion of its policy meeting on Friday a modest increase in purchases of exchange-traded funds (ETFs), but maintained its base money target at 80 trillion yen as well as the pace of purchases for other assets.

The central bank also kept negative interest rates unchanged at -0.1%.

The move disappointed expectations for a stimulus package of nearly 28 trillion yen promised by Prime Minister Shinzo Abe earlier in the week to boost the economy.

EUR/USD climbed 0.84% to a four-week high of 1.1171.

Preliminary data earlier showed that the euro zone's consumer price index rose at an annualized rate of 0.2% in July, exceeding expectations for a 0.1% uptick and after a 0.1% gain the previous month.

Core CPI, which excludes food, energy, alcohol and tobacco, increased by 0.9% last month, year-on-year, in line with expectations.

GBP/USD gained 0.62% to 1.3250. while USD/CHF lost 1.01% to 0.9708.

The Bank of England said on Friday that net lending to individuals rose to £5.2 billion in June from an upwardly revised total of £4.5 billion in May, compared to expectations for a rise to £4.2 billion.

But the pound's gains were capped as investors turned to the BoE's policy meeting next week amid growing expectations for a rate cut.

The Australian and New Zealand dollars extended earlier gains, with AUD/USD up 1.11% at 0.7585 and with NZD/USD rallying 1.71% to 0.7192.

Elsewhere, USD/CAD erased earlier gains and retreated 0.57% to 1.3079 after Statistics Canada said the country's GDP fell 0.6% in May, compared to expectations for a 0.4% slip and after a growth rate of 0.1% the previous month.

The U.S. dollar index, which measures the greenback's strength against a trade-weighted basket of six major currencies, was down 1.11% at 95.61, the lowest level since July 5.

CTFC Commitment of Traders

This week bearishness increased again on the pound and euro. Bullishness increased 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.27

Gold

Gold rose considerably on Friday, surging to two-week highs, as the U.S. Dollar fell sharply amid subdued GDP data and a soaring Yen after the Bank of Japan approved modest stimulus measures at a closely-watched meeting in Tokyo.

On the Comex division of the New York Mercantile Exchange, Gold for December delivery traded between $1,335.45 and $1,357.95 an ounce before settling at $1,357.55, up 16.35 or 1.22% on the session. Gold ended July on a four-day winning session, rising more than 2.5% for the month. Since opening the year around $1,075 an ounce, Gold has soared approximately 25% year to date and is on pace for one of its strongest years in a decade.

Gold is now trading near 28-month highs from mid-July after market players piled into the precious metal in broad risk-off trade following the shocking decision from voters in the U.K. to leave the European Union on June 24.

Gold likely gained support at $1,253.70, the low from June 24 and was met with resistance at $1,376.40, the high from July 7.

Citing an uncertain outlook in global financial markets and expectations for a slowdown in emerging economies stemming from last month's Brexit decision, the BOJ approvedmoderate stimulus measures at Friday's monetary policy meeting. While the Japanese Central Bank took some action on Friday by upping the level of ETF purchases from ¥3.3 to 6 trillion ($60 billion), the BOJ largely fell short of market expectations for further interest rate cuts and expanded Quantitative Easing. In a 7-2 vote, the BOJ held its deposit rate at minus 0.1% and maintained its monetary base target at ¥80 trillion. Consequently, USD/JPYimmediately crashed more than 2.5% in overnight trading, before falling to an intraday-low of 102.12, its lowest level in nearly three weeks. The BOJ said in a statement:

"The Bank will continue with (QE) with a Negative Interest Rate, aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner. It will examine risks to economic activity and prices, and take additional easing measures in terms of three dimensions -- quantity, quality, and the interest rate -- if it is judged necessary for achieving the price stability target."

Elsewhere, the U.S. Bureau of Economic Analysis (BEA) said Friday that preliminary GDP for the second quarter rose by 1.2%, far below consensus estimates of 2.6%. It came as inventories nationwide fell for the first time since 2011, offset somewhat by robust levels of consumer spending. For the three-month period, consumer spending rose by 4.2% -- more than doubling first quarter growth of 1.6%.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 1% on Friday to an intraday low of 95.67. The index is on pace for its fifth straight losing session after hitting four-month highs at 97.62 on Monday.

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

Silver for September delivery gained 0.160 or 0.77% to 20.353 an ounce.

Copper for September delivery added 0.13 or 0.57% to 2.22 a pound.

Oil

Crude futures inched up on Friday after hitting a $40 handle for the first time since April, ending the month sharply lower one day after entering a bear market due to renewed concerns of global oversupply.

On the New York Mercantile Exchange, WTI crude for September delivery traded between $40.58 and $41.66 a barrel before closing at $41.52, up 0.38 or 0.92% on the session. Despite halting a four-day losing streak, WTI crude still ended July down roughly 13% on the month. On the Intercontinental Exchange (ICE), brent crude for October delivery wavered between $42.52 and $43.60 a barrel, before settling at $43.47, up 0.24 or 0.56% on the day.

Oil futures bounced off three-month lows on Friday, as the U.S. Dollar fell sharply amid weak GDP data and a soaring Yen. It came after the Bank of Japan rattled markets by approving only modest easing measures at a highly-anticipated meeting in Tokyo. Heading into the monetary policy meeting, the BOJ was widely expected to cut interest rates and expand Quantitative Easing in an effort to boost persistently sluggish inflation. The BOJ also ignored calls from the Japanese government to use all the tools necessary to lower the Yen in order to jumpstart soft exports. As a result, the Dollar plunged more than 2.5% against the Yen to an intraday-low of 102.12, its lowest level in nearly three weeks.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 1% on Friday to an intraday low of 95.67. The index is on pace for its fifth straight losing session after hitting four-month highs at 97.62 on Monday. Dollar-denominated commodities such as Crude become more expensive for foreign purchasers when the dollar appreciates.

Elsewhere, oil services firm Baker Hughes said in its Weekly Rig Count report that U.S. oil rigs last week rose by three to 374. It marked the fifth consecutive week of weekly increases among oil rigs nationwide. At the same time, the overall rig count ticked up by one to 463, as gas rigs fell by two to 89.

Shares in Exxon Mobil Corporation (NYSE:XOM) fell sharply after the multinational oil and gas giant badly missed analysts' earnings forecasts last quarter. On Friday, ExxonMobil reported earnings of $1.7 billion or 0.41 per share, its worst quarterly profit since 1999. For the quarter, net profits tumbled 59% on an annual basis due to the low cost of oil.

Crude prices have come under pressure in recent weeks, as oil companies in Canada, Nigeria and Libya continue to return online. Over the spring, a wave of production disruptions in the aforementioned countries cushioned oil from further losses after a comprehensive Doha agreement in April abruptly collapsed. Despite reports from the International Energy Agency (IEA) that the imbalance in the global supply-demand could be on the verge of leveling off, data released this week has shown otherwise. On Wednesday, the U.S. Department of Energy reported an unexpected inventory build of 1.7 million barrels last week pushing stockpiles to 521.1 million barrels, near record-highs for this time of the year. U.S. production, meanwhile, moved higher for a third consecutive week.

Crude futures have been enmeshed in a two-year downturn since OPEC roiled markets in November, 2014 by maintaining its production ceiling above 30 million barrels per day. The strategic decision triggered a prolonged battle for market share between the U.S. and producers in the Middle East, saturating global markets with a glut of oversupply. Since peaking at $115 a barrel two years ago, oil prices have tumbled by more than 60%.

Natural Gas (Thursday Report)

U.S. natural gas futures rallied sharply 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 September on the New York Mercantile Exchange spiked 14.0 cents, or 5.26%, to trade at $2.800 per million British thermal units by 14:35GMT, or 10:35AM ET. Prices were at around $2.730 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 July 22 rose by 17 billion cubic feet, below forecasts for an increase of 26 billion.

That compared with an increase of 34 billion cubic feet in the prior week, 49 billion a year earlier and a five-year average of 52 billion cubic feet.

Total U.S. natural gas storage stood at 3.294 trillion cubic feet, 13.2% higher than levels at this time a year ago and 15.9% above the five-year average for this time of year.

A day earlier, prices lost 1.7 cents, or 0.64%, amid speculation that July heat won't prevent stockpiles from reaching a record before the winter.

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.

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