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posted on 05 August 2016

Investing.com Weekly Wrap-Up 05 August 2016

Written by , Investing.com

U.S. stocks soar, as job gains push NASDAQ, S&P to record closing highs

U.S. stocks rose considerably on Friday, as stronger than expected jobs data in July helped bolster the financial sector, propelling the NASDAQ Composite index and the S&P 500 to all-time record closing highs.

The Dow Jones Industrial Average gained 191.48 or 1.04% to 18,543.53, while the NASDAQ added 54.87 or 1.06% to 5,221.12, soaring to a fresh record close for the first time in more than a year. The S&P 500, meanwhile, added 18.62 or 0.86% to 2,182.87, moving back into record territory.

Last month, U.S. nonfarm payrolls surged by 255,000, the Labor Department said on Friday, topping the high end of analysts' expectations by 70,000 and erasing lingering concerns that June's robust report may have been a fluke. The Labor Department also upwardly revised June gains by 5,000 to 292,000, helping erase some negative sentiments from a disappointing report in May when the labor market added only 24,000 jobs. The solid figures could compel the Federal Reserve to consider raising interest rates when the Federal Open Market Committee (FOMC) meets again in September.

As a result, stocks on Wall Street turned in one of their strongest one-day performances since early-July, placing a temporary halt to a two-week period of range-bound, sideways trading.

NASDAQ gains were fueled by major tech stocks such as Apple Inc (NASDAQ:AAPL) and Micron Technology Inc (NASDAQ:MU), which posted sharp gains in Friday's session. The NASDAQ last closed at a record-high on July 20, 2015 when it ended the session at 5,210.14.

On the S&P 500, eight of 10 sectors closed in the green as stocks in the Financials and Technology industries led. Stocks in the interest-rate sensitive Utility sector lagged, falling by 1.31% for the session.

The top performer on the Dow was Merck & Company Inc (NYSE:MRK), which gained 6.02 or 10.41% to 63.86. Merck (NYSE:MRK) shares received a boost after rival BMY reported disappointing results with a late stage clinical trial for treating advanced non-small cell lung cancer. On Friday shortly before markets opened, Bristol-Myers announced that its drug Opdivo failed to significantly outperform chemotherapy treatment in a study of newly-diagnosed lung cancer patients. The results could jeopardize Bristol-Myers chances of gaining regulatory approval by the U.S. Food and Drug Administration (FDA) for the usage, while paving the way for Merck to capitalize with sales of its drug Keytrada. The worst performer was VZ Holding AG (SIX:VZN), which fell 0.29 or 0.54% to 53.64.

The biggest gainer on the NASDAQ was Symantec Corporation (NASDAQ:SYMC), which added 0.86 or 4.07% to 21.89. Earlier, the cybersecurity firm reported earnings of $135 million and revenue of $884 million for its first quarter of 2017, slightly beating analysts' forecasts of $878.1 million. The worst performer was Liberty Interactive Corp A (NASDAQ:QVCA), which tumbled 5.69 or 21.63% to 20.61. While Liberty Interactive reported earnings growth of 13% last quarter, CEO Greg Maffei warned that the company could be moving into a "choppy retail environment," marred by weakening consumer demand. At one point on Friday, shares in the Colorado-based media holdings company hit a 52-week low at $19.92.

On the New York Stock Exchange, advancing issues outnumbered declining ones by a 2,133-824 margin.

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

Forex

GBP/USD fell mildly on Friday, dropping to 3-week lows, as strong U.S. jobs data for the second consecutive month bolstered the prospects of an interest rate hike from the Federal Reserve before the end of year, creating upward pressure for the volatile Dollar.

The currency pair traded between 1.3022 and 1.3175, before closing the U.S. afternoon session at 1.3070, down 0.29%. It came one day after the British Pound fell by more than 1.5% versus its American counterpart, following the Bank of England's decision to cut its benchmark rate to a record-low of 0.25% and implement a host of easing measures. In Friday's session, the Pound Sterling closed below 1.31 against the Dollar for the first time since July 11.

On Friday morning, the U.S. Department of Labor said in its monthly employment report that the economy added 255,000 nonfarm payrolls in July, topping the high end of analysts' expectations by 70,000 and erasing lingering concerns that June's robust report may have been a fluke. Adding further optimism to July's reading, the labor participation rate ticked up by 0.1 to 62.8% while the unemployment rate remained flat at 4.9%.

Within the report, the gains were driven by increases in professional & business services and temporary help, which rose by 70,000 and 17,000 respectively. Hiring in the construction and retail industries, which have lagged throughout the year, also picked up last month each adding at least 14,000. Meanwhile, employment in government and financial activities edged up, offset slightly by declines in the mining sector. Notably, average hourly wages surged by 0.3% in July and are now up by 2.6% over the last year. For the month, average hourly earnings of private-sector production and nonsupervisory employees rose by seven cents to $21.59. Analysts expected to see a 0.3% increase in average hourly earnings, one month after wages inched up by 0.1% in June.

Following the release, the CME Group's (NASDAQ:CME) Fed Watch tool placed the odds of a September rate hike by the Federal Open Market Committee (FOMC) at 18%, up considerably from 9% over the previous session. The chances of a December rate hike from the FOMC also increased to 39.7% on Friday, up from 29.4% a day earlier. There is also a 6.7% chance the FOMC will approve two rate hikes of 25 basis points each before the end of the year, the CME Group added. Earlier this week, Chicago Fed president Charles Evans said it could be appropriate to raise rates once this year if economic conditions continued to improve, while Atlanta Fed president Dennis Lockhart failed to take a September rate hike off the table.

Any rate hikes by the Fed this year are viewed as bullish for the Dollar, as foreign investors pile into the greenback in order to capitalize on higher yields.

Elsewhere, Sterling net short contracts surged to 82,515 this week, hitting a fresh record-high, according to data released by the U.S. Commodities Futures Trading Commission on Friday. Net long positions in the dollar fell by more than $750 million to $12.81 billion for the period ending on Aug. 2, the CFTC said. GBP/USD has slid more than 12% since voters in the U.K. decided to leave the European Union in a historic referendum on June 24.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.50% to an intraday high of 96.50, before falling back to 96.19 at the end of the U.S. afternoon session. The index is still down by more than 1% since hitting four-month highs of 97.62 early last week.

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 fell sharply on Friday amid a resurgent dollar, as the U.S. labor market added more than 250,000 jobs for the second consecutive month in July, increasing the probability that the Federal Reserve could raise short-term interest rates before the end of the year.

On the Comex division of the New York Mercantile Exchange, Gold for December delivery traded between $1,342.70 and $1,370.95 an ounce before settling at $1,344.75, down 22.65 or 1.66% on the session. With the sharp declines, Gold suffered its worst one-day loss in three weeks and erased all of its gains from earlier this week. The precious metal is still up by more than 6% since the historic Brexit referendum in late-June and has increased by nearly 27% since the start of the year.

Gold likely gained support at $1,313.80, the low from July 25 and was met with resistance at $1,391.40, the high from March 14, 2014.

See Forex section above for discussion of revised prospects for the Fed to raise rates this year based on new economic data.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.40% to an intraday high of 96.50. The index is still down by more than 1% since hitting four-month highs of 97.62 early last week.

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

Silver for September delivery plummeted 0.636 or 3.11% to 19.807 an ounce.

Copper for September delivery fell 0.015 or 0.69% to 2.159 a pound.

Oil

Crude futures fell slightly, halting a massive two-day rally as the Dollar recovered on Friday after a strong U.S. monthly jobs report augmented hawkish arguments for a near-term rate hike from the Federal Reserve.

On the New York Mercantile Exchange, WTI crude for September delivery traded between $41.06 and $42.09 a barrel before closing at $41.80, down 0.13 or 0.31% on the session. At one point this week, the front month contract for U.S. crude closed below $40 for the first time since mid-April. On the Intercontinental Exchange (ICE), brent crude for October delivery wavered between $43.52 and $44.48 a barrel, before settling at $44.27 down 0.02 or 0.05% on the day.

The international and U.S. domestic benchmarks for crude are currently down by more than 15% from their June highs.

On Friday morning, the U.S. Department of Labor said in its monthly employment report that the economy added 255,000 nonfarm payrolls in July, marking the second consecutive month that the labor market has added more than 200,000 jobs. At the same time, the labor participation rate ticked up by 0.1 to 62.8% while the unemployment rate remained flat at 4.9%. The Federal Open Market Committee (FOMC) will receive one additional monthly jobs report to judge the strength of the labor market before it meets again in late-September.

Any rate hikes by the FOMC this year are viewed as bullish for the dollar, as foreign investors pile into the greenback in order to capitalize on higher yields.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.40% to an intraday high of 96.50. The index is still down by more than 1% since hitting four-month highs of 97.62 early last week. 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 increased by seven to 381 for the week ending on July 29. It represented the sixth consecutive week of weekly increases among oil rigs nationwide. Concurrently, gas rigs fell by five to 81, while miscellaneous rigs dropped by one to two. Overall, the total rig count increased by one to 464.

Rising rig counts are viewed as a lagging indicator for increased drilling activity nationwide. As such, the latest data indicates that producers were more prone to ramp up output in June when U.S. crude surged to $50 a barrel than in the spring when oil prices were recovering from 13-year lows.

Crude futures are up sharply since falling as low as $26.05 a barrel in mid-February. Nevertheless, oil prices are still down considerably from their level two summers ago when they peaked at $115 a barrel.

Natural Gas (Thursday Report)

U.S. natural gas futures jumped in North America trade on Thursday, after data showed that natural gas supplies in storage in the U.S. fell unexpectedly last week, as a recent heat wave prompted households to ramp up their air conditioning.

Natural gas for delivery in September on the New York Mercantile Exchange rose 2.5 cents, or 0.88%, to trade at $2.864 per million British thermal units by 14:33GMT, or 10:33AM ET. Prices were at around $2.837prior to the release of the supply data.

A day earlier, prices surged 10.6 cents, or 3.88%, as traders placed wagers that this week's storage data would be on the bullish side.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended July 29 declined by 6 billion cubic feet, compared to forecasts for an increase of 2 billion.

That compared with a build of 17 billion cubic feet in the preceding week, 41 billion a year earlier and a five-year average of 54 billion cubic feet.

Total U.S. natural gas storage stood at 3.288 trillion cubic feet, 11.8% higher than levels at this time a year ago and 14.1% above the five-year average for this time of year.

Meanwhile, updated weather forecasting models pointed to mostly mild weather across most parts of the U.S. in the coming days, underlining the view that higher summer demand for the commodity is coming to an end.

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.

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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