Investing.com Weekly Wrap-Up 21 December 2012

Closing the Week with Investing.com

by Investing.com Staff

U.S. stock prices dropped on Friday after congressional Republicans moved against fiscal reforms proposed by House Speaker John Boehner to avoid a year-end fiscal cliff.

At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.91%, the S&P 500 index was down 0.94%, while the Nasdaq Composite index fell 0.96%.

Republicans in the U.S. House of Representatives late Thursday canceled plans to vote on fiscal proposals drafted by Speaker Boehner, himself a Republican, which called for tax hikes on incomes over USD1 million, well above a White House proposal calling for tax hikes on incomes topping USD400,000.

Critics said the bill didn’t address spending cuts enough.

Stocks fell on the news as failure to push fiscal reforms today will allow tax breaks in place now to expire as scheduled at the end of this year, right when deep spending cuts kick in, a combination known as a fiscal cliff that could throw the country into a recession next year if left unchecked by Congress.

Fiscal uncertainty served as the market’s chief steering current throughout the day.

Elsewhere, the U.S. Census Bureau reported earlier that core durable goods orders, which exclude transportation items, rose 1.6% in November, beating market expectations for a 0.2% decline though down slightly from a 1.9% increase the previous month.

Durable goods orders rose by 0.7% last month, outpacing consensus forecasts for a 0.2% rise though down from a 1.1% increase in October.

Meanwhile, a separate Commerce Department report revealed that personal spending in the U.S. rose by 0.4% in November, beating expectations for a 0.3% rise and far outpacing 0.1% fall the previous month.

Also in the U.S. earlier, the Thomson Reuters/University of Michigan’s consumer sentiment index slumped unexpectedly in December, possibly due to fears the U.S. will careen over the fiscal cliff.

The index dipped to 72.9 for December from 74.5 the previous month, missing analysts’ call for an improvement to 74.7 this month.

Leading Dow Jones Industrial Average performers included American Express, up 0.44%, McDonald’s Corp., up 0.16%, and Boeing, down 0.04%.

The Dow Jones Industrial Average’s worst performers included Bank of America, down 2.00%, Exxon Mobil, down 1.87%, and Walt Disney, down 1.83%.

European indices, meanwhile, finished lower.

After the close of European trade, the EURO STOXX 50 fell 0.27%, France’s CAC 40 fell 0.15%, while Germany’s DAX 30 finished down 0.47%. Meanwhile, in the U.K. the FTSE 100 lost 0.31%.

Forex

The dollar rose in a risk-off trading session on Friday after House Republicans late Thursday rejected a plan proposed by their leader in the House of Representatives to avoid the U.S. fiscal cliff.

In U.S. trading on Friday, EUR/USD was down 0.52% at 1.3174.

Republicans in the U.S. House of Representatives canceled plans to vote on fiscal reforms proposed by Speaker John Boehner, himself a Republican, which called for tax hikes on incomes over USD1 million, well above a White House proposal calling for tax hikes on incomes topping USD400,000.

Dissent in Boehner’s own party rattled nerves and stoked fears the U.S. will fail to reach a budgetary deal.   Without a deal tax breaks will expire for all Americans in 2013 and deep cuts to government spending to kick in at the same time, a combination known as a fiscal cliff that could tip the country into a recession next year.

The news overshadowed rather positive economic data discussed earlier in ths article.

In Europe, the Gfk research group reported that its index of Germany’s consumer climate fell to 5.6 in December from 5.8 in November.

Analysts had expected the index to improve to 5.9 this month.

The greenback, meanwhile, was up against the pound, with GBP/USD trading down 0.71% at 1.6163.

In the U.K., official data earlier revealed that the economy grew less than anticipated in the third quarter, expanding 0.09%, missing market calls for a 1% rise.

A separate report showed that public sector net borrowing rose more than expected in November, gaining to GBP15.3 billion from GBP6 billion in October.

Analysts had expected public sector net borrowing to rise to GBP14.2 billion last month.

Elsewhere, the U.K. current account deficit narrowed to GBP12.8 billion in the third quarter from a deficit of GBP17.4 billion, beating expectations for a drop to GBP14 billion.

The dollar was down against the yen, with USD/JPY trading down 0.15% at 84.26 and up against the Swiss franc, with USD/CHF trading up 0.56% at 0.9167.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.61% at 0.9938, AUD/USD down 0.79% at 1.0399 and NZD/USD trading down 1.23% at 0.8236.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.50% at 79.69.

Gold

Gold prices jumped up in afternoon U.S. trading Friday amid demand from investors looking for safety as U.S. budget talks hit a fresh snag in Congress.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery were up 0.59% at USD1,655.65 a troy ounce in U.S. trading, up from a session low of USD1,636.465 and down from a high of USD1,660.45 a troy ounce.

Gold futures were likely to test support USD1,636.45 a troy ounce, the earlier low, and resistance at USD1,677.85, Wednesday’s high.

Investors flocked to gold to digest a budgetary impasse threatening to throw the U.S. economy into a recession next year.

Failure on the part of the White House and Congress to agree on a 2013 fiscal framework will allow sweeping tax hikes to kick in at the same time deep government spending cuts take effect, a combination known as a fiscal cliff that could contract the economy by 0.5% next year if Congress fails to avoid it, according to Congressional Budget Office estimates.

Investors flocked to nicely priced gold positions to seek safety after rebellion in Boehner’s own party sent rattled nerves.

Reports that central banks continue to stock up on gold to diversify reserve assets boosted prices also.

Meanwhile on the Comex, silver for March delivery was up 1.44% and trading at USD30.105 a troy ounce, while copper for March delivery was up 0.81% and trading at USD3.565 a pound.

Oil

Crude oil futures fell on Friday after House Republicans rejected a proposal put forth by House Speaker John Boehner, himself a Republican, to avoid a year-end combo of tax hikes and spending cuts.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at USD88.62 a barrel on Friday, down 1.68%, off from a session high of USD90.08 and up from an earlier session low of USD87.97.

Failure to strike a budgetary agreement in the U.S. will allow sweeping tax breaks to expire at the same time deep cuts to government spending kick in, a combination known as a fiscal cliff that could contract the economy by 0.5% next year if Congress fails to avoid it, according to Congressional Budget Office estimates.

Meanwhile on the ICE Futures Exchange, Brent oil futures for February delivery were down 1.12% at USD108.97 a barrel,  USD20.35 higher than its U.S. counterpart.

Natural Gas

Natural gas futures cooled on Friday, giving up earlier gains as profit-taking ended a rally fueled by a powerful winter storm pounding much of the central and northeastern U.S.

On the New York Mercantile Exchange, natural gas futures for delivery in January traded at USD3.449 per million British thermal units, down 0.39%.

A powerful storm continued to trek across much of the central and eastern United States on Friday though natural gas futures gave back earlier gains on sentiment temperatures won’t stay cold enough to boost demand for a significant period of time.

Profit takers also wiped out gains stemming from falling supplies.

The U.S. Energy Information Administration reported earlier this week that natural gas storage in the U.S. in the week ended Dec. 14 fell by 82 billion cubic feet, outpacing expectations for a decline of 72 billion cubic feet.

Inventories fell by 100 billion cubic feet in the same week a year earlier, while the five-year average change for the week represented a decline of 144 billion cubic feet.

Total U.S. natural gas storage stood at 3.724 trillion cubic feet as of last week.

Stocks were 66 billion cubic feet higher than during the same period a year ago and 345 billion cubic feet above the five-year average of 3.379 trillion cubic feet for this time of year.

The report showed that in the East Region, stocks were 80 billion cubic feet above the five-year average, following net withdrawals of 49 billion cubic feet.
Stocks in the Producing Region were 183 billion cubic feet above the five-year average of 1.078 billion cubic feet, after a net withdrawal of 24 billion cubic feet.

Meanwhile, blizzard conditions striking he Midwest were due to spread to the more heavily populated northeastern U.S., where temperatures were expected to remain cooler than normal for the next two weeks.

About half of U.S. households use gas for heating purposes, according to Energy Department data.

The heating season from November through March is the peak demand period for U.S. gas consumption.