Investing.com Weekly Wrap-Up 28 December 2012

Closing the Week with Investing.com

by Investing.com Staff

U.S. stock prices dropped on Friday as the nation headed for the weekend and one more 2012 trading day on Monday with no deal in sight needed to steer the country away from the fiscal cliff, a combination of tax hikes and spending cuts taking effect in unison at the end of the year.

Failure to outright avoid the cliff could result in the U.S. sliding into a recession next year.

At the close of U.S. trading, the Dow Jones Industrial Average finished down 1.21%, the S&P 500 index was down 1.11%, while the Nasdaq Composite index fell 0.86%.

President Barack Obama was meeting with congressional Democrats and Republicans on Friday to find a way to avoid careening over the fiscal cliff, and the uncertainty sent investors selling stocks and seeking safe-haven positions in the U.S. dollar.

While early January can come a go without a deal, as tax hikes and spending cuts will take some time to materialize, markets will roil if U.S. leaders fail to resolve the fiscal cliff early in 2013.

Solid data out of the U.S. failed to boost spirits for long.

In the U.S. earlier, the National Association of Realtors revealed that pending home sales beat expectations in November, rising by 1.7% after a 5% increase the previous month.

Analysts were expecting pending home sales to rise by 1.0% in November.

Elsewhere in the U.S., the Chicago’s purchasing managers’ index rose to 51.6 in December, up from 50.4 in November and beating expectations for a rise to 51.0.

Leading Dow Jones Industrial Average performers included American Express, up 0.04%, Home Depot, down 0.67%, and DuPont, down 0.71%.

The Dow Jones Industrial Average’s worst performers included Hewlett-Packard, down 2.42%, Exxon Mobil, down 1.88%, and Chevron, down 1.78%.

European indices, meanwhile, finished lower.

After the close of European trade, the EURO STOXX 50 fell 1.90%, France’s CAC 40 fell 1.47%, while Germany’s DAX 30 finished down 0.57%. Meanwhile, in the U.K. the FTSE 100 finished down 0.49%.

Forex

The dollar rose against most of its peers on Friday as investors largely flocked to the safe-haven currency to await signs of progress in U.S. negotiations to avoid the fiscal cliff, a year-end combo of tax hikes and deep spending cuts taking effect simultaneously at year’s end.

Failure to push through tax and spending reforms and avoid the cliff could tip the country into a recession in 2013.

In U.S. trading on Friday, EUR/USD was down 0.13% at 1.3221.

Investors remained parked in a wait-and-see mode as the Obama-congressional meeting took place, which sent the dollar gaining.

While Jan. 1 can come a go without a deal, as tax hikes and spending cuts will take some time to materialize, markets will roil if U.S. leaders fail to resolve the fiscal cliff early in 2013.

Elsewhere, investors kept an eye on U.S. and European data though most attention remained focused on Washington.

In Europe, the Markit research group reported earlier that the eurozone’s retail purchasing managers’ index fell to 44.5 in December from 45.8 the previous month.

Elsewhere, official data revealed that French consumer spending rose 0.2% in November, more than market forecasts for a 0.1% increase and from a 0.1% decline the previous month.

Also in France, the country’s gross domestic product rose less than expected in the last quarter.

The country’s National Institute for Statistics and Economic Studies said that French GDP rose by a seasonally adjusted 0.1% in the third quarter from 0.2% in the preceding quarter.

Analysts were expecting French GDP to rise 0.2% in the third quarter.

The euro slumped against the Japanese yen on Friday after French gross domestic product figures came in slightly weaker than expected.

Bottom fishers snapped up nicely price yen positions as well on sentiment that currency has weakened enough on talk of policy loosening.

In U.S. trading on Friday, EUR/JPY hit 113.81, down 0.16% and up from a low of 113.30 and off a high of 114.70.

The pair sought to test support at 113.30, the earlier low, and resistance at 114.70, the earlier high.
The greenback, meanwhile, was down against the pound, with GBP/USD trading up 0.35% at 1.6157.

The dollar was flat against the yen, with USD/JPY unchanged at 86.11 and up against the Swiss franc, with USD/CHF trading down 0.03% at 0.9131.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.07% at 0.9958, AUD/USD down 0.05% at 1.0372 and NZD/USD trading down 0.13% at 0.8200.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.08% at 79.78.

Gold

Gold prices softened in U.S. trading Friday as investors avoided the precious metal and opted to ride out U.S. fiscal uncertainties parked in the U.S. dollar.

Gold and the dollar trade inversely from one another.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery were down 0.48% at USD1,655.75 a troy ounce in U.S. trading, up from a session low of USD1,654.55 and down from a high of USD1,666.95 a troy ounce.

Gold futures were likely to test support USD1,636.45 a troy ounce, the low from Dec. 21, and resistance at USD1,668.45, Wednesday’s high.

In the U.S., President Barack Obama was to meet congressional leaders later Friday at the White House to discuss ways to avoid the fiscal cliff, a combination of tax hikes and spending cuts taking effect in unison at the end of this year.

The nonpartisan Congressional Budget Office has warned that failure to address the fiscal cliff could tip the U.S. economy into a recession next year.

Sticking points between the White House and congressional Republicans include tax rates on top U.S. earners and the scope of public spending cuts.

While policymakers can still negotiate fiscal reforms in the coming days or even in early 2013, investors opted for the safe and liquid greenback to ride out uncertainty.

Investors largely ignored solid U.S. economic indicators.

Meanwhile on the Comex, silver for March delivery was down 0.61% and trading at USD30.055 a troy ounce, while copper for March delivery was down 0.26% and trading at USD3.591 a pound.

Oil

Crude oil futures softened on Friday as crude inventories fell less than expected last week.

Uncertainty as to whether the U.S. will pass through fiscal reforms pushed prices down as well.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at USD90.69 a barrel on Friday, down 0.20%, off from a session high of USD91.50 and up from an earlier session low of USD90.34.

Failure to agree on fiscal framework in the U.S. now will allow tax breaks to expire at the end of the year alongside deep spending cuts, a combination known as a fiscal cliff that could push the U.S. economy into a recession next year, which would seriously crimp demand for fuels and energy.

Meanwhile, the U.S. Energy Information Administration reported earlier that the country’s crude oil stocks dropped by 586,000 barrels last week, less than an expected decline of 1.86 million barrels, which pushed prices down on fears demand may be waning.

Gasoline stocks rose by 3.78 million barrels, more than market calls for a gain of 543,000 barrels.

Solid economic indicators bolstered the commodity.

On the ICE Futures Exchange, Brent oil futures for February delivery were down 0.39% at USD110.36 a barrel, up USD19.67 from its U.S. counterpart.

Natural Gas

Natural gas futures rose on Friday on forecasts that colder weather will return for much of the U.S. in early January.

On the New York Mercantile Exchange, natural gas futures for delivery in February traded at USD3.463 per million British thermal units, up 1.49%.

Forecasts for cold weather to return in January pushed up prices.

The lower 48 states will experience cooler-than-normal temperatures in the next 10 days, according to various weather services, which should prompt more households and businesses to turn up the heating.

Earlier forecasts made this week predicted slightly warmer temperatures in store for the U.S., which pushed prices down in earlier sessions, giving them room to rebound on Friday.

The heating season from November through March sees peak demand for U.S. gas.

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

Elsewhere, U.S. natural gas storage fell less than expected last week, official data revealed on Friday.

In a report, the Energy Information Administration said that U.S. natural gas storage fell by 72 billion cubic feet last week to 3.652 trillion cubic feet, less than a decline of 82 billion cubic feet in the preceding week.

Analysts had expected U.S. natural gas storage to fall 76 billion cubic feet last week, though markets focused more on weather forecasts.