Investing.com Weekly Wrap-Up 04 January 2012

Closing the Week with Investing.com

by Investing.com Staff

Stronger-than-expected data out of the U.S. service sector and a solid December jobs report sent U.S. stock prices climbing on Friday.

At the close of U.S. trading, the Dow Jones Industrial Average finished up 0.33%, the S&P 500 index was up 0.49%, while the Nasdaq Composite index rose 0.04%.

In the U.S. earlier, the Bureau of Labor Statistics reported the U.S. economy added 155,000 nonfarm payrolls in December, beating market calls for the economy to create 150,000 new jobs.

In addition, the U.S. employment rate remained unchanged at 7.8% last month, though markets had hoped for a decline to 7.7%.

Meanwhile, the Bureau of Labor Statistics revised October’s figures to 137,000 from 138,000 new jobs and hiked November’s figure to 161,000 from 146,000.

Elsewhere, the U.S. Institute of Supply Management reported earlier that its non-manufacturing index improved to 56.1 in December from 54.7 in November, beating expectations for a rise to 54.2.

While the data failed to send investors charging into a full-fledged risk-on trading session due to question marks looming on U.S. fiscal and monetary horizons, the numbers were strong enough to send investors snapping up stocks, viewed by many as nicely priced these days.

Congress will debate raising the government’s debt ceiling possibly in February.

Fears that lawmakers may stage a repeat performance of 2011’s debt-ceiling debates, which nearly threw the country into default thanks to brinkmanship, kept some investors sticking with safe-haven dollar positions, especially on sentiment the jobs market is not improving fast enough to suggest the economy may be returning to its pre-recession health.

Uncertainty as to when the Federal Reserve may wind down its monetary stimulus programs also pushed down the pair.

The Fed revealed in the minutes of its December monetary policy meeting that some members are ready to consider paring back the U.S. central bank’s monthly USD85 billion bond-buying program, which weakens the greenback as a side effect.

Leading Dow Jones Industrial Average performers included Alcoa, up 2.09%, Walt Disney, up 1.91%, and JPMorgan Chase & Co., up 1.77%.

The Dow Jones Industrial Average’s worst performers included Microsoft, down 1.87%, McDonald’s Corp., down 0.86%, and Merck, down 0.85%.

European indices, meanwhile, finished higher.

After the close of European trade, the EURO STOXX 50 rose 0.30%, France’s CAC 40 rose 0.24%, while Germany’s DAX 30 finished up 0.26%. Meanwhile, in the U.K. the FTSE 100 finished up 0.70%.

Forex

The dollar rose against most of its peers on Friday despite better-than-expected data out of the labor market and service sector, as investors remained anchored in the safe-harbor currency to see if Congress lifts the U.S. debt ceiling and if the Federal Reserve continues stimulating the economy.

In U.S. trading on Friday, EUR/USD was up 0.16% at 1.3070, largely due to preliminary data revealing that eurozone inflation came in stronger than expected last month, suggesting more consumer demand than once thought.

The currency zone’s consumer price index remained unchanged at an annualized rate of 2.2% in December, outpacing market calls for the index to tick down to 2.1% in December.

In the U.S., solid employment and service-sector data failed to spark a full risk-on trading session that would normally weaken the greenback.

The greenback was up against the pound, with GBP/USD trading down 0.29% at 1.6062.

In the U.K., service-sector activity fell unexpectedly last month.

In a report, The Chartered Institute of Purchasing & Supply and the NTC Economics said that U.K. Services PMI fell to a seasonally adjusted annual rate of 48.9 in December from 50.2 in the preceding month.

Analysts had expected U.K. Services PMI to rise to 50.4 last month.

The dollar was up against the yen, with USD/JPY up 1.09% at 88.19 and down against the Swiss franc, with USD/CHF trading down 0.24% at 0.9246.

The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.07% at 0.9871, AUD/USD up 0.07% at 1.0474 and NZD/USD trading up 0.37% at 0.8312.

The pound, meanwhile, was down against the euro and up against the yen, with EUR/GBP trading up 0.41% at 0.8135 and GBP/JPY up 0.75% at 141.57.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.06% at 80.61.

Gold

Gold prices dropped on Friday after the U.S. government released its December jobs report, which beat expectations but did not come in solid enough to spark a risk-on rally needed to bolster the precious metal.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery were down 1.35% at USD1,652.05 a troy ounce in U.S. trading, up from a session low of USD1,626.05 and down from a high of USD1,664.45 a troy ounce.

Gold futures were likely to test support USD1,626.05 a troy ounce, the earlier low, and resistance at USD1,664.45, the earlier high.

Investors largely ditched gold positions despite positive news from the jobs front.

Meanwhile on the Comex, silver for March delivery was down 2.42% and trading at USD29.978 a troy ounce, while copper for March delivery was down 0.66% and trading at USD3.692 a pound.

Oil

Crude oil futures rose on Friday after official data revealed that the country’s inventories fell more than expected last week.

Uncertainty as to when the Federal Reserve may wind down its stimulus programs kept the growth-sensitive commodity’s gains in check.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at USD92.96 a barrel on Friday, up 0.04%, off from a session high of USD93.10 and up from an earlier session low of USD91.55.

In a report, Energy Information Administration said that U.S. crude oil inventories fell by 11.12 million barrels last week, well above market calls for a decrease of 919,000 barrels, which pushed up prices on sentiment demand for fuels an energy may be stronger than once thought.

Even though U.S. jobs data came in stronger than expected, uncertainty over the Federal Reserve’s plans to wind down stimulus tools dampened the rally.

Oil jumped in and out of positive territory due to market sentiments that U.S. central bankers may be grouping off into different camps when it comes to deciding when a USD85 million monthly bond-buying program designed to stimulate the economy should wind down.

The Fed said in the minutes of its December monetary policy meeting released this week:

“A few members expressed the view that ongoing asset purchases would likely be warranted until about the end of 2013, while a few others emphasized the need for considerable policy accommodation but did not state a specific time frame or total for purchases. Several others thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet. One member viewed any additional purchases as unwarranted.”

The bond-buying program, known technically as quantitative easing but dubbed by many as printing money out of thin air, weakens the U.S. dollar and pumps up stock and commodity prices by flooding the economy with liquidity.

Some saw the comments as a sign the Fed may wind down stimulus programs to prevent inflationary pressures from building, slowing recovery and strengthening the dollar in the process, which could pressure oil prices downward.

Meanwhile on the ICE Futures Exchange, Brent oil futures for February delivery were down 0.83% at USD111.20 a barrel, up USD18.24 from its U.S. counterpart.

Natural Gas

Natural gas futures shot up on Friday after inventories fell more than expected in the U.S., reversing several sessions of losses stemming from forecasts for warming temperatures.

On the New York Mercantile Exchange, natural gas futures for delivery in February traded at USD3.281 per million British thermal units, up 2.61%.

The Energy Information Administration reported earlier that U.S. natural gas storage fell by a seasonally adjusted annual rate of 135 billion cubic feet last week, beating out market calls for a decline of 127 billion cubic feet.

The news brought in buyers who have spent several days on the sidelines thanks to forecasts for warmer weather.

Earlier this week, weather service provider MDA Weather said that it expected temperatures to warm up in the coming days through the second week of January.

Elsewhere, Commodity Weather Group in Bethesda, Maryland, reported that cooler temperatures across most of the mainland U.S. will thaw and yield to above-normal temperatures from Jan. 7 through Jan. 11, which sent natural gas prices plummeting in earlier sessions.

Natural gas futures are very sensitive to weather reports in the U.S. winter.

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

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

Futures for February delivery of the other major U.S. household heating fuel, heating oil, were down 0.28% and trading at USD3.0166 per gallon.