Investing.com Weekly Wrap-Up 18 January 2012

Closing the Week with Investing.com

by Investing.com Staff

U.S. stock prices erased earlier losses sustained on weaker-than-expected consumer sentiment data and finished near five-year highs on Friday on talk congressional Republicans will agree to lift the government’s debt ceiling.

At the close of U.S. trading, the Dow Jones Industrial Average finished up 0.39%, the S&P 500 index was up 0.34%, while the Nasdaq Composite index slipped 0.04%.

Stocks dipped earlier after data revealed that The Thomson Reuters/University of Michigan’s preliminary index of U.S. consumer sentiment fell to 71.3 in January — its lowest level since December 2011 — from 72.9 in December, disappointing expectations for an improvement to 75.0.

Many investors fled to the safety of the dollar on fears the U.S. economy still faces stiff headwinds, as consumer spending drives about 70% of the country’s total output.

Towards the closing bell, however, stocks rose after congressional Republicans said they would hike the debt ceiling if Senate Democrats pass a budget proposal.

Fears congressional bickering similar to the 2011 debt-ceiling debates dampened stock prices in recent sessions, as markets roiled two years ago when lawmakers waited until the last second to lift the government’s borrowing limit, nearly throwing the government into default.

Leading Dow Jones Industrial Average performers included General Electric, up 3.52%, Caterpillar, up 1.89%, and DuPont, up 1.42%.

The Dow Jones Industrial Average’s worst performers included Intel, down 6.31%, American Express, down 1.53%, and Bank of America, down 1.24%.

European indices, meanwhile, finished largely lower.

After the close of European trade, the EURO STOXX 50 fell 0.34%, France’s CAC 40 fell 0.07%, while Germany’s DAX 30 finished down 0.43%. Meanwhile, in the U.K. the FTSE 100 finished up 0.47%.

Forex

Weaker-than-expected consumer sentiment data in the U.S. turned investors away from risk-on assets and sent most going long on the safe-haven dollar, which rose against most major currencies on Friday.

In U.S. trading on Friday, EUR/USD was down 0.36% at 1.3328.

The dollar saw widespread demand after earlier data revealed that The Thomson Reuters/University of Michigan’s preliminary index of U.S. consumer sentiment fell to 71.3 in January — its lowest level since December 2011 —from 72.9 in December, disappointing expectations for an improvement to 75.0.

Investors opted to remain camped out in the safety of the dollar on fears the U.S. economy still faces stiff headwinds, as consumer spending drives about 70% of the country’s total output.

The dollar rose in earlier sessions on the coattails of firming housing and labor-market demand.

The U.S. Department of Labor reported on Thursday that the number of individuals filing for weekly jobless benefits last week fell by 37,000 to a seasonally adjusted five-year low of 335,000, much more than market calls for a decline of 7,000 to 365,000.

Meanwhile, the Commerce Department said U.S. housing starts jumped by 12.1% in December to an annual unit rate of 954,000, the highest level since 2008, beating out market expectations for a 4.6% increase to 890,000.

Softer-than-expected consumer sentiment figures caught many investors off guard, making higher-yielding currencies ripe for profit taking, which sent the dollar gaining on Friday.

The greenback, meanwhile, was up against the pound, with GBP/USD trading down 0.73% at 1.5880.

Retail sales in the U.K. fell unexpectedly in December, official data showed on Friday.

In a report, the U.K. Office for National Statistics revealed that monthly retail sales declined 0.1% in December, missing analysts calls for retail sales to rise 0.2% last month.

The dollar was up against the yen, with USD/JPY trading up 0.17% at 90.03 and up against the Swiss franc, with USD/CHF trading up 0.18% at 0.9343.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.67% at 0.9924, AUD/USD down 0.32% at 1.0513 and NZD/USD trading up 0.05% at 0.8366.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.44% at 80.08.

Gold

Gold prices retreated in U.S. trading on Friday as investors sold the yellow metal for profits after weak consumer sentiment data hit the wire earlier, catching markets off guard.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery were down 0.14% at USD1,688.35 a troy ounce in U.S. trading, up from a session low of USD1,685.35 and down from a high of USD1,695.05 a troy ounce.

Gold futures were likely to test support USD1,666.55 a troy ounce, Thursday’s low, and resistance at USD1,696.25, Thursday’s high.

The weak consumer sentiment numbers sent investors snapping up safe-haven dollar positions, which sent gold falling as the two assets tend to trade inversely from one another.

Solid housing and employment data released in the U.S. earlier this week sent the metal gaining, and the surprisingly soft consumer sentiment figures brought in profit takers on Friday.

Solid Chinese growth figures gave the precious metal support, however.

China’s gross domestic product rose 7.9% in the fourth quarter from a year earlier, compared with expectations for a 7.8% rise, after a 7.4% increase in the previous quarter.

Meanwhile on the Comex, silver for March delivery was up 0.31% and trading at USD31.908 a troy ounce, while copper for March delivery was up 0.35% and trading at USD3.675 a pound.

Oil

Soft U.S. consumer sentiment figures caught energy investors off guard on Friday and prompted a sell-off of crude futures a day after solid housing and labor-market data sparked a rally.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in March traded at USD95.64 a barrel on Friday, down 0.31%, off from a session high of USD96.12 and up from an earlier session low of USD95.40.

Consumer spending drives about 70% of total U.S. economic output, and the disappointing sentiment figures offset solid housing and labor-market data released on Thursday.

In the U.S. a day earlier, the Department of Labor reported that the number of individuals filing for weekly jobless benefits last week fell by 37,000 to a seasonally adjusted five-year low of 335,000, much more than market calls for a decline of 7,000 to 365,000.

The news sent oil prices surging on sentiments that a stronger U.S. economy will demand more fuels and energy going forward.

Also on Thursday, the Commerce Department said U.S. housing starts jumped by 12.1% in December to an annual unit rate of 954,000, the highest level since 2008, beating out expectations for a 4.6% increase to 890,000, which also pushed growth-sensitive oil prices higher.

Solid Chinese growth data offset crude’s losses, however.

China’s gross domestic product rose 7.9% in the fourth quarter from a year earlier, compared with expectations for a 7.8% rise, after a 7.4% increase in the previous quarter.

Elsewhere on the ICE Futures Exchange, Brent oil futures for March delivery were up 0.10% at USD111.22 a barrel, up USD15.58 from its U.S. counterpart.

Natural Gas

Natural gas futures extended Thursday’s gains into Friday in wake of U.S. government reports revealing inventories fell more than expected last week.

Forecasts for lower temperatures to settle in across much of the U.S. pushed up prices as well.

On the New York Mercantile Exchange, natural gas futures for delivery in February traded at USD3.574 per million British thermal units, up 2.28%.

The commodity hit a session low of USD3.474 and a high of USD3.576.

A winter storm that ploughed across much of the heavily populated eastern U.S. earlier and has prompted weather forecasters to predict dry but cooler air to settle in its wake, which was bullish for natural gas.

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.

The commodity continued to see support from official data pointing to declining stockpiles.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended Jan. 11 fell by 148 billion cubic feet compared to market expectations for a decline of 136 billion cubic feet, which took many market participants by surprise.

Inventories fell by 89 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 144 billion cubic feet.

Total U.S. natural gas storage stood at 3.168 trillion cubic feet as of last week. Stocks were 147 billion cubic feet less than last year at this time and 316 billion cubic feet above the five-year average of 2.852 trillion cubic feet for this time of year.

The report showed that in the East Region, stocks were 92 billion cubic feet above the five-year average, following net withdrawals of 86 billion cubic feet.

Stocks in the Producing Region were 156 billion cubic feet above the five-year average of 957 billion cubic feet, after a net withdrawal of 39billion cubic feet.