by Investing.com Staff, Investing.com
U.S stocks drop on June rebalance, Fed comments; Dow dips 0.76%
U.S. stocks ended largely lower Friday due to a June rebalancing of the Russell Index and to mixed signals from Federal Reserve officials suggested that stimulus 
programs may stay in place for now but end later this year.
At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.76%, the S&P 500 index ended down 0.43%, while the Nasdaq Composite index rose 0.04%.
Each June, the Russell Index rebalances its list of investible stocks, which tends to fuel volatility, especially on the last trading day of the quarter.
Earlier Friday, Federal Reserve Governor Jeremy Stein suggested that asset purchases may begin to taper in September provided the economy improves, which boosted stocks earlier. Stein said in prepared remarks in a speech he gave earlier:
“The best approach is for the Committee to be clear that in making a decision in, say, September, it will give primary weight to the large stock of news that has accumulated since the inception of the program and will not be unduly influenced by whatever data releases arrive in the few weeks before the meeting — as salient as these releases may appear to be to market participants.”
Separately, San Francisco Federal Reserve President and noted inflation dove John Williams said that it was still too early to scale back stimulus tools yet, though stocks rose earlier on the notion that liquidity injections from asset purchases will keep stocks high, and by the time the Fed begins to scale back, better economic fundamentals will support equities.
However, Federal Reserve Bank of Richmond President Jeffrey Lacker said markets will experience more volatility while figuring out what the Fed will do, which added to the day’s declines.
Elsewhere, the Thomson Reuters/University of Michigan consumer sentiment index rose to 84.1 for a final reading in June, up from a 82.7 reading the previous month and also above expectations for a 82.8 reading.
The upbeat numbers came in wake of a report that revealed that the Chicago purchasing managers’ index fell to 51.6 this month from 58.7 in May, exceeding expectations for a decline to 56.0.
Any reading over 50 signifies expansion, which fueled demand for stocks during the volatile session.
Leading Dow Jones Industrial Average performers included Home Depot, up 1.13%, Intel, up 0.87%, and Hewlett-Packard, up 0.16%.
The Dow Jones Industrial Average’s worst performers included IBM, down 2.35%, DuPont, down 2.00%, and Merck, down 1.65%.
European indices, meanwhile, finished lower.
After the close of European trade, the EURO STOXX 50 fell 0.66%, France’s CAC 40 fell 0.62%, while Germany’s DAX 30 finished down 0.39%. Meanwhile, in the U.K. the FTSE 100 finished down 0.45%.
Rising U.S. consumer sentiment data and comments from a Federal Reserve governor suggesting monetary stimulus tools may taper in September sent the dollar strengthening against most of its counterparts Friday.
Monetary stimulus tools such as the Fed’s monthly USD85 billion bond-buying program weaken the dollar to spur recovery, and talk of their dismantling often firms the greenback.
In U.S. trading on Friday, EUR/USD was down 0.23% at 1.3010.
Meanwhile in the eurozone, official data showed that German retail sales rose 0.8% in May, beating expectations for a 0.2% gain after a 0.1% contraction the previous month, though U.S. events served as the market’s chief steering current.
The greenback was up against the pound, with GBP/USD trading down 0.38% at 1.5201.
In the U.K., house price inflation rose 0.3% this month, in line with expectations after a 0.4% gain in May.
The dollar was up against the yen, with USD/JPY up 0.94% at 99.28, and flat against the Swiss franc, with USD/CHF trading down 0.01% at 0.9450.
Japan’s manufacturing purchasing managers’ index rose to 52.3 in June from 51.5 in May, the index’s fastest expansion in almost two years.
A separate report showed that industrial production in Japan rose 2% in May, exceeding expectations for a 0.2% rise after a 0.9% increase a month earlier.
In addition, housing starts in Japan jumped 14.5% in May, far more than the expected 6.2% increase after a 5.8% rise the previous month.
Investors, however, opted for the dollar over the yen in wake of U.S. consumer sentiment numbers and Stein’s comments.
The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.27% at 1.0505, AUD/USD down 1.41% at 0.9145 and NZD/USD trading down 0.68% at 0.7742.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.29% at 83.41.
The dollar traded higher against the yen on Friday despite a slew of Japanese economic indicators that beat expectations.
The pair was likely to find resistance at 99.45, the earlier high, and support at 98.35, the earlier low.
The dollar traded higher against the yen on Friday despite a slew of Japanese economic indicators that beat expectations.
Gold prices shot up on Friday as short covering marked the last trading day of the quarter and allowed for choppy trading.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery were up 1.12% at USD1,225.15 a troy ounce in U.S. trading on Friday, up from a session low of USD1,180.35 and down from a high of USD1,228.55 a troy ounce.
Gold futures were likely to find support at USD1,180.35 a troy ounce, the earlier low, and resistance at USD1,300.55, Monday’s high.
Short covering sent gold soaring, as the yellow metal has plummeted 24% during the second quarter of this year.
Uncertainty as to when the Federal Reserve begins to taper monetary stimulus measures has repelled investors away from the precious metal, which benefits when monetary policy is loose due to its role as a hedge to a weakening dollar.
Elsewhere on the Comex, silver for September delivery was up 5.15% at USD19.508 a troy ounce, while copper for September delivery was up 0.03% and trading at USD3.060 a pound.
Crude prices rose in rather subdued trading on Friday, buoyed by rising consumer sentiment numbers in the U.S., which reflected an improving economy that will demand more fuels and energy going forward.
Comments from a Federal Reserve governor suggesting an end to monetary stimulus programs starting in September quieted trading as investors digested the news.
On the New York Mercantile Exchange, light sweet crude futures for delivery in August traded up 0.27% at USD97.31 a barrel on Friday, off from a session high of USD97.82 and up from an earlier session low of USD96.55.
Stimulus tools such as a monthly USD85 billion bond-buying program tend to push oil up as a side effect by weakening the greenback, which makes the commodity attractive in dollar-denominated exchanges.
On the ICE Futures Exchange, Brent oil futures for August delivery were up 0.15% at USD102.98 a barrel, up USD5.67 from its U.S. counterpart.
Natural gas prices extended Thursday’s heavy losses into Friday after official U.S. inventory data revealed the country’s stockpiles shot up way more than expected last week.
In the New York Mercantile Exchange, natural gas futures for delivery in August traded at USD3.531 per million British thermal units, down 1.44%.
The commodity hit a session low of USD3.528 and a high of USD3.618.
The U.S. Energy Information Administration said in its weekly report on Thursday that natural gas storage in the U.S. in the week ended June 21 rose by 95 billion cubic feet, above expectations for an increase of 88 billion.
The data sent prices tumbling by more than 4% after release.
Inventories rose by 58 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a rise of 79 billion cubic feet.
Total U.S. natural gas storage stood at 2.533 trillion cubic feet as of last week. Stocks were 522 billion cubic feet less than last year at this time and 31 billion cubic feet below the five-year average of 2.564 trillion cubic feet for this time of year.
The report showed that in the East Region, stocks were 89 billion cubic feet below the five-year average, following net injections of 58 billion cubic feet.
Stocks in the Producing Region were 13 billion cubic feet above the five-year average of 944 billion cubic feet after a net injection of 24 billion cubic feet.
Further depressing prices were weather reports calling for below-normal temperatures in pockets of the eastern U.S. in the coming days.
Mild summer temperatures cut into the need for gas-fired electricity to cool homes and dampen demand for natural gas.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in August were up 0.23% and trading at USD97.27 a barrel, while heating oil futures for August delivery were up 0.10% at USD2.8908 per gallon.
Natural gas accounts for about a quarter of U.S. electricity generation.
