Investing.com Weekly Wrap-Up 19 July 2013

by Investing.com Staff, Investing.com

U.S stocks end mixed on Fed outlook, earnings misses; Dow dips 0.03%

U.S. stocks ended mixed on Friday, buoyed by hopes that U.S. monetary policy will remain accommodative for the long term, though disappointing earnings out of the technology sector dampened the session.

At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.03%, the S&P 500 index rose 0.16%, while the Nasdaq Composite index fell 0.66%.

Stocks inched higher on sentiments that U.S. monetary policy will remain loose long after the Federal Reserve winds down its monthly USD85 billion asset-purchasing program, which lowers interest rates to spur recovery, sending stocks gaining as a result.

Fed Chairman Ben Bernanke told U.S. lawmakers in his semi-annual congressional testimony this week that monthly asset purchases will remain in place for the foreseeable future though they may begin to wind down later this year if the economy improves.

Still, the top U.S. central banker stressed that an end to stimulus programs does not mean tighter monetary policy such as hikes to benchmark interest rates will quickly follow suit, which was bullish for stocks Friday.

Disappointing earnings from tech giants Google and Microsoft dampened gains, though better-than-earnings at General Electric offset those losses somewhat.

Leading Dow Jones Industrial Average performers included General Electric, up 4.66%, Johnson & Johnson, up 2.31%, and Pfizer, up 2.18%.

The Dow Jones Industrial Average’s worst performers included Microsoft, down 11.48%, Hewlett-Packard, down 4.63%, and IBM, down 2.26%.

European indices, meanwhile, finished lower.

After the close of European trade, the EURO STOXX 50 fell 0.07%, France’s CAC 40 fell 0.06%, while Germany’s DAX 30 finished down 0.07%. Meanwhile, in the U.K. the FTSE 100 finished down 0.06%.

Forex

The dollar softened against most major currencies on Friday after markets digested Federal Reserve Chairman Ben Bernanke’s congressional testimony this week and concluded that monetary policy will remain accommodative even after the U.S. central bank wraps up stimulus tools.

Stimulus programs such as the Fed’s USD85 billion monthly bond-buying program tend to weaken the dollar to spur recovery.

In U.S. trading on Friday, EUR/USD was up 0.23% at 1.3138.

The dollar hovered lower throughout the day after Federal Reserve Chairman Ben Bernanke told U.S. lawmakers in his semi-annual congressional testimony this week that monthly asset purchases will remain in place for the foreseeable future though they may begin to wind down later this year if the economy improves.

While the dollar firmed in recent sessions on sentiments that stimulus programs are on their way out in a matter of months to about a year, the currency weakened on Friday on expectations that the Fed may even delay such a decision should economic data disappoint.

Meanwhile in Europe, official data showed that Germany’s producer price index came in flat in June, defying expectations for a 0.1% contraction after a 0.3% decline the previous month. 

The greenback, meanwhile, was down against the pound, with GBP/USDtrading up 0.28% at 1.5268.

Public-sector net borrowing in the U.K. fell less than expected in June, declining to GBP10.2 billion from GBP12.8 billion the previous month. 

Analysts had expected public sector net borrowing to fall to GBP9.5 billion last month, and the numbers provided support for the pound a day after a separate data revealed that U.K. retail sales rose 0.2% in June from May and were up 2.2% from June of last year.

Monthly retail sales met analysts’ expectations though the on-year numbers beat market calls for  a 1.7% increase.

The dollar was down against the yen, with USD/JPY down 0.15% at 100.27, and down against the Swiss franc, with USD/CHF trading down 0.38% at 0.9411.

The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.10% at 1.0368, AUD/USD up 0.24% at 0.9192 and NZD/USD trading up 0.49% at 0.7940.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.28% at 82.71.

Gold

Gold prices extended Thursday’s gains into Friday after Federal Reserve Chairman Ben Bernanke told lawmakers that any decision to taper the pace of its monthly asset purchases that weaken the dollar to spur recovery won’t signal the arrival of tighter monetary policy. 

Gold and the dollar tend to trade inversely with one another, especially in times of loose monetary policies.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery were up 0.67% at USD1,292.85 a troy ounce in U.S. trading on Friday, up from a session low of USD1,281.45 and down from a high of USD1,297.05 a troy ounce.

Gold futures were likely to find support at USD1,269.45 a troy ounce, Wednesday’s low, and resistance at USD1,299.45, Wednesday’s high.

Bernanke told U.S. lawmakers in his semi-annual congressional testimony this week that the Fed’s bond-buying program will remain in place for the foreseeable future, and even though monetary authorities may begin to taper later the program this year if the economy improves, policy will remain loose for the longer term.

Stimulus programs such as the Fed’s USD85 billion monthly asset-purchasing program tend to weaken the dollar to spur recovery, making gold an attractive hedge.

A weaker dollar, also the product of growing expectations for the Fed to take its time unwinding stimulus tools, pushed the yellow metal higher in quiet trading on Friday as well.

Elsewhere on the Comex, silver for September delivery was up 0.37% at USD19.460 a troy ounce, while copper for September delivery was up 0.28% and trading at USD3.140 a pound.

Oil

Profit taking sent crude prices falling on Friday after investors locked in gains and sold, ending a rally stemming from better-than-expected U.S. jobs and supply data.

On the New York Mercantile Exchange, light sweet crude futures for delivery in September traded down 0.53% at USD107.24 a barrel on Friday, off from a session high of USD108.92 and up from an earlier session low of USD107.04.

Oil prices posted strong gains on Thursday after the U.S. Department of Labor reported that the number of individuals filing for initial jobless benefits last week fell by 24,000 to 334,000, compared to expectations for a drop of 13,000 to 345,000.

Also on Thursday, the Federal Reserve Bank of Philadelphia said that its manufacturing index rose 19.8 for July from June’s 12.5 reading. Analysts had expected the index to decline to 7.8, and the better-than-expected readings sent prices gaining.

Positive U.S. indicators often send oil prices rising by stoking sentiments the world’s largest economy is gaining steam and will demand more fuel and energy going forward.

Adding to the week’s buying spree, the U.S. Energy Information Administration said in its weekly report that U.S. crude oil inventories fell by 6.9 million barrels last week, compared to expectations for a decline of 2 million barrels. 

The U.S. is the world’s biggest oil consuming country, responsible for almost 22% of global oil demand.

On the ICE Futures Exchange, Brent oil futures for September delivery were down 1.15% at USD107.46 a barrel, down USD0.08 from its U.S. counterpart.

Natural Gas

Natural gas prices edged lower on Friday after investors locked in gains from Thursday’s 5% rally and sold the commodity for profits.

In the New York Mercantile Exchange, natural gas futures for delivery in August traded at USD3.788 per million British thermal units, down 0.64%.

The commodity hit a session low of USD3.762 and a high of USD3.827.

Natural gas prices soared by over 5% on Thursday after the U.S. Energy Information Administration reported that natural gas storage in the week ending July 12 rose by 58 billion cubic feet, below market expectations for an increase of 64 billion cubic feet.

Inventories rose by 29 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a build of 70 billion cubic feet.

Total U.S. natural gas storage stood at 2.745 trillion cubic feet as of last week. Stocks were 414 billion cubic feet less than last year at this time and 34 billion cubic feet below the five-year average of 2.779 trillion cubic feet for this time of year.

The report showed that in the East Region, stocks were 101 billion cubic feet below the five-year average, following net injections of 37 billion cubic feet. 

Stocks in the Producing Region were 36 billion cubic feet above the five-year average of 977 billion cubic feet after a net injection of 15 billion cubic feet.

Weather forecasts supported prices as well, as a heat wave continued to sear the heavily populated eastern U.S. though calls for a return of less intense summertime mercury readings allowed prices to edge lower on Friday as well.

Natural gas accounts for about a quarter of U.S. electricity generation.