by Investing.com Staff, Investing.com
U.S. stocks fell on Friday in a quiet session as investors sold on sentiments that monetary stimulus programs such as the Fed’s USD85 billion bond-buying program are on their way out beginning in a couple of months.
At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.46%, the S&P 500 index fell 0.36%, while the Nasdaq Composite index fell 0.25%.
Investors sold or avoided stocks on market sentiments that Federal Reserve monetary stimulus programs that bolster stock prices by keeping borrowing costs low will begin to taper in September or December – either way in the near future.
Cleveland Fed President Sandra Pianalto said Wednesday there has been “meaningful improvement” in the labor market and that tapering may be warranted if it continues to strengthen.
Chicago Fed President Charles Evans and Dallas Fed President Richard Fisher have made similar comments.
Fed officials have said they will pay close attention to data before deciding on when to taper and eventually end stimulus programs, though investors took up positions on Friday that tapering will begin this year.
A decision to dismantle stimulus measures could send stocks falling even if temporarily due to the beginning of the end of Federal Reserve support.
Leading Dow Jones Industrial Average performers included Alcoa, up 3.92%, Caterpillar, up 0.61%, and Pfizer, up 0.27%. The Dow Jones Industrial Average’s worst performers included Walt Disney, down 1.55%, AT&T, down 1.39%, and Home Depot, down 1.36%.
European indices, meanwhile, finished higher.
After the close of European trade, the EURO STOXX 50 rose 0.23%, France’s CAC 40 rose 0.30%, while Germany’s DAX 30 finished up 0.24%. Meanwhile, in the U.K. the FTSE 100 finished up 0.82%.
The dollar traded mixed to higher against most major currencies on Friday after investors digested comments from several Federal Reserve officials over the week and decided stimulus programs will begin to unwind this year.
Monetary stimulus programs such as monthly asset purchases push down long-term borrowing costs to spur recovery, weakening the greenback in the process, though talk of their dismantling can strengthen the greenback.
In U.S. trading on Friday, EUR/USD was down 0.28% at 1.3342.
France reported earlier that the country’s industrial production dropped 1.4% in June, disappointing expectations for a 0.1% rise. May’s figure was revised to a 0.3% contraction from a previously estimated 0.4% decline.
The numbers weakened the euro, while the dollar saw some support on market sentiments that Federal Reserve monetary stimulus that weaken the greenback to spur recovery will begin to taper in September or December – either way in the near future.
The greenback was up against the pound, with GBP/USD down 0.19% at 1.5509.
The pound rose earlier after the Office for National Statistics said that the U.K. trade deficit narrowed by more than expected in June, improving to GBP8.08 billion from a deficit of GBP8.67 billion the previous month.
Analysts had expected the trade deficit to narrow to GBP8.50 billion in June, though the dollar regained strength after early weakness.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.10% at 81.16.
Gold prices edged higher on Friday in quiet, listless trading amid lingering uncertainty over when the Federal Reserve will announce a decision to taper stimulus measures such as the central bank’s monthly USD85 billion in asset purchases, which gave the metal some support.
Monetary stimulus measures tend to weaken the dollar to spur recovery, which makes gold an attractive hedge.
On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at USD1,311.10 during U.S. afternoon hours, up 0.09%.
Gold prices hit a session low of USD1,304.50 a troy ounce and high of USD1,316.10 a troy ounce.
The December contract settled up 1.91% at USD1,309.90 a troy ounce on Thursday.
Gold futures were likely to find support at USD1,272.10 a troy ounce, Thursday’s low, and resistance at USD1,319.85, Monday’s high.
Several Federal Reserve officials have said in recent days that they could not rule out making a decision to taper stimulus measures at the bank’s September meeting, though lackluster economic indicators out of the U.S. have some market participants betting that such a decision will come in December, which has pushed and pulled at prices in recent days.
Elsewhere on the Comex, silver for September delivery was up 1.02% at USD20.398 a troy ounce, while copper for September delivery was up 1.14% and trading at USD3.308 a pound.
U.S. crude oil prices shot up on Friday after Chinese industrial output figures beat expectations and renewed hopes for a more robust global recovery.
On the New York Mercantile Exchange, light sweet crude futures for delivery in September traded at USD105.58 a barrel during U.S. trading, up 2.11%.
The September contract settled down 0.93% at USD103.40 a barrel on Thursday.
China reported earlier that the country’s industrial production rose 9.7% in July, beating expectations for a 9.0% increase and easing concerns over a slowdown in the world’s second-largest economy.
Separate data showed that China’s consumer price index remained unchanged at an annualized rate of 2.7% last month, just shy of expectations for an uptick to 2.8%.
The overall bullish data came a day after a report showed that Chinese exports rose 5.1% from a year earlier in July, beating expectations for a 3% increase and following a 3.1% drop in June.
The data showed that imports surged 10.9%, blowing past forecasts for a 2.1% increase and following a 0.7% decline in June.
The country’s trade surplus narrowed to USD17.8 billion for the month from a surplus of USD27.1 billion in June.
China is the world’s second largest oil consumer after the U.S., and improving manufacturing numbers often serve as a gauge for future fuel and energy demand.
On the ICE Futures Exchange, Brent oil futures for September delivery were up 0.89% at USD107.63 a barrel, up USD2.05 from its U.S. counterpart.
Natural gas prices jumped in and out of positive territory on Friday amid a tug-of-war battle between bearish weather reports calling for below-normal temperatures in the northeastern U.S. with bullish forecasts calling for warming trends in Texas and in the southern U.S. Plains.
On the New York Mercantile Exchange, natural gas futures for delivery in September traded at USD3.278 per million British thermal units during U.S. afternoon trading, down 0.59% in very choppy trading.
The September contract settled up 1.54% at USD3.297 per million British thermal units on Thursday.
Forecasts for above-normal temperatures setting in over Texas and neighboring Plains states sent prices rising earlier, though weather reports calling for an eastern U.S. cool snap to continue erased gains, allowing for hefty swings in afternoon trading.
Demand for natural gas tends to wane amid unseasonably cool weather snaps, as homes and businesses throttle back on their air conditioners.
Investors continued to digest bearish supply data.
The U.S. Energy Information Administration said in its weekly report on Thursday that natural gas storage in the U.S. in the week ending August 2 rose by 96 billion cubic feet, well above market expectations for an increase of 77 billion cubic feet.
Inventories rose by 25 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a build of 42 billion cubic feet.
Total U.S. natural gas storage stood at 2.941 trillion cubic feet as of last week. Stocks were 297 billion cubic feet less than last year at this time and 20 billion cubic feet above the five-year average of 2.921 trillion cubic feet for this time of year.
The report showed that in the East Region, stocks were 105 billion cubic feet below the five-year average, following net injections of 58 billion cubic feet.
Stocks in the Producing Region were 76 billion cubic feet above the five-year average of 973 billion cubic feet after a net injection of 15 billion cubic feet.
Natural gas accounts for about a quarter of U.S. electricity generation.