Investing.com Weekly Wrap-Up 12 December 2013

by Investing.com Staff, Investing.com

U.S. stocks eke out gain, brace for Fed tapering decision; Dow up 0.10%

U.S. stocks posted slight gains after a cautious session on Friday as bargain hunters snapped up attractively-priced positions amid concerns the Federal Reserve is moving closer to tapering its USD85 billion in monthly bond purchases possibly as early as next week.

Fed asset purchases drive down interest rates to spur recovery, boosting equities in the process, and talk of their dismantling can dampen stock prices by fanning uncertainty as to how equities will perform without a monetary crutch.

At the close of U.S. trading, the Dow Jones Industrial Average rose 0.10%, the S&P 500 index fell 0.01%, while the Nasdaq Composite index rose 0.06%.

The Federal Reserve will hold a monetary policy meeting on Dec. 17-18, and surprisingly strong retail sales, consumer sentiment, employment and other indicators have many betting the U.S. central bank will announce plans to trim its asset-purchasing plan then or shortly afterwards, which watered down stock prices in recent sessions to levels ripe for bottom fishing on Friday.

Wholesale pricing data released earlier stoked expectations for the Fed to move next week or early in 2014.

The Labor Department reported earlier that the U.S. producer price index fell 0.1% last month, in line with expectations, after a 0.2% decline in October.

Core producer price inflation, which excludes food and energy, rose 0.1% in November after a 0.2% increase the previous month, also in line with consensus forecasts.

Investors interpreted the data as another cue to prompt the Fed to rethink its stimulus policies at its Dec. 17-18 policy meeting or shortly afterwards.

Pockets of investors betting the Fed will hold off until early 2014 bolstered prices somewhat.

Leading Dow Jones Industrial Average performers included Visa, up 1.94%, General Electric, up 1.13%, and Boeing, up 0.67%.

The Dow Jones Industrial Average’s worst performers included Microsoft, down 1.44%, Cisco, down 1.34%, and Chevron, down 0.91%.

European indices, meanwhile, finished lower.

After the close of European trade, the EURO STOXX 50 fell 0.17%, France’s CAC 40 fell 0.23%, while Germany’s DAX 30 fell 0.12%. Meanwhile, in the U.K. the FTSE 100 finished down 0.08%.

Forex

The dollar was mixed to higher against most major currencies on Friday in a quiet session marked by expectations for the Federal Reserve to announce plans to taper its USD85 billion in monthly asset purchases soon.

Wholesale pricing data that met market forecasts earlier cemented views the Fed will either announce plans to wind down bond purchases at a policy meeting next week or give a clear signal when such a move may occur, though profit taking sent the greenback into negative territory against some currencies.

Monthly asset purchases in place for a year now have weakened the dollar by depressing interest rates to spur on economic recovery.

In U.S. trading on Friday, EUR/USD was down 0.14% at 1.3735.

Low inflation data in the U.S. was bullish for the dollar along with further thinking that the Fed may start to taper USD85 billion a month asset purchase program at its Dec. 17-18 policy meeting or in early 2014.

Meanwhile in Europe, Eurostat, the statistical arm of the European Union, reported that employment fell by 0.8% in the euro area in the third quarter, in line with expectations.

The euro saw some demand as expectations for further monetary easing continued to wane after the European Central Bank left monetary policy unchanged at its meeting this month following a surprise rate cut in November.

The greenback was up against the pound, with GBP/USD down 0.34% at 1.6295.

The dollar was down against the yen, with USD/JPY down 0.15% at 103.22, and up against the Swiss franc, with USD/CHF up 0.08% at 0.8899.

The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.44% at 1.0593, AUD/USD up 0.29% at 0.8964 and NZD/USD trading up 0.21% at 0.8267.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.05% at 80.21.

GOLD

Gold prices rose on Friday amid demand from bottom fishers who viewed the commodity as oversold on expectations for the Federal Reserve to begin tapering its USD85 billion in monthly asset purchases, possibly as early as next week.

Bond purchases seek to boost recovery by pushing down interest rates, weakening the dollar in the process and making gold an attractive hedge.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,235.00 during U.S. afternoon hours, up 0.82%.

Gold prices hit a session low of USD1,220.10 a troy ounce and high of USD1,238.00 a troy ounce.

Gold futures were likely to find support at USD1,211.20 a troy ounce, the low from Dec. 6, and resistance at USD1,267.30, Tuesday’s high.

The February contract settled down 2.57% at USD1,224.90 a troy ounce on Thursday.

Better-than-expected retail sales, consumer sentiment and jobless reports have many investors betting the Fed is growing closer to trimming its monthly bond-purchasing program, which has supported gold for over a year by weakening the dollar.

Earlier Friday, wholesale pricing data did the same.

The Labor Department reported earlier that the U.S. producer price index fell 0.1% last month, in line with expectations, after a 0.2% decline in October.

Core producer price inflation, which excludes food and energy, rose 0.1% in November after a 0.2% increase the previous month, also in line with consensus forecasts.

Investors interpreted the data as another cue to prompt the Fed to begin winding down monetary stimulus programs at its Dec. 17-18 policy meeting or in early 2014.

Gold weakened to levels ripe for bottom fishers on Friday, though the yellow metal still remained on track to post its first yearly loss this year in 13 years.

Elsewhere on the Comex, silver for March delivery was up 1.05% at USD19.658 a troy ounce, while copper for March delivery was up 0.43% and trading at USD3.310 a pound.

Oil

Oil prices slid on Friday amid expectations for the Federal Reserve to announce plans to trim its USD85 billion in monthly asset purchases either next week or early in 2014.

A stronger greenback makes oil a less attractive commodity on dollar-denominated exchanges.

On the New York Mercantile Exchange, light sweet crude futures for delivery in January traded at USD96.59 a barrel during U.S. trading, down 0.93%.

The commodity hit a session low of USD96.27 and a high of USD97.61. The January contract settled up 0.06% at USD97.50 a barrel on Thursday.

Oil futures were likely to find support at USD92.57 a barrel, the low from Dec. 2, and resistance at USD98.75 a barrel, Tuesday’s high.

Benign wholesale pricing data released earlier managed to keep expectations firm that the Fed remains on course to begin dismantling its bond-purchasing program at its Dec. 17-18 policy meeting or early next year.

The Labor Department reported earlier that the U.S. producer price index fell 0.1% last month, in line with expectations, after a 0.2% decline in October.

Core producer price inflation, which excludes food and energy, rose 0.1% in November after a 0.2% increase the previous month, also in line with consensus forecasts.

Fuel inventory data released earlier this week dampened prices as well.

The U.S. Energy Information Administration said in its weekly report that U.S. crude oil inventories fell by 10.59 million barrels in the week ended Dec. 6, well beyond expectations for a decline of 2.95 million barrels, due in part to a drop in imports.

Total U.S. crude oil inventories stood at 375.2 million barrels as of last week.

The report also showed that total motor gasoline inventories increased by 6.72 million barrels, compared to expectations for a gain of 1.79 million barrels, which was bearish for crude.

Stockpiles of distillate, which include diesel and heating oil, rose by 4.54 million barrels compared to market calls for a gain of 937,000.

Meanwhile on the ICE Futures Exchange, Brent oil futures for January delivery were down 0.10% at USD108.57 a barrel, up USD11.98 from its U.S. counterpart.

Natural Gas

Natural gas prices edged lower on Friday after investors locked in gains stemming from chilly U.S. weather forecasts and sold the commodity for profits.

On the New York Mercantile Exchange, natural gas futures for delivery in January traded at USD4.377 per million British thermal units during U.S. trading, down 0.74%.

The commodity hit a session low of USD4.341 and a high of USD4.443.

The January contract settled up 1.66% at USD4.709 per million British thermal units on Thursday.

Futures were likely to find support at USD4.175 per million British thermal units, Wednesday’s low, and resistance at USD4.444, the high from May 1.

Wintry weather will give way to a warming trend next week though a fresh blast of below-normal temperatures will move from west to east during the Dec. 20-27 time period, according to natgasweather.com.

Colder temperatures hike the need for heating this time of year, thus increasing demand for natural gas at the nation’s thermal power generators.
Profit taking sent prices falling on Friday, a day after the release of a bearish U.S. inventory report.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended Dec. 6 fell by 81 billion cubic feet, below expectations for a withdrawal of 88 billion cubic feet.

Inventories fell by 8 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 76 billion cubic feet.

Total U.S. natural gas storage stood at 3.533 trillion cubic feet. Stocks were 273 billion cubic feet less than last year at this time and 109 billion cubic feet below the five-year average of 3.642 trillion cubic feet for this time of year.

The report showed that in the East Region, stocks were 155 billion cubic feet below the five-year average, following net withdrawals of 46 billion cubic feet.

Stocks in the Producing Region were 41 billion cubic feet above the five-year average of 1.173 billion cubic feet after a net withdrawal of 9 billion cubic feet.