Investing.com Weekly Wrap-Up 03 January 2014

by Investing.com Staff, Investing.com

U.S. stocks end mixed on earnings uncertainty, Bernanke; Dow up 0.17%

U.S. stocks ended Friday mixed as investors applauding a cautiously optimistic speech from Federal Reserve Chairman Ben Bernanke offset those jumping to the sidelines to await fourth-quarter earnings and gross domestic product figures.

At the close of U.S. trading, the Dow Jones Industrial Average rose 0.17%, the S&P 500 index fell 0.03%, while the Nasdaq Composite index fell 0.27%.

Outgoing Fed Chairman Ben Bernanke said earlier that the country continues to recover, which boosted stocks on expectations for the fundamental economy to improve while the Federal Reserve continues to keep policy loose.

“The combination of financial healing, greater balance in the housing market, less fiscal restraint, and, of course, continued monetary policy accommodation bodes well for U.S. economic growth in coming quarters. But, of course, if the experience of the past few years teaches us anything, it is that we should be cautious in our forecasts,” Bernanke said, adding any decision to scale down the Fed’s USD75 billion in monthly asset purchases shouldn’t be interpreted as a sign tighter policy is down the road.

Stimulus tools such as the Fed’s USD75 billion in monthly asset purchases spur recovery by driving down interest rates, boosting stock prices in the process.

Bernanke said in prepared remarks of a speech he gave earlier Friday:

“It is important to recognize that the potential signaling aspect of asset purchases depends on the broader economic and policy context. In particular, the [Fed’s] decision to modestly reduce the pace of asset purchases at its December meeting did not indicate any diminution of its commitment to maintain a highly accommodative monetary policy for as long as needed.“

After the close of European trade, the EURO STOXX 50 rose 0.47%, France’s CAC 40 rose 0.48%, while Germany’s DAX 30 rose 0.37%. Meanwhile, in the U.K. the FTSE 100 finished up 0.19%.

Still, fourth-quarter earnings will begin publishing next week, which sent investors jumping to the sidelines ahead of time.

Many were eager to see how fourth-quarter GDP rates come in as well as the December jobs report, and the uncertainty ahead of time watered down stock prices by steering investors to safe-haven dollar positions on the sidelines.

Leading Dow Jones Industrial Average performers included Johnson & Johnson, up 0.90%, JPMorgan Chase, up 0.76%, and UnitedHealth, up 0.71%.

The Dow Jones Industrial Average’s worst performers included Verizon, down 1.18%, Microsoft, down 0.65%, and Coca-Cola, down 0.49%.

European indices, meanwhile, finished higher.

Forex

The dollar traded higher against most major currencies on Friday after soft data out of the Chinese service sector sparked safe-haven demand for the greenback, while a cautiously optimistic take on recovery from outgoing Federal Reserve Chairman Ben Bernanke fueled demand for the greenback as well.

U.S. trading on Friday, EUR/USDwas down 0.61% at 1.3588.

The greenback enjoyed safe-harbor demand after data showed that China’s non-manufacturing purchasing managers’ index fell to 54.6 in December from 56.0 the previous month.

Also this week, data revealed that China’s final HSBC PMI inched down to 50.5 in December from 50.8 in November, which bolstered the greenback’s safe-haven appeal.

That report came a day after government data showed that China’s manufacturing PMI fell to a four-month low of 51.0 last month from 51.4 in November and worse than forecasts for a decline to 51.2.

Fed Chairman Ben Bernanke said earlier that the economy continues to recover, which gave the dollar room to strengthen due to sentiments that monetary authorities will continue to scale back stimulus programs as the year unfolds.

Stimulus tools such as monthly Fed asset purchases spur recovery by driving down interest rates, weakening the dollar in the process.

The greenback was up against the pound, with GBP/USD down 0.26% at 1.6410.

In the U.K., the Markit Economics research group earlier said the construction PMI fell to 62.1 in December from 62.6 in November. Analysts had expected the index to drop to 62.0 last month.

Elsewhere, industry data revealed that U.K. house price inflation rose 1.4% in December, beating expectations for a 0.7% uptick after an upwardly revised 0.7% increase in November.

The dollar was down against the yen, with USD/JPY down 0.03% at 104.77, and up against the Swiss franc, with USD/CHF up 0.70% at 0.9053.

The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.39% at 1.0629, AUD/USD up 0.54% at 0.8959 and NZD/USD trading up 1.17% at 0.8282.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.38% at 81.02.

GOLD

Gold prices carried Thursday’s gains into Friday on reports of rising physical demand in Asia, while bottom fishers snapped up nicely priced positions after the commodity suffered its worst loss in 2013 in three decades.

On the Comex division of the New York Mercantile Exchange, gold futures for February delivery traded at USD1,236.60 a troy ounce during U.S. trading, up 0.93%. Gold prices traded in a range between USD1,221.40 a troy ounce and USD1,239.60 a troy ounce.

Futures were likely to find near-term support at USD1,181.90 a troy ounce, the low from Dec. 31, and resistance at USD1,251.40, the high from Dec. 16. The February contract settled 1.90% higher on Thursday to end at USD1,225.20 a troy ounce.

Reports of rising demand for gold bars and jewelry in Asia sent prices spiking on Friday, which brought in bargain hunters who viewed the yellow metal as an attractive buy.

Gold prices fell about 29% in 2013 amid growing expectations that the Federal Reserve will taper its bond purchases in 2014 and possibly end the program later this year.

Earlier Friday, outgoing Fed Chairman Ben Bernanke said any decision to trim the U.S. central bank’s USD75 billion in asset purchases this year shouldn’t be interpreted as a sign that tighter monetary policy is around the corner.

Elsewhere on the Comex, silver futures for March delivery were down 0.12% and trading at USD20.103 a pound, while copper for March delivery was down 0.91% at 3.351.

Oil

Oil prices dropped on Friday as the market braced for rising Libyan output, while soft Chinese service-sector data softened demand for the growth-sensitive commodity as well.

Oil prices largely ignored an otherwise bullish U.S. supply report.

On the New York Mercantile Exchange, West Texas Intermediate crude for delivery in February traded at USD94.17 a barrel during U.S. trading, down 1.33%. New York-traded oil futures hit a session low of USD93.38 a barrel and USD95.74 a barrel.

The February contract settled at USD95.44 on Tuesday, down 3.03%.

Nymex oil futures were likely to find support at USD92.57 a barrel, the low from Dec. 2, and resistance at USD95.74 a barrel, the earlier high.

Ongoing expectations for Libyan oil exports to resume to near normal levels sent prices falling due to the added supply they’d bring to the global market.

Libyan oil operations faced glitches in the recent past due to protesters disrupting production at various oilfields.

Expectations for increased exports from South Sudan also nudged prices lower.

Prices also slumped after data showed that China’s non-manufacturing purchasing managers’ index fell to 54.6 in December from 56.0 the previous month.

Also this week, data revealed that China’s final HSBC PMI inched down to 50.5 in December from 50.8 in November, which bolstered the greenback’s safe-haven appeal.

That report came a day after government data showed that China’s manufacturing PMI fell to a four-month low of 51.0 last month from 51.4 in November and worse than forecasts for a decline to 51.2.

China is the world’s second-largest consumer of crude oil.

The U.S. Energy Information Administration reported in its weekly report earlier that U.S. crude oil inventories fell by 7.01 million barrels in the week last week, far surpassing market expectations for a decline of 2.98 million barrels.

The report also showed that total motor gasoline inventories fell by 844,000 barrels compared to expectations for a gain of 1.93 million barrels.

However, the government added that distillate fuel, which includes diesel and heating oil, rose by 5.04 million barrels, defying market calls for a gain of 1.23 million, which overshadowed crude’s losses.

Elsewhere, on the ICE Futures Exchange in London, Brent oil futures for February delivery fell 0.70% to trade at USD107.03 a barrel, while the spread between the Brent and U.S. crude contracts stood at USD11.29 a barrel.

Natural Gas

Natural gas prices rose on Friday after updated weather forecasting models called for cold air to keep its grip across the central and eastern U.S., though a bearish supply report capped the commodity’s gains albeit slightly.

On the New York Mercantile Exchange, natural gas futures for delivery in February traded at USD4.368 per million British thermal units during U.S. trading, up 1.08%.

The commodity hit a session high of 4.389 and a low of 4.209, with support seen at 4.208, the earlier low, and resistance seen at 4.471, Monday’s high.

The February contract settled up 2.15% lower on Thursday to end at USD4.321 per million British thermal units.

A winter storm system that dumped snow across the central and northeastern U.S. will leave frigid temperatures in its wake, which should hike demand for natural gas at the country’s thermal power plants as homes and businesses crank up their heating.

Natgasweather.com reported in its 8-14 outlook that while moderate temperatures will return, they may be back for about a week when a fresh blast of cold air returns, which should hike demand for the commodity.

Uncertainty as to how far south that cold air mass may sweep capped gains as did bearish supply data, though slightly.

The Energy Information Administration reported earlier that U.S. Natural Gas Storage fell by a seasonally adjusted annual rate of 97 billion cubic feet compared to a drop of 177 billion cubic feet in the preceding week.

Analysts were expecting U.S. Natural Gas Storage to fall by 126 billion last week.