Investing.com Weekly Wrap-Up 07 February 2014

by Investing.com Staff, Investing.com

U.S. stocks rally as markets see jobs report as not so bad; Dow up 1.06%

U.S. stocks rallied on Friday after markets digested a soft January jobs report and decided the numbers were weak but not as bad as initially perceived.

At the close of U.S. trading, the Dow Jones Industrial Average rose 1.06%, the S&P 500 index gained 1.33%, while the Nasdaq Composite index rose 1.69%.

The U.S. Labor Department reported earlier that the economy added 113,000 jobs in January, less than an expected 185,000 increase. December’s figure was revised up to a 75,000 rise from a previously estimated 74,000 increase.

The report also showed that 142,000 jobs were added in the U.S. private sector last month, compared to expectations for a 185,000 increase. In December, the number of jobs created in the private sector was revised up to 89,000 from a previously estimated 87,000.

The U.S. unemployment rate ticked down to 6.6% last month, from 6.7% in December. Analysts had expected the unemployment rate to remain unchanged in January.

The numbers had a Goldilocks effect on stocks by painting a picture of a not-too-hot-not-too-cold economy, one that will grow fast enough to improve corporate fundamentals, but slow enough to convince the Federal Reserve to taper its USD65 billion monthly bond-buying program gradually and keep interest rates low for the foreseeable future.

Fed asset purchases tend to spur recovery by driving down interest rates, which makes stocks climb with the hope companies will invest and hire

Furthermore, investors applauded data revealing that the size of the labor force increased and construction improved, while sentiments that harsh winter weather may have played a factor and not soft demand boosted spirits as well.

Leading Dow Jones Industrial Average performers included Boeing, up 3.54%, Merck, up 1.83%, and Nike, up 1.62%.

The Dow Jones Industrial Average’s worst performers included Coca-Cola, down 0.25%, Goldman Sachs, which was up 0.06%, and Walt-Disney, up 0.13%.

European indices, meanwhile, finished higher.

After the close of European trade, the EURO STOXX 50 rose 0.89%, France’s CAC 40 rose 0.96%, while Germany’s DAX 30 rose 0.49%. Meanwhile, in the U.K. the FTSE 100 finished rose 0.20%.

Forex

The greenback traded largely lower against most major currencies on Friday after data revealed the U.S. economy added fewer jobs in January than expected.

In U.S. trading on Friday, EUR/USD was up 0.25% at 1.3625.

The employment numbers softened the dollar by stoking expectations that the Federal Reserve will taper its USD65 billion monthly bond-buying program gradually.

Fed asset purchases tend to weaken the dollar by driving down interest rates as long as they remain in effect.

Capping the euro’s gains, however, German industrial production fell 0.6% in December, confounding expectations for a 0.5% increase, after an upwardly revised 2.4% gain the previous month.

A separate report showed that Germany’s trade surplus narrowed to EUR18.5 billion in December, from EUR18.9 billion the previous month. Analysts had expected the trade surplus to narrow to EUR17.3 billion in December.

The dollar was up against the yen, with USD/JPY up 0.21% at 102.33, and down against the Swiss franc, with USD/CHF down 0.33% at 0.8980.

The greenback was down against the pound, with GBP/USD up 0.51% at 1.6406.

The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.40% at 1.1026, AUD/USD up 0.07% at 0.8966 and NZD/USD up 0.53% at 0.8292.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.25% at 80.78.

GOLD

Gold prices rose on Friday on expectations that a disappointing U.S. jobs report will cue the Federal Reserve to taper its monthly bond-buying program on a very gradual basis.

Fed bond purchases tend to weaken the dollar by suppressing long-term interest rates that make stocks more attractive, thus bolstering gold’s role as a portfolio hedge.

Gold and the greenback tend to trade inversely with one another.

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,266.80 a troy ounce during U.S. trading, up 0.76%, up from a session low of USD1,256.00 and off a high of 1,271.60.

The April contract settled up 0.02% at USD1,257.20 on Thursday.

Futures were likely to find support at USD1,240.60 a troy ounce, Monday’s low, and resistance at USD1,274.10, Wednesday’s high.

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery traded at USD1,242.00 a troy ounce during U.S. trading, down 0.04%, up from a session low of USD1,238.40 and off a high of 1,254.70.

Meanwhile, silver for March delivery was up 0.35% and trading at USD19.998 a troy ounce, while copper futures for March delivery were up 0.27% at USD3.238 a pound.

Oil

Crude prices rose on Friday on sentiments that below-normal temperatures will lead to increased demand for heating oil, while a mixed jobs report sent prices gaining due to perceptions that the economy is improving but not fast enough to prompt the Federal Reserve to rush to taper stimulus programs.

On the New York Mercantile Exchange, West Texas Intermediate crude for delivery in March traded at USD99.20 a barrel during U.S. trading, up 1.39%. New York-traded oil futures hit a session low of USD97.15 a barrel and a high of USD99.30 a barrel.

The March contract settled up 0.47% at USD97.84 a barrel on Thursday.

Nymex oil futures were likely to find support at USD97.14 a barrel, the earlier low, and resistance at USD100.42 a barrel, the high from Dec. 30.

Supply snags in the North Sea sent oil prices gaining alongside sentiments that below-normal temperatures this winter will hike demand for heating oil.

While updated weather-forecasting models called for a thawing trend around the third week of February, market perceptions that the winter has been cold enough so far to take its toll on heating oil bolstered the commodity.

The U.S. employment numbers had a Goldilocks effect on oil by painting a picture of a not-too-hot-not-too-cold economy, one that will grow fast enough to hike demand for energy but slow enough to convince the Federal Reserve to taper its USD65 billion monthly bond-buying program very gradually.

Fed asset purchases tend to weaken the greenback by driving down interest rates, thus making oil an attractive commodity in dollar-denominated exchanges.

Furthermore, investors applauded data revealing that the size of the labor force increased.

Elsewhere, on the ICE Futures Exchange in London, Brent oil futures for March delivery were up 1.69% and trading at 109.01 a barrel, while the spread between the Brent and U.S. crude contracts stood at 9.81 a barrel.

Natural Gas

Natural gas futures carried Thursday’s losses into Friday on weather reports calling for a break in below-normal temperatures that have gripped the U.S. the past week, which should prompt homes and business to scale back on their heating.

On the New York Mercantile Exchange, natural gas futures for delivery in March traded at USD4.798 per million British thermal units during U.S. trading, down 2.70%. The commodity hit session high of USD5.043 and a low of USD4.744.

The March contract settled down 1.97% on Thursday to end at USD5.030 per million British thermal units.

Natural gas futures were likely to find support at USD4.723 per million British thermal units, the low from Jan. 31, and resistance at USD5.734, Wednesday’s high.

A series of blizzards and cold air masses freezing much of the U.S. will give way to somewhat below-normal temperatures through the end of next week followed by seasonably mild temperatures through Feb. 21, according to updated weather-forecasting models, which sent natural gas prices falling.

Mild temperatures this time of year curb demand for natural gas at the country’s thermal power plants.

Thursday’s supply data pushed down prices as well.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended January 31 fell by 262 billion cubic feet, missing expectations for a decline of 270 billion cubic feet.

Gas supplies fell by 129 billion cubic feet during the same week a year earlier.

Total U.S. natural gas storage stood at 1.923 trillion cubic feet. Stocks were 778 billion cubic feet less than last year at this time and 556 billion cubic feet below the five-year average of 2.479 trillion cubic feet for this time of year.

The report showed that in the East Region, stocks were 312 billion cubic feet below the five-year average, following net withdrawals of 143 billion cubic feet.

Stocks in the Producing Region were 187 billion cubic feet below the five-year average of 889 billion cubic feet after a net withdrawal of 93 billion cubic feet.

Traders were hoping below-normal temperatures gripping much of the U.S. last week would have taken more of a toll on the country’s inventories.