Investing.com Weekly Wrap-Up 12 September 2014

U.S. stocks end lower ahead of Fed meeting; Dow slides 0.36%

by Investing.com Staff, Investing.com

U.S. stocks fell on Friday after investors sold and jumped to the sidelines ahead of next week’s Federal Reserve statement on interest rates and monetary policy.

At the close of U.S. trading, the Dow 30 fell 0.36%, the S&P 500index fell 0.60%, while the NASDAQ Composite index fell 0.53%.

The Volatility S&P 500 index, which measures the outlook for market volatility, was up 3.98% at 13.31.

The Fed will meet next week to review monetary policy, and markets are hoping for hints as to when benchmark interest rates will rise.

The Fed is also expected to cut its quantitative easing program to $10 billion in Treasury and mortgage-backed securities purchased each month from $15 billion before closing the program in October.

Upbeat data fueled expectations for a hawkish Fed statement due out next Wednesday, prompting investors to sell stocks for profits and head to the sidelines ahead of time.

The Thomson Reuters/University of Michigan preliminary consumer sentiment index rose to a 14-month high of 84.6 this month from 82.5 in August. Analysts had expected the index to rise to 83.3 in September.

The report came after official data showed that U.S. retail sales rose 0.6% last month, in line with expectations. Retail sales for July were revised to a 0.3% gain from a previously estimated flat reading.

Core retail sales, which exclude automobiles, increased by 0.3% in August, also in line with market expectations and growing at the fastest pace since April. July’s figure was revised to a 0.3% gain from a previously estimated 0.1% rise.

Falling oil prices sent energy stocks edging lower earlier, which also added to Friday’s profit taking.

Military conflicts in Ukraine and in the Middle East have rattled nerves in recent weeks, though oil shipments have flowed normally without disruptions, which sent energy companies falling on Friday as investors continued to wind down positions carrying geopolitical risk premiums.

Leading Dow Jones Industrial Average performers included Goldman Sachs Group Inc (NYSE:GS), up 1.16%, J P Morgan Chase & Co (NYSE:JPM), up 0.46%, and McDonald’s Corporation (NYSE:MCD), up 0.41%.

The Dow Jones Industrial Average’s worst performers included Exxon Mobil Corporation (NYSE:XOM), down 1.29%, Verizon Communications Inc (NYSE:VZ), down 1.25%, and Coca-Cola Company (NYSE:KO), down 1.18%.

European indices, meanwhile, ended the day mixed.

After the close of European trade, the DJ Euro Stoxx 50 fell 0.12%, France’s CAC 40 rose 0.02%, while Germany’s DAX fell 0.41%. Meanwhile, in the U.K. the FTSE 100 rose 0.11%.

On Friday, the U.S. is to release data on retail sales, a government measure of consumer spending, which accounts for the majority of overall economic activity.

The U.S. is also to release what will be closely watched preliminary data on consumer sentiment.

Forex

The dollar traded largely higher against most major currencies on Friday amid expectations the Federal Reserve next week will trim its bond-buying program and release a monetary policy statement possibly hinting at when benchmark interest rates may rise.

In U.S. trading on Friday, EUR/USD was up 0.23% at 1.2952, mainly as investors felt the greenback had risen too high against the single currency in recent sessions and sold the dollar for profits.

The euro has come under pressure in recent sessions on expectations for European and U.S. monetary policies to diverge.

While the European Central Bank recently cut interest rates and announced plans to purchase asset-backed securities to shore up the economy, the Federal Reserve is expected to close its bond-buying program next month and begin hiking interest rates in 2015, likely sooner than once anticipated.

The Fed will meet next week to review monetary policy, and markets are hoping for hints as to when benchmark interest rates will rise.

The Fed is also expected to cut its quantitative easing program to $10 billion in Treasury and mortgage-backed securities purchased each month from $15 billion before closing the program in October.

Still, by Friday investors felt the greenback’s gains over the single currency grown somewhat frothy, and sold the U.S. currency for profits despite upbeat U.S. data.

The dollar was up against the yen, with USD/JPY up 0.23% at 107.34, and down against the Swiss franc, with USD/CHF down 0.22% at 0.9340.

The yen remained in negative territory after BoJ Governor Haruhiko Kuroda said Thursday monetary authorities would be prepared to immediately loosen monetary policy or implement other measures if its 2% inflation target becomes difficult to meet.

Earlier this week official data showed that Japan’s second quarter economic contraction was larger than initially estimated, and another report showed that the country’s current account surplus fell short of expectations in July.

The lackluster data indicated the economy is struggling to gain momentum and fuelled expectations for more stimulus from the Japanese central bank.

The greenback was down against the pound, with GBP/USD up 0.12% at 1.6258.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.51% at 1.1093, AUD/USD down 0.63% at 0.9043 and NZD/USD down 0.42% at 0.8148.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.09% at 84.39.

Commitments of Traders data from the CFTC (Commodity Future Trading Commission) – After several weeks of increases, bearish sentiment moderated slightly for the euro and Japanese yen. Bullishness for the British pound strengthened. The sentiment for all other currencies tracked were little changed from a week ago. All sentiment is relative to the U.S. dollar.

Gold

Gold prices edged lower on Friday after upbeat U.S. data fueled speculation that the Federal Reserve will make fresh cuts to its bond-buying program at a policy meeting next week, with added hopes that language may hold clues as to when rates may rise also pushing the yellow metal lower.

On the Comex division of the New York Mercantile Exchange, gold futures for December delivery traded at 1,229.10 a troy ounce during U.S. trading, down 0.80%, up from a session low of $1,228.20 and off a high of $1,242.20.

The December contract settled down 0.51% at $1,239.00 on Thursday.

Futures were likely to find support at $1218.60 a troy ounce, the low from Jan. 8, and resistance at $1,279.20, last Thursday’s high.

A study released by the San Francisco Feb on Monday indicated that central bank officials see rates rising sooner than markets expect.

Loose monetary policies such as stimulus programs bolster gold due to its appeal as a hedge to a weaker dollar, while talk of tightening has the opposite effect.

The Fed’s monthly bond-buying program currently stands at $25 billion, though markets are expecting that figure to fall to $15 billion at next week’s meeting and close in October.

Investors also hope the Fed’s Sept. 17 statement on monetary policy will hold clues as to when rates may rise.

Meanwhile, silver for December delivery was down 0.09% at $18.583 a troy ounce, while copper futures for December delivery were up 0.27% at $3.101 a pound.

Oil

Oil prices traded near session lows on Friday due to ongoing concerns that global supply is plentiful while global demand remains soft, which offset concerns that conflicts in Ukraine and the Middle East may disrupt supply.

In the New York Mercantile Exchange, West Texas Intermediate crude oil for delivery in October traded down 0.81% at $92.08 a barrel during U.S. trading. New York-traded oil futures hit a session low of $92.06 a barrel and a high of $93.67 a barrel.

The October contract settled up 1.27% at $92.83 a barrel on Thursday.

Nymex oil futures were likely to find support at $90.43 a barrel, Thursday’s low, and resistance at $95.91 a barrel, the high from Sept. 2.

Oil prices fell on concerns that while the U.S. and other major economies are improving, the global economy still battles headwinds at a time when energy markets are awash in crude.

Military conflicts in Ukraine and in the Middle East have rattled nerves in recent weeks, though oil shipments have gone on without disruptions, which sent investors selling anew on Friday to wind down positions carrying geopolitical risk premiums.

Investors ignored upbeat U.S. data, mainly due to a firming dollar.

A stronger greenback makes oil less attractive commodity in dollar-denominated exchanges, especially in the eyes of investors holding other currencies.

Separately, on the ICE Futures Exchange in London, Brent oil futures for October delivery were down 1.14% at US$96.97 a barrel, while the spread between Brent and U.S. crude contracts stood at US$4.89 a barrel.

Natural Gas

Natural gas prices extended Thursday’s losses into Friday after data revealed U.S. stockpiles rose more than expected last week, though the commodity managed to come off earlier lows on concerns the tropics are brewing in the Gulf of Mexico.

On the New York Mercantile Exchange, natural gas futures for delivery in October were down 0.12% at $3.819 per million British thermal units during U.S. trading. The commodity hit a session low of $3.787, and a high of $3.849.

The October contract settled down 3.31% on Thursday to end at $3.823 per million British thermal units.

Natural gas futures were likely to find support at $3.761 per million British thermal units, Monday’s low, and resistance at $4.016, Tuesday’s high.

On Thursday the U.S. Energy Information Administration reported that natural gas storage in the U.S. in the week ended Sept. 5 rose by 92 billion cubic feet, well above expectations for an increase of 82 billion cubic feet, which sent prices tumbling.

Inventories rose by 64 billion cubic feet in the same week a year earlier, while the five-year average change is a build of 60 billion cubic feet.

Injections of gas into storage have surpassed the five-year average for 21 consecutive weeks, alleviating concerns over tightening supplies.

Total U.S. natural gas storage stood at 2.801 trillion cubic feet. Stocks were 443 billion cubic feet less than last year at this time and 463 billion cubic feet below the five-year average of 3.264 trillion cubic feet for this time of year.

The commodity came off earlier lows as markets focused on the tropics. A low-pressure system trekking across southern Florida was poorly organized on Friday, though longer-range computer models suggested the system stood some chance to strengthen into a tropical cyclone in the Gulf of Mexico in the coming days.

The National Hurricane Center was reporting at the time of writing that the system stood a 20% chance of developing into a tropical cyclone in 48 hours and a 40% chance in five days.

Tropical storms and hurricanes in the Gulf of Mexico tend to send natural gas prices rising, as rigs evacuate to let the storm pass, which cuts into production.