Investing.com Weekly Wrap-Up 29 May 2015

U.S. stocks end month on a sour note, as disappointing GDP data weighs

by Investing.com Staff, Investing.com

U.S. stocks fell broadly on the final trading session of the month, as U.S. GDP for the first quarter was revised downward on Friday as expected, providing a harbinger for tepid economic growth over the current period.

Stocks dropped considerably on Friday after GDP in the first quarter was lowered to minus 0.7% from an initial reading of 0.2%. The reading was in line with analysts’ expectations of a downward revision of minus 0.8%. A surge in imports to 5.6% from an initial gain of 1.8%, linked to an abrupt unloading of imports at West Coast ports was thought to be responsible for the revision. A port work stoppage throughout the winter weighed on the U.S. economy in the first quarter.

The Dow Jones Industrial Average and the S&P 500 Composite fell more than 0.6% on the session, while the NASDAQ dropped more than 25 points to fall out of near-record territory. The Dow lost 115.44 or 0.64% to close the session at 18,010.68. The NASDAQ lost 27.95 or 0.55% to 5,070.03, while the S&P 500 fell 13.40 or 0.63% to 2,107.39, as all10 sectors closed in the red. Stocks in the Technology, Financials and Industrials sectors lagged, each dropping by more than 0.7%.

For the month, though, all three major indices closed higher after each reached an all-time closing high at one point in May.

The top performer on the Dow was Merck & Company Inc (NYSE:MRK), which gained 1.33 or 2.22% to 61.03. The worst performer was Visa Inc (NYSE:V), which fell 0.79 or 1.14% to 68.77.

The biggest gainer on the NASDAQ was Altera Corporation (NASDAQ:ALTR), which gained 2.03 or 4.32% to 49.00. The worst performer was Paccar Inc., which lost 1.54 or 2.36% to 63.63 after Forbes reported that the Bellevue, Washington-based manufacturer of heavy-duty trucks has become one of the five-highest shorted stocks on the NASDAQ 100.

On the S&P 500, Humana Inc (NYSE:HUM) surged more than 20% after Dow Jones reported that the Louisville, Kentucky-based health insurer could be actively seeking a merger. Humana, the top performer on the S&P 500, gained 35.74 or 20.03% to 214.15.

Bristol-Myers Squibb Company (NYSE:BMY), meanwhile, finished as the worst performer, plunging 4.35 or 6.29% to 64.80. The sell-off transpired ahead of this weekend’s American Society of Clinical Oncology Conference (ASCO) in Chicago, where the pharmaceutical giant is expected to present data which it says demonstrates promising findings related to its broad Immuno-Oncology portfolio. The drugs are expected to help treat solid tumors and blood cancers, including Multiple Myeloma.

Forex

The euro posted moderate gains against the dollar on Friday extending its rally to a third consecutive session, amid mixed U.S. economic data and continued instability regarding the Greek debt crisis.

EUR/USD gained 0.0039 or 0.36% to end the session at 1.0987. The pair has still yet to move back above 1.10 since falling nearly 1% on Tuesday when the dollar appreciated by its highest one-day amount in almost two years.

For the month, the euro fell roughly 2% against the dollar after opening May above 1.12. Wild fluctuations in the pair throughout May ostensibly kept currency traders on their toes. The pair surged to a three-month high of 1.1467 on May 15, before falling to a monthly low of 1.0819 on May 27, a spread of nearly 6.5%.

The pair spiked to a session-high of 1.0990 roughly an hour after U.S. GDP for the first quarter was revised downward to minus 0.7% in U.S. morning trading. The reading was in line with analysts’ expectations of a downward revision of minus 0.8%. When the U.S. Bureau of Economic Analysis (BEA) initially released first quarter GDP, it reported an increase of 0.2% from the previous quarter.

A surge in imports to 5.6% from an initial gain of 1.8%, linked to an abrupt unloading of imports at West Coast ports was thought to be responsible for the revision. A port work stoppage throughout the winter weighed on the U.S. economy in the first quarter. First quarter GDP was also sluggish in 2014, when it fell by 2.1% from the previous quarter. For the second quarter, U.S. GDP is expected to gain roughly 3% during the period as transitory factors recede.

Separately, a rebound over the last two weeks lifted the University of Michigan Consumer Sentiment Survey to 90.7, above a mid-month flash of 88.6. The reading is still down significantly from April’s level of 95.9. Consumer expectations, meanwhile, fell to 84.2 from 88.8, illustrating diminished confidence in the long-term outlook of the labor market.

In Brussels, there were conflicting reports of the level of progress made in ongoing talks between Greece and its troika of creditors. Officials from the euro zone said late Thursday evening that a deal which would unlock critical aid to Athens was “not imminent,” in spite of contrary reports. Earlier, Greece was hopeful a solution could be reached by Sunday. Greek officials are growing increasingly desperate to reach a deal before several obligations are due to the International Monetary Fund in June totaling more than €1.5 billion.

Yields on Greek 10-Year bonds rose 12 basis points to 10.86%. Over the last year, the yields are up nearly 500 basis points. Yields on German 10-Year bunds fell four basis points to 0.49%, while yields on U.S. 10-Year Treasuries dropped one basis point to 2.12%. The spread between U.S. and German 10-year bonds fell to 163 basis points.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell 0.18% to 96.94. Earlier in the week, the index soared to a five-week high at 97.88.

CTFC Commitment of Traders

This week speculators were less bearish on the euro, yen and the British pound, while becoming less bearish in the S&P 500 and much more bullish on gold and silver.

Gold

Gold futures inched up on Friday extending modest gains from the previous session, as a basket of mixed U.S. economic data weighed on the dollar and a lack of progress with the Greek debt negotiations remained in focus.

On the Comex division of the New York Mercantile Exchange, gold for August delivery gained 1.60 or 0.13% to 1,190.40, ending the final session of May on a high note.

Gold futures traded in a tight of range of 1,186 on the low end and a high of 1,194.00, capping an abbreviated week headlined by Tuesday’s plunge of 1.6% amid a resurgent dollar. For the month, the precious metal gained less than 1% wavering between a low of 1,168.40 on May 1 and a peak of 1,232.80 on May 18 when it surged to a three-month high. While the gains appear to be fairly reasonable, gold still finished with its best month since January when it soared more than 7.85%. In April, gold futures ticked up 0.07% after experiencing losses of 2.42 and 5.23% in March and February respectively.

Gold likely received support at 1,183.90 the low from May 27 and was met with resistance at 1,215.30, the high from May 22.

Gold spiked to a session-high on Friday after U.S. GDP for the first quarter was revised downward to minus 0.7% from an initial reading of 0.2%. The reading was in line with analysts’ expectations of a downward revision of minus 0.8%. A surge in imports to 5.6% from an initial gain of 1.8%, linked to an abrupt unloading of imports at West Coast ports was thought to be responsible for the revision. A port work stoppage throughout the winter weighed on the U.S. economy in the first quarter. First quarter GDP was also sluggish in 2014, when it fell by 2.1% from the previous quarter. For the second quarter, U.S. GDP is expected to gain roughly 3% during the period as transitory factors recede.

Separately, a rebound over the last two weeks lifted the University of Michigan Consumer Sentiment Survey to 90.7, above a mid-month flash of 88.6. The reading is still down significantly from April’s level of 95.9. Consumer expectations, meanwhile, fell to 84.2 from 88.8, illustrating diminished confidence in the long-term outlook of the labor market.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell 0.15% to 96.98.

Dollar-denominated commodities such as gold become more expensive for foreign purchasers.

Elsewhere, Greece’s troika of creditors said late Thursday evening that a deal which would unlock critical aid to Athens was “not imminent,” in spite of contrary reports. Earlier this week, Greece appeared hopeful a solution could be reached by Sunday.

Silver for July delivery gained 0.039 or 0.23% to 16.708 an ounce.

Copper for July delivery plunged 0.036 or 1.30% to 2.731 a pound.

Oil

Crude futures surged nearly 5% on Friday, as a dwindling U.S. rig count provided the clearest indication in months that concerns over a glut of oversupply in the market may be easing.

On the New York Mercantile Exchange, WTI crude for July delivery soared 2.62 or 4.54% to $60.30 a barrel. WTI crude ended a month above $60 a barrel for the first time since November, days after OPEC rattled markets with its decision to keep production levels constant. The move triggered an arms race of sorts with the U.S., flooding the market with a surplus of crude causing prices to crash.

In spite of Friday’s surge, crude futures are still down more than 12% since November 27 when WTI crude plunged nearly $5 a barrel following OPEC’s bombshell announcement. Ever since, industry experts have paid close attention to U.S. rig counts, which have fallen at an alarming rate over the last six months.

On Friday, oil services firm Baker Hughes (NYSE:BHI) said the number of oil rigs in the U.S. last week dropped by 13 to 646, the lowest level since August, 2010. A week earlier, the U.S. rig count fell by one to 659 marking the slowest rate decline over the last 24 weeks. Nevertheless, the rig count is still down drastically after peaking above 1,600 last fall.

In addition, analysts from Goldman Sachs (NYSE:GS) believe crude prices may have stabilized to a level that could convince producers to intensify production. Last week,U.S. crude production increased to 9.566 million barrels per day up from a total of 9.262 for the week ending May 15.

“We believe that should West Texas Intermediate crude oil prices remain near $60/bbl, US producers will ramp up activity given improved returns with costs down by at least 20%,” analysts from Goldman Sachs’ Global Investment Research wrote in a note to investors.

Over the last two months, U.S. shale production has leveled off as crude stockpiles reached near full storage capacity. Crude inventories, as well, have decreased markedly over the past several weeks. In its weekly Petroleum Status Report released on Thursday, the Energy Information Administration (EIA) said that U.S. crude stockpiles decreased by 2.8 million barrels for the week that ended May 22, marking the fourth consecutive week of weekly declines. Analysts expected crude stockpiles to decline marginally by 0.9 million barrels on the week.

On the Intercontinental Exchange (ICE), Brent crude for July delivery also soared on Friday, gaining 2.95 or 4.71% to 65.53. The spread between the international and U.S. benchmarks of crude rose to 5.23, up from Thursday’s level of 4.83.

Energy traders await a critical OPEC meeting next week in Vienna, where OPEC officials are expected to keep production levels steady above 30 million barrels per day.

For the month, WTI gained 1.27% while Brent experienced a 2.71% decline. Both benchmarks gained more than 19% during a bullish April.

Natural Gas (Thursday Report)

Natural gas futures plunged sharply to hit a three-week low on Thursday, after data showed that U.S. natural gas supplies rose more than expected last week.

On the New York Mercantile Exchange, natural gas for delivery in July tumbled 11.8 cents, or 4.16%, to trade at $2.729 per million British thermal units during U.S. morning hours. Prices were at around $2.790 prior to the release of the supply data.

A day earlier, natural gas prices shed 0.2 cents, or 0.07%, to close at $2.847. Futures were likely to find support at $2.710 per million British thermal units, the low from May 7, and resistance at $2.915, the high from May 27.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended May 22 rose by 112 billion cubic feet, compared to expectations for an increase of 99 billion and following a build of 92 billion cubic feet in the preceding week.

Supplies rose by 113 billion cubic feet in the same week last year, while the five-year average change is an increase of 95 billion cubic feet.

Total U.S. natural gas storage stood at 2.101 trillion cubic feet as of last week. Stocks were 737 billion cubic feet higher than last year at this time and 18 billion cubic feet below the five-year average of 2.119 trillion cubic feet for this time of year.

Meanwhile, weather forecasting models called for slightly warmer than average temperatures across the U.S. over the next ten days, although not yet enough to significantly boost cooling demand.

Spring usually sees the weakest demand for natural gas in the U.S, as the absence of extreme temperatures curbs demand for heating and air conditioning.