Investing.com Weekly Wrap-Up 25 September 2015

U.S. stocks mixed as Nike boosts Dow, biotech’s weigh on NASDAQ, S&P 500

by Investing.com Staff, Investing.com

U.S. stocks were mixed on Friday ending a bearish week, as investors digested hawkish comments from Janet Yellen suggesting that it is likely the Federal Reserve will raise short-term interest rates before the end of the year.

The Dow Jones Industrial Average still closed higher for the session, after receiving a much-needed boost from Nike Inc (NYSE:NKE). One day after crushing analysts’ expectations for its first quarter earnings, the global apparel giant surged nearly 9% on Friday to reach a fresh all-time high at 125.94. The NASDAQ Composite index and theS&P 500 Composite index, however, both closed lower amid a weak performance among biotech stocks. The Dow gained 113.35 or 0.7% to close at 16,314.67, while the NASDAQ fell 47.98 or 1.01% to end the week at 4,686.50. The NASDAQ Biotechnology exchange-traded fund slumped nearly 5% on the day, suffering one of its worst one-day declines since April, 2014.

The S&P 500, meanwhile, lost 0.90 or 0.05% to 1,931.34, even as six of 10 sectors closed in the green. Stocks in the Health Care, Consumer Services and Basic Materials sectors lagged, while stocks in the Financials, Utilities and Consumer Goods industries led. Health Care stocks plunged nearly 3% on the session.

Speaking at the University of Massachusetts-Amherst on Thursday evening, the Fed chair said conditions in the economy will likely be appropriate for the U.S. central bank to raise the target range on its benchmark Federal Funds Rate at some point in 2015. Downplaying widespread concerns related to the deceleration of inflation, Yellen noted that the Fed believes inflation can move to its targeted goal of 2% once transitory factors from falling energy prices and a stronger dollar evaporate.

Nike ended Friday as the top performer on the Dow after soaring 10.21 or 8.89% to 125.00. On Thursday, the Beaverton, Oregon apparel company posted earnings of $8.4 billion and adjusted earnings per share of 1.34 for the first quarter of fiscal year 2016, significantly above analysts’ forecasts of $8.22 billion and 1.19 respectively. In terms of revenues, Nike sales increased in North America by more than 8% on a currency neutral basis and 30% in China. Nike shares are now up more than 40% year to date. The worst performer was UnitedHealth Group Incorporated (NYSE:UNH), which fell 4.72 or 3.90% to 116.37.

The biggest gainer on the NASDAQ was Cisco Systems Inc (NASDAQ:CSCO), which rose 0.62 or 2.42% to 26.03. Earlier this week, Inspur, a Chinese cloud computing company said it inked a deal with the Silicon Valley-based networking device company to sell networking technologies in China. The worst performer was Vertex Pharmaceuticals Inc (NASDAQ:VRTX), which plunged 7.83 and 7.05% to 103.28.

Nike was also the top performer on the S&P 500, just ahead of Genworth Financial Inc (NYSE:GNW) which gained 0.20 or 4.21% to 4.95. Shares in Genworth Financial (NYSE:GNW) are still down by nearly 65% on the year. A host of prominent pharmaceutical stocks, including: Vertex Pharmaceutical, Regeneron Pharmaceuticals Inc (NASDAQ:REGN), Alexion Pharmaceuticals Inc (NASDAQ:ALXN) and Perrigo all closed Friday’s session among the biggest losers on the S&P 500.

On the New York Stock Exchange, declining issues outnumbered advancing ones by a 1,625 to 1,479 margin.

Additional stock news from Reuters at Investing.com.

Forex

EUR/USD fell mildly on Friday, as currency traders reacted to relatively hawkish comments from Federal Reserve chair Janet Yellen hours earlier, providing a strong likelihood that the U.S. central bank will raise short-term interest rates over the next three months.

The currency pair wavered between a range of 1.1117 and 1.1296, before settling at 1.1195, down 0.0037 or 0.33% on the session. The euro has now closed lower against the American dollar in five of the last seven sessions. For the week, the euro lost nearly 1% in value against its American counterpart.

EUR/USD likely gained support at 1.1088, the low from September 4 and was met with resistance at 1.1625, the high from Aug. 25.

Speaking at the University of Massachusetts-Amherst on Thursday evening, Yellen said conditions in the economy will likely be appropriate for the Fed to raise the target range on its benchmark Federal Funds Rate at some point in 2015. It marked the first time Yellen personally supported a 2015 rate hike since July. Yellen’s stance represents a stark contrast from her position last week when the Federal Open Market Committee only disclosed that 13 of 17 of its members were in favor of raising rates this year.

The Federal Funds Rate, the rate at which banks use to lend to other institutions on overnight loans, has remained at its current “zero-bound level,” since December, 2008. Nearly a decade has passed since the FOMC last hiked short-term interest rates.

Yellen also noted that the inflation shortfall is likely to be transitory, as one-off factors such as lower energy prices and weaker imports due to a stronger dollar abate. Yellen added that inflation should reach the Fed’s 2% target when the labor market returns to full employment. Long-term inflation has remained under the Fed’s goal for every month over the last three years.

The FOMC is expected to take a “data-driven approach,” in determining whether it should wait until October or December for lift-off. On Friday, the U.S. Department of Commerce said the nation’s Real Gross Domestic Product for the second quarter increased by 3.9% on an annual basis, above consensus estimates of a 3.7% gain. Real GDP measures the value of the goods and services produced by the nation’s economy less the value of the goods and services used in production adjusted for inflation. The acceleration in Real GDP over the quarter reflects an uptick in export levels, the Commerce Department’s Bureau of Economic Analysis said in a statement.

Separately, the University of Michigan’s Consumer Survey Center said its consumer sentiment index ticked up to 87.2 for September, up from a preliminary reading of 85.7. Analysts expected a final reading of 87.1 for the month.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.4% on Friday to an intraday high of 96.88. The index surged to its highest level since mid-August, before closing at 96.37, up 0.26% on the day.

Investors await the release of euro zone inflation and U.S. employment data next week for further indications on the strength of the global economy.

CTFC Commitment of Traders

Speculators this week were less bearish on the euro, yen, the Mexiacan peso and the Canadian dollar. Bearishness increased on the Australian dollar and remained at very high levels for the S&P 500. Bullishenss increased for both gold and silver.

Gold

Gold futures fell slightly on Friday retreating from monthly highs, as optimistic U.S. economic data and hawkish comments from Federal Reserve chair Janet Yellen on a likely 2015 interest rate hike weighed on the precious metal.

On the Comex division of the New York Mercantile Exchange, gold for December delivery traded in a range between $1,140.30 and $1,153.80, before settling at $1,145.40, down 8.40 or 0.73% on the session. A day earlier, gold futures surged more than $20 an ounce for its strongest one day performance of September amid soft durable good orders last month. For the week, gold soared more than 3% after opening on Monday below $1,130 an ounce.

Gold likely gained support at $1,140.30, the low from Sept. 14 and was met with resistance at $1,153.80, the high from Sept. 24.

Gold may be headed for an extended downturn after Yellen said on Thursday evening that the U.S. central bank will likely support raising the target range for its benchmark Federal Funds Rate at some point this year. It marked the first time Yellen personally supported a 2015 rate hike since July. Yellen’s stance represents a stark contrast from her position last week when the Federal Open Market Committee only disclosed that 13 of 17 of its members were in favor of raising rates this year.

The Federal Funds Rate, the rate at which banks use to lend to other institutions on overnight loans, has remained at its current “zero-bound level,” since December, 2008. An interest rate hike is viewed as bearish for the precious metal. Gold, which is not attached to interest rates or dividends, struggles to compete with high-yield bearing assets in rising rate environments.

Yellen also noted that the inflation shortfall is likely to be transitory, as one-off factors such as lower energy prices and weaker imports due to a stronger dollar abate. Yellen added that inflation should reach the Fed’s 2% target when the labor market returns to full employment. Long-term inflation has remained under the Fed’s goal for every month over the last three years.

The FOMC is expected to take a “data-driven approach,” in determining whether it should wait until October or December for lift-off.

On Friday, the U.S. Department of Commerce said the nation’s Real Gross Domestic Product for the second quarter increased by 3.9% on an annual basis, above consensus estimates of a 3.7% gain. Real GDP measures the value of the goods and services produced by the nation’s economy less the value of the goods and services used in production adjusted for inflation. The acceleration in Real GDP over the quarter reflects an uptick in export levels, the Commerce Department’s Bureau of Economic Analysis said in a statement.

Separately, the University of Michigan’s Consumer Survey Center said its consumer sentiment index ticked up to 87.2 for September, up from a preliminary reading of 85.7. Analysts expected a final reading of 87.1 for the month.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.4% on Friday to an intraday high of 96.88. The index surged to its highest level since mid-August. Dollar-denominated commodities such as gold become more expensive for foreign purchasers when the dollar appreciates.

Silver for December delivery lost 0.030 or 0.20% to 15.100 an ounce.

Copper for December delivery dipped 0.18 or 0.77% to 2.284 a pound.

Oil

U.S. crude futures rose moderately on Friday extending minor gains from one session earlier, as oil rigs nationwide fell for a fourth consecutive week.

On the New York Mercantile Exchange, WTI crude for November delivery traded in a broad range between $44.85 and $46.34 a barrel, before closing at $45.72, up 0.81 or 1.80% on the session. In spite of a volatile week of trading, Texas Long Sweet futures rose by less than 1.25% during the five-day span after opening on Monday just below $45 a barrel. U.S. crude futures are still up nearly 20% over the last month after falling to six and a half year lows in late-August near $38.

On the Intercontinental Exchange (ICE), brent crude for November delivery wavered between a low of $47.87 and $49.09 a barrel, before settling at $48.60, up 0.43 or 0.90% on the day. Brent futures have now closed higher in five of the last six sessions. For the week, brent crude gained more than 1.5% in value after opening on Monday around $48 a barrel.

Meanwhile, the spread between the international and U.S. domestic benchmarks of crude stood at $2.88, below Thursday’s level of $3.47 at the close of trading.

On Friday afternoon, oil services firm Baker Hughes (NYSE:BHI) said in its weekly rig count that U.S. oil rigs fell by four last week to 640 for the week ending September 18. A week earlier, the rig count declined by 8 to 644. Oil rigs nationwide have now declined over each of the last four weeks, a skid that dates back to late-August. The U.S. rig count still remains far below its level last fall when it peaked above 1,600.

Energy traders continued to digest bullish supply data on Friday, after Genscape, Inc. reported a significant draw in crude inventories at the Cushing Oil Hub in Oklahoma, the main delivery point for NYMEX oil. Earlier this week, Genscape, a leading provider of energy information for global commodity markets, said crude stockpiles at Cushing fell by 625,000 barrels for the week ending on Sept. 22. It followed a draw of 1.9 million barrels in U.S. crude inventories, according to a government report, extending a previous decline of 2.1 million a week earlier.

Crude futures have remained below $70 a barrel since last November when OPEC spooked global energy markets with its decision to keep its production ceiling above 30 million barrels per day. Last week, OPEC forecasted that crude prices will not return back to $80 a barrel until 2020.

Investors also digested hawkish comments from Federal Reserve chair Janet Yellen on Thursday evening, which provided strong signals that the U.S. central bank appears ready to raise short-term interest rates. A rate hike is viewed as bullish for the dollar, as foreign investors pile into the greenback to capitalize on higher yields.

On Friday, the U.S. Dollar Index surged more than 0.4% to 96.88, its highest level since mid-August. Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.

Natural Gas (Thursday Report)

Natural gas futures fell to session lows 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 October was last down 1.24% to $11.990 per million British thermal units. Prices were at around $2.556 prior to the release of the supply data.

In its weekly report the Energy Information Administration said natural gas storage in the week ended September 18 rose by 106 billion cubic feet, compared to expectations for an increase of 96 bcf.

Total U.S. natural gas storage stood at 3,440 bcf the EIA said. Stocks were 466 Bcf higher than last year at this time and 148 Bcf above the 5-year average of 3,292 Bcf.

EIA data shows that power plants account for approximately 32% of gas demand in the U.S. Demand for natural gas tends to fluctuate in the summer based on hot weather and air conditioning use.