Written by Investing.com Staff, Investing.com
Stocks – Wall Street Slips on China Fears, Holiday Lethargy
Stocks fell Friday on a holiday-shortened trading day ostensibly because of new worries about the long-awaited phase one U.S.-China trade deal.
The S&P 500 and Dow Jones industrials fell 0.4%. The Nasdaq Composite dropped 0.46%. The Nasdaq 100 dropped about 0.5%.
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The China issue was that President Donald Trump signed the Hong Kong Human Rights and Democracy Act, and the Beijing was unhappy about it and threatened unspecified retaliation. The noise pressured stocks and sent gold up $11.90 in New York to $1,472.70 an ounce.
Wall Street reacted unhappily, along with markets around much of the world. But the China stress didn’t set off a lot of panic. Rather, the mood seemed to be more of the same in a long negotiation, with regular eruptions of anger from both sides, and that a phase one trade deal is still coming.
The larger issue was an absence of demand to buy stocks because many investors are comfortable with the stock market’s current state.
In a holiday-shortened week, the S&P 500 managed to add nearly 1%. The Dow rose 0.6%, and the Nasdaq climbed 1.71%.
Stocks enjoyed their best month November since June. The S&P 500 finished 3.4% higher for the month, with the Dow up 3.72% and the Nasdaq up 4.5%.
For the year, the S&P 500 is up 25.3%, with the Dow up 20.3% and the Nasdaq up 30.6%.
If stocks are flat in December, the market will have its best gains since 2013.
But the euphoria must be tempered by the 2018 fourth-quarter slump, when the S&P 500 fell 14%, the Dow dropped 11.8% and the Nasdaq tumbled 17.5%.
On the Friday after Thanksgiving in 2018, the fourth-quarter market swoon was erupting in a big way, leading to a decline of 9% for the S&P 500, Dow and Nasdaq in December 2018
Early notes this year suggested the big Black Friday holiday shopping spree was going well, if not gangbusters. But some noted that there were pre-holiday sales appearing regularly across the country.
All 11 sectors of the S&P 500 were lower on the day.
Financial stocks were least affected by the selling. But energy stocks were the weak link as oil prices moved lower. The selling was due in part because of worries next week’s OPEC meeting won’t produce meaningful action to reduce output among OPEC members. In addition, the United States proved a net exporter of crude oil for the first time since records were kept.
IBM (NYSE:IBM) was the top Dow stock. Walmart (NYSE:WMT) was up slightly. Apple (NASDAQ:AAPL) hit a 52-week high but then fell back.
Interest rates were higher as the United States 10-Year Treasury yield bumped up to 1.778% from Wednesday’s 1.767%.
West Texas Intermediate crude was off more than 5% to $55.17 a barrel. The February contract for Brent t crude, the global benchmark, was down 3.8% to $60.78 a barrel.
Electric-utility giant NRG Energy (NYSE:NRG), personal-computer company HP (NYSE:HPQ), fertilizer maker CF Industries (NYSE:CF) and information tech company DXC Technology (NYSE:DXC) were the top performers among S&P 500 stocks.
Oil-and-gas companies Apache (NYSE:APA), TechnipFMC (NYSE:FTI), Devon Energy (NYSE:DVN) and retailer Kohl’s (NYSE:KSS) were the weakest S&P 500 performers.
See also:
StockBeat: Semis Swing Lower as U.S.-China Trade Sours; Trump Targets Huawei
Stocks – Wall Street Falls on Trade Hurdles Over Hong Kong Bill
The U.S. dollar was flat on Friday in holiday-thinned trade as U.S-China trade progress remained in focus. But Latin American currencies rermained active, with Brazil’s real seeing more sharp moves.
U.S. President Donald Trump signed a law backing Hong Kong protests on Wednesday despite potential backlash from Beijing as the two superpowers try to resolve their trade differences. Chinese officials have threatened to take “firm countermeasures” and Chinese Vice Foreign Minister Le Yucheng demanded that Washington immediately stop interfering in China’s domestic affairs.
The law threatens to derail progress on trade talks, with the next batch of American tariffs on Chinese goods due to begin on Dec. 15.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was steady at 98.36 as of 10:32 AM ET (15:32 GMT). The dollar was flat against the safe-haven Japanese yen, with USD/JPY at 109.50.
Trading was thin due to the U.S. Thanksgiving holiday on Thursday, with most investors off until Monday.
But in Brazil the real saw another slump, with USD/BRL up 1.01% to 4.2324, despite intervention by the country’s central bank. The currency hit an all-time low of 4.277 this week following an essentially failed “mega” oil auction accelerated the real’s decline.
Meanwhile the pound inched up, with GBP/USD rising 0.1% to 1.2917 and EUR/USD unmoved at 1.1010.
See also:
U.S. President Donald Trump’s wavering on China is benefitting gold once again, as his latest support for Hong Kong rights demonstrators threatens to sink a prospective trade deal with Beijing.
Both bullion and gold futures edged higher on Friday, reacting belatedly to Trump signing into law on Wednesday the Hong Kong Human Rights and Democracy Act. The bill would allow the U.S. to impose trade sanctions on China if it breaches its obligation to respect Hong Kong’s autonomy. Market reaction to Trump’s action was delayed by the U.S. Thanksgiving holiday on Thursday.
Gold futures for February delivery on New York’s COMEX was up $9.85, or 0.7%, at $1,470.65 per ounce by 1:05 PM ET (18:05 GMT). The contract plumbed $1,456.60 earlier this week – a bottom since Nov. 8.
Spot gold, which tracks live trades in bullion, rose $6.31, or 0.4%, to $1,464.40.
For the week, February gold futures were flat while bullion rose 0.1%.
China reacted furiously on Thursday to Trump’s signing of the pro-Hong Kong U.S. legislation. Beijing summoned the U.S. ambassador to protest and warn that the move would undermine cooperation with Washington.
Hong Kong, a former British colony that was granted semi-autonomy when China took control in 1997, has been rocked by six months of sometimes violent pro-democracy demonstrations.
Thousands of pro-democracy activists crowded a public square in downtown Hong Kong on Thursday night for a “Thanksgiving Day” rally to thank the United States for passing the laws and vowed to “march on” in their fight.
Trump’s approval of the bills was not unexpected. But it did unnerve markets expecting the president to be more pragmatic amid attempts to bring a bitter 16-month trade war to some kind of initial settlement.
Gold was also aided by a swing lower in chip stocks on Wall Street on Friday after a report that the United States was looking at measures to stop foreign companies from supplying equipment to key Chinese chip customer Huawei.
The Trump administration was considering measures to stop foreign companies from supplying equipment to Huawei – an important customer for a number of U.S. semiconductor companies – amid concerns the current blacklisting has failed to cut off supplies to the Chinese telecom giant, Reuters reported, citing two sources.
See also:
Black Friday seems to have taken on a different meaning for oil bulls.
Crude prices plunged 5% on the ritualistic shopping day after Thanksgiving as Russia sent out mixed signals on its commitment to extend production cuts and a U.S.-China deal looked more complicated after President Donald Trump’s signing of two bills aimed at supporting Hong Kong protests against Beijing.
U.S. West Texas Intermediate and U.K. Brent crude fell unceremoniously from recent two-month highs as thinner holiday-like trading volumes exaggerated the selloff, creating a perfect storm for those long oil.
NYMEX-traded WTI settled down $2.94, or 5.1%, at $55.17 per barrel, well below the two-month high of $58.74 on Nov. 22.
ICE-traded Brent, the global benchmark for crude, slumped $2.55, or 4.%, to $60.72, after a two-month high of $64.60 on Wednesday.
For the week, WTI was down 4.1% while Brent fell 4.2%. For the month, the U.S. crude benchmark rose 1.8% versus the near-1% gain for its U.K. peer.
Friday’s slide in oil came after Russian Energy Minister Alexander Novak said on Friday he would prefer if OPEC and its non-OPEC allies, banded under a partnership called OPEC+, took a decision closer to April on whether to extend their oil output deal, the TASS news agency reported.
Novak’s comments are likely to be opposed by most of OPEC’s members, who are aiming to agree at the cartel’s upcoming Dec. 5-6 meeting on the current OPEC+ deal to cut 1.2 million barrels per day. Fitch Solutions said in a commentary on Friday:
“OPEC+ is in an unenviable position, struggling to prop up prices against weak demand growth, fragile market sentiment and strong gains in non-OPEC supply. It is highly probable that the group will rollover the deal in its current form until at least the end of 2020, but we see limited scope for a new round of cuts, in light of uneven compliance and diminishing returns.”
Adding to the grim outlook for oil, data from the Energy Information Administration on Friday showed the United States exported 89,000 bpd more than it imported in September, solidifying its status as a net exporter of crude and petroleum products under government records that began in 1949.
China, meanwhile, reacted furiously on Thursday to Trump’s signing of bills in support of the Hong Kong demonstrators, summoning the U.S. ambassador to protest and warning the move would undermine cooperation with Washington.
Hong Kong, a former British colony that was granted semi-autonomy when China took control in 1997, has been rocked by six months of sometimes violent pro-democracy demonstrations.
Thousands of pro-democracy activists crowded a public square in downtown Hong Kong on Thursday night for a “Thanksgiving Day” rally to thank the United States for passing the laws and vowed to “march on” in their fight.
Trump’s approval of the bills was not unexpected. But it did unnerve markets expecting the president to be more pragmatic amid attempts to bring a bitter 16-month trade war to some kind of initial settlement.
See also:
- Oil Prices Slip in Quiet Day, Set for Weekly Gain as OPEC Expects to Extend Cuts
- A Worrying Week For Oil Markets (Oilprice)
- U.S. Posts First Month in 70 Years as a Net Petroleum Exporter (Bloomberg)
Natural Gas (Oilprice)
Spot prices for natural gas fell sharply on Friday as forecasts for warm weather spooked traders who were hoping for increased demand heading into what is normally cold season in the United States.
Natural gas prices were trading down 7.52% on Friday afternoon at $2.313. And the loss wasn’t just on Friday. Natural gas prices started out at $2.738 on Sunday – a loss of 15.5% for the week.
It’s typical this time of year for natural gas inventories to start to draw down as cold weather sets in, but the National Weather Service is calling for likely above-average temperatures in most of the country over the next 6-12 days, and traders fear that not enough of a drawdown will be realized, continuing the glut and therefore lower natural gas prices.
As a result of what some see as moderately warmer weather in the short term, US demand is expected to increase only to 104.7 Bcf/d over the same timeframe, compared with US natural gas production that is expected to hover around 92.7 Bcf/d – a 6% increase over year-ago levels, according to S&P Global Platts.
Forecasts aside, the EIA has estimated that total natural gas use actually fell 5% compared to the previous week, with natural gas use for power consumption declining even more, by 7%. Exports of natural gas to Mexico was flat week on week.
But the net withdrawal from working gas for the week ending November 15 – the latest data available from the EIA – totaled 94 Bcf, which brings the total working natural gas stocks to 3,683 Bcf. This is 16% more than a year ago.
Natural gas prices are down sharply year on year, with prices as of November 30, 2018, sitting at $4.339, a loss of $2.026 or 47% y/y.
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