Written by Investing.com Staff, Investing.com
S&P 500 Falls for Second Week as Tech Stutters
The S&P 500 fell for the second week in a row Friday as the rotation from growth to value continued, keeping tech stocks and the broader market in check.
The S&P 500 fell 0.1%, the Dow Jones Industrial Average rose 0.37%, or 124 points, and the Nasdaq Composite slipped 0.48%.
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Investors bet that value sectors of the market will continue to outperform growth continued amid ongoing momentum in the economy, pushing financials, energy and industrials higher.
Financials were the best performing sector on the day, with banks including Morgan Stanley (NYSE:MS), SVB Financial (NASDAQ:SIVB) and Citigroup (NYSE:C) in the ascendency.
A climb in Boeing (NYSE:BA), meanwhile, lifted industrials higher amid a Reuters report the aircraft maker is mulling ramping-up output of its 737 MAX jets to as many as 42 jets per month by late 2022.
Energy, meanwhile, was helped by a rebound in oil prices from weakness earlier this week, even as investors fear a wave of Iranian supply is on the horizon as the Islamic Republic inches closer to a nuclear deal.
The economic backdrop continued to support investor bets on a stronger recovery, as manufacturing and services activity, a key drivers of the economic engine, continued to improve.
Tech, meanwhile, shed gains as growth stocks struggle to find their footing, though managed to avoid a fifth straight week of losses.
Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Google-parent Alphabet (NASDAQ:GOOGL), Amazon.com (NASDAQ:AMZN), and Facebook (NASDAQ:FB) ended in the red.
Apple was under added scrutiny after CEO Tim Cook took the stand for questioning over the company’s App Store business model amid an ongoing legal battle with Epic Games.
Chip stocks were flat after strong week of gains, though Nvidia (NASDAQ:NVDA) was up 3% after announcing a 4-for-1 stock split that will need to be backed by shareholders.
The Federal Reserve minutes for its April meeting showed some Fed members were starting to think about tapering bond purchases. The market largely took the comments in their stride as confidence that the Fed will able to lay the ground for a tapering without the tantrum, or sell-off in risk seen previously.
“[I]t was actually healthy for the market [the Fed comments on tapering],” said David Wagner, portfolio manager at Aptus Capital Advisors, in a recent interview with Investing.com.
“This instills faith in the market that the FOMC is not completely dovish and that they can be hawkish, which is a positive from an inflationary perspective.”
On the earnings front, Deere (NYSE:DE) and Palo Alto Networks (NYSE:PANW) reported quarterly results that topped analysts expectation, sending their shares up more than 1% and 5%, respectively.
In Washington meanwhile, news broke that the White House has scaled down the size of its infrastructure stimulus package to $1.7 trillion from $2.25 trillion ahead President Joe Biden’s meeting with Senate Republics, who are wary of further spending. The proposal is still far off the GOPs counter offer of $568 million.
U.S. investors look to Europe for next leg of stock gains (Reuters)
S&P in Choppy Trade as Tech Sluggish Amid Rotation From Growth to Value
S&P 500 Snaps 3-Day Losing Streak as Tech Reigns Supreme (Thursday)
The dollar ended the week lower Friday, though its days in the doldrums of darkness are coming to end in the short-term as the Federal Reserve prepares to begin talking about tapering.
“The Fed minutes may end the recent phase of USD weakness for now. It is probably too little for a trend reversal,” Commerzbank (DE:CBKG) said. The bank, highlighting parallels to the previous 2013/2014 Fed taper, said that reining in bond tapering may not have an immediate boost to the dollar.
“Taper tantrum and USD appreciation were about a year apart at the time. And in retrospect, the lesson of 2013/14 should be that the two are independent decisions that do not follow each other in a fixed time interval. This is even more true under the new Fed strategy.”
Federal Reserve officials signaled it may appropriate to start discussing a plan to rein in bond purchases at upcoming meetings, according to the minutes of the Fed’s April 27-28 meeting, released Wednesday.
Others agree that the dollar is set for short-term gain, but will continue its long-term pain.
“We expect the dollar’s mild depreciation trend to become more apparent later in the year or early in 2022, as U.S. growth slows and converges with the eurozone rate. A more synchronized post-pandemic recovery should produce more balanced global growth and recovering trade, with U.S. trade deficits large and growing. Historically, this is one where the dollar falls rather than rises, so, we anticipate that the dollar’s current trading range will give way to more sustained weakness in 2022,” Wells Fargo (NYSE:WFC) said in a note.
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Gold prices dipped on Friday even as they clinched a third straight weekly gain. But longs hoping to break above $1,900 were stopped $10 short of the target, proving sentiment for the yellow metal wasn’t as hot yet as they thought.
Gold for June delivery on New York’s Comex settled at $1,876.70 an ounce, down $5.20, or 0.3%, on the day. For the week, the benchmark gold futures contract rose 2%, extending last week’s 0.7% gain and the 3.3% advance the week prior.
More importantly though, Friday’s peak was $1,890.15 – the second time this week that June gold had missed the $1,900 target by just about $10. The first occasion was on Wednesday when it got to as high as $1,891.25.
The spot price of gold, reflective of real-time trades in bullion, was at $1,877.45 after an intraday high at $1,889.40.
Traders and fund managers sometimes decide on the direction for gold by looking at the spot price – which reflects bullion for prompt delivery – instead of futures.
A break above $1,900, particularly $1,920, will bring gold above the lows of the year, returning it to positive territory for 2021. It could also set the path for a recapture of the high $1,900s pivotal for those hoping to see a return to August record highs of above $2,000.
This week was significant for gold with more than a handful of analysts predicting a crack of the $1,900 ceiling as the Federal Reserve appears determined to stay with its ultra-low interest rates and accommodative monetary policy.
This is despite a raging debate on Wall Street that the central bank might be forced to tighten monetary policy quicker than it expects as inflation builds from soaring commodity prices.
“Gold bulls are pausing for breath after a six-session winning run,” said Sophie Griffiths, who heads U.K. and EMEA market research for online trading platform OANDA.
“The bottom line is that any rise in US interest rates is still a long way off. The low-interest-rate environment is set to stay for some time yet, which is supportive of non-yielding gold.”
Data since last month on consumer and producer prices, industrial production and consumer confidence have all ticked higher. Prices of everything from houses to the lumber that goes into building them have also soared through the proverbial roof, scaring economists into believing that inflation this year could be at its highest in 35 years.
The Federal Reserve acknowledges the price pressures arising from bottlenecks in U.S. supply chains struggling to cope with demand in an economy reopening after months of pandemic-suppression.
But the central bank insists that these inflationary pressures are “transitory” and will fade as the economy makes a full recovery from the pandemic. It also says it does not see the need for now to raise interest rates.
Such an environment heightens gold’s natural role as an inflation hedge, say longs who are emboldened to attempt first a return to $1,900 levels last seen in January, before a further push to record highs of around $2,100 set in August.
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Oil prices rose on Friday but still ended the week about 3% down on fears that Iran was nearing a nuclear deal that could remove U.S. sanctions, possibly adding two million barrels per day of crude to the market.
Speculation of a storm forming in the Gulf of Mexico, where the bulk of U.S. energy installations are located, helped oil prices to rebound from Thursday’s losses triggered by worries over the Iranian situation.
But the gain wasn’t enough to offset the slide for the week.
“Much of the energy market has priced in more Iranian crude output later this summer,” said Ed Moya, head of research for the Americas at online trading platform OANDA.
West Texas Intermediate crude for July delivery, the benchmark for U.S. oil, settled up $1.64, or 2.6%, at $63.58 per barrel.
For the week though, WTI lost 2.7%.
Brent crude for July delivery, which acts as the global benchmark for oil, settled up $1.33, or 2%, at $66.44. For the week, Brent fell 3.3%.
WTI and Brent rose on the day as a weather system forming over the western Gulf of Mexico showed a 40% chance of becoming a cyclone in the next 48 hours, according to data from the U.S. National Hurricane Center.
“This early storm prompted traders to buy crude ahead of the weekend in anticipation of potential production shut-ins,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
But the concerns over Iranian crude ramp-up were greater.
World powers negotiating to bring Tehran back into a nuclear accord canceled by former U.S. President Donald Trump have accepted that major sanctions imposed since 2018 on the Islamic Republic’s crude exports be lifted, President Hassan Rouhani told Iranian television on Thursday.
“Finer points” were being worked to finalize a deal, Rouhani said, even as European diplomats insisted that success was not guaranteed and that tough issues remained in the talks.
At stake is an additional supply of some 500,000 to 2 million barrels of crude that could enter the market anytime between the next three to 18 months, those in the know say.
Iran has said previously that it could return “within months” to its peak oil production of nearly 4 million barrels a day once the sanctions on its oil are lifted. Sources familiar with the country’s crude output currently estimated its production at around 2 million barrels daily.
Analysts say the additional supply from Iran, whenever that comes, will force a reconfiguration of global oil supply that could be more bearish than bullish – especially with questions about demand resurfacing after new coronavirus flare-ups in No. 3 oil consumer India.
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Natural Gas (Hellenic Shipping News)
Keeping natural gas costs low key to US export success amid transition: Venture Global
US liquefaction project developers’ success in advancing new projects hinges in part on their ability to keep costs low enough to compete with coal globally, Venture Global LNG CEO Michael Sabel said May 19.
Even as the energy transition takes aim at fossil fuels, coal remains a major fuel in power production in emerging markets in Asia.
During the second day of the US Chamber of Commerce’s Global Forum on Economic Recovery, Sabel said that natural gas can maintain its share of a diversifying energy mix as long as the industry is able to build sufficient infrastructure.
“The demand for global energy is going to continue to grow and accelerate and, in particular, in Asia,” Sabel said. “If we don’t support gas exports, you’re going to have a lot of renewables and a lot of coal.”
Venture Global’s Calcasieu Pass export terminal in Louisiana is under construction and preparing to possibly begin production in the coming months. The company said in March that it plans a phased operational start-up that, with the requisite review and approvals from US regulators, could include the first exports of LNG in late 2021.
That would be about a year earlier than originally anticipated. Full operations at the export terminal are currently expected in mid-2022.
Venture Global is developing three other proposed LNG export facilities in Louisiana. Plaquemines LNG, which would be built in two phases and have a production capacity of up to 20 million mt/year, has not yet been formally sanctioned .
While he did not specifically address construction progress at Calcasieu Pass or commercial progress for the other projects, Sabel said Venture Global’s work over the last decade in the LNG space has informed the company’s perspective on the current global energy transition.
“Gas is going to be a critical part of the short-, middle- and long-term transition to alternative energy production and uses,” he said.
That is especially true when it comes to countries’ stated goals for reducing greenhouse gas emissions, Sabel said.
“We view it as impossible to achieve these targets without gas,” he said.
Source: Platts
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S&P 500 Snaps 3-Day Losing Streak as Tech Reigns Supreme
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