Written by Investing.com Staff, Investing.com
U.S. stocks lower at close of trade; Dow Jones Industrial Average down 1.58%
U.S. stocks were lower after the close on Friday, as losses in the Oil & Gas, Utilities and Financials sectors led shares lower.
At the close in NYSE, the Dow Jones Industrial Average lost 1.58% to hit a new 1-month low, while the S&P 500 index declined 1.31%, and the NASDAQ Composite index declined 0.92%.
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The best performers of the session on the Dow Jones Industrial Average were Home Depot Inc (NYSE:HD), which fell 0.16% or 0.47 points to trade at 302.65 at the close. Meanwhile, Caterpillar Inc (NYSE:CAT) fell 0.35% or 0.74 points to end at 208.71 and Nike Inc (NYSE:NKE) was down 0.41% or 0.53 points to 128.39 in late trade.
The worst performers of the session were Chevron Corp (NYSE:CVX), which fell 3.76% or 4.03 points to trade at 103.04 at the close. Walgreens Boots Alliance Inc (NASDAQ:WBA) declined 3.75% or 1.98 points to end at 50.83 and Goldman Sachs Group Inc (NYSE:GS) was down 3.53% or 12.77 points to 348.73.
The top performers on the S&P 500 were Lennar Corporation (NYSE:LEN) which rose 3.72% to 98.17, Adobe Systems Incorporated (NASDAQ:ADBE) which was up 2.58% to settle at 565.59 and ABIOMED Inc (NASDAQ:ABMD) which gained 1.90% to close at 318.56.
The worst performers were Globe Life Inc (NYSE:GL) which was down 6.08% to 92.14 in late trade, Baker Hughes Co (NYSE:BKR) which lost 5.42% to settle at 22.68 and FMC Corporation (NYSE:FMC) which was down 5.07% to 112.02 at the close.
The top performers on the NASDAQ Composite were Alfi Inc (NASDAQ:ALF) which rose 30.41% to 8.02, Sykes Enterprises Incorporated (NASDAQ:SYKE) which was up 29.95% to settle at 53.50 and Geron Corporation (NASDAQ:GERN) which gained 29.08% to close at 1.820.
The worst performers were Orphazyme (NASDAQ:ORPH) which was down 49.79% to 7.31 in late trade, Athira Pharma Inc (NASDAQ:ATHA) which lost 39.36% to settle at 11.06 and Urban One (NASDAQ:UONE) which was down 27.31% to 9.930 at the close.
Falling stocks outnumbered advancing ones on the New York Stock Exchange by 2491 to 693 and 87 ended unchanged; on the Nasdaq Stock Exchange, 2562 fell and 901 advanced, while 134 ended unchanged.
Shares in Adobe Systems Incorporated (NASDAQ:ADBE) rose to all time highs; gaining 2.58% or 14.23 to 565.59. Shares in Alfi Inc (NASDAQ:ALF) rose to all time highs; gaining 30.41% or 1.87 to 8.02. Shares in Sykes Enterprises Incorporated (NASDAQ:SYKE) rose to all time highs; gaining 29.95% or 12.33 to 53.50. Shares in Athira Pharma Inc (NASDAQ:ATHA) fell to all time lows; falling 39.36% or 7.18 to 11.06.
The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was up 16.62% to 20.70.
Gold Futures for August delivery was down 0.65% or 11.55 to $1763.25 a troy ounce. Elsewhere in commodities trading, Crude oil for delivery in July rose 0.70% or 0.50 to hit $71.54 a barrel, while the August Brent oil contract rose 0.36% or 0.26 to trade at $73.34 a barrel.
EUR/USD was down 0.37% to 1.1862, while USD/JPY fell 0.00% to 110.19.
The US Dollar Index Futures was up 0.47% at 92.308.
See also:
- S&P 500 Closes Near 1-Month Low on Sooner Rate Liftoff Talk
- Dow Futures 70 Pts Lower; Adobe in Spotlight
The dollar’s sunny days are set to continue for quite a while, but the Fed’s path will eventually turn murky again to bring the bears out of hiding.
The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose 0.35% to 92.2, and looks set to notch a third-weekly gain.
“Admittedly, the current moderate USD strength may continue for quite a while,” Commerzbank (DE:CBKG) said in a note. The positive remarks come just days after the Federal Reserve kept its benchmark rate on hold, but released projections showing rate hikes in 2023.
“After publication of the latest FOMC projections, the dollar was able to gain significantly,” [even as] the OIS market has been pricing in a first Fed rate hike in 2023 for some time,” Commerzbank said.
But liftoff could occur even sooner, according to St. Louis Federal Reserve President James Bullard.
“I put us starting in late 2022,” Bullard said Friday during a TV interview on CNBC. “[M]y forecast said 3% inflation in 2021 — core PCE inflation — and 2.5% core PCE inflation in 2022.”
“To me, that would meet our new framework where we said we’re going to allow inflation to run above target for some time, and from there we could bring inflation down to 2% over the subsequent horizon,” he added.
The hawkish tone from Bullard didn’t spook the bond market as the bid remained in place, but yields are expected to eventually move higher, albeit gradually, and that will add another tailwind for the greenback.
“We expect the yield on the 10-year Treasury note to gradually rise into the 2.25% to 2.75% range by YE 2022 from the current 1.5%,” Wells Fargo (NYSE:WFC) said in a note.
“The U.S. Federal Reserve’s near-zero fed funds interest rate target is unlikely to change over the coming 18 months, but at some point during this time period, our central bankers will likely start to hint that they will begin reducing (or “tapering” in Fed-speak) the amount of bonds they are buying in the open market each month from the current $120 billion,” it added.
But for those hoping this could be end of the bear market for the dollar, think again. The dollar’s fate is tied to the Fed’s policy measures and the central bank’s outlook on inflation. This outlook may need to be revised when winter comes calling as the inflationary pressures could abate.
“Only when inflationary pressures ease significantly again in the fall and winter [ … ] should the Fed start to worry again that permanent re-inflation might not materialize after all,” Commerzbank said. “This should make Fed normalization seem less certain again and weigh on the dollar again. We expect the dollar to weaken again from then on.”
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Gold bulls suffered their worst week since the 2020 Covid outbreak as prices fell almost 6% on the Federal Reserve’s expedited timetable for rate hikes and stimulus tapering.
The moves generated fear beyond the necessary which played out well for the yellow metal’s bears.
Front-month gold futures on New York’s Comex settled at $1,769 per ounce on Friday, down $5.80, or 0.3%. For the week, the decline was $110, or 5.9%, the biggest drop in Comex gold since the week ended March 6, 2020. The loss came after a seven-week low of $1,768 set for the benchmark gold futures contract on Thursday.
The spot price of gold was at $1,765.53 by 4:00 PM ET (20:00 GMT). That was down by $7.78, or 0.4%, on the day, and off by $111, or almost 6%, on the week.
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.
The Federal Reserve signaled at the end of its monthly policy meeting on Wednesday that it will raise interest rates at least twice by the end of 2023 to 0.6% from current levels of zero to 0.25%.
The Fed also said it was looking out for data on when to start tapering its monthly asset purchase of $120 billion. The central bank has been buying at least $80 billion in Treasury bonds and $40 billion in mortgage bonds to support credit markets and the economy since the COVID-19 outbreak last year.
The well-expected moves still managed to generate more market panic than necessary, sending the previously-battered Dollar Index rallying on the rate hike expectations and hammering commodities priced in the currency, including gold. Bears in the yellow metal loaded up massively on shorts a day after the Fed’s announcement, despite U.S. weekly jobless claims on Thursday that had been supportive to gold.
Adding somewhat to the pressure on gold was St. Louis Fed President James Bullard’s observation on Friday that the central bank might have to consider raising interest rates by next year instead of 2023 as inflation could run ahead of its expectations.
Bullard is a non-voting member of the Fed but a senior one whose comments often reverberate across markets.
“The reflation trade is no more and this selling across commodities could see further short-term pressure with gold prices,” said Ed Moya, analyst at online trading platform OANDA.
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Global oil markets closed up for a fourth straight week on Friday in a pre-summer rally based sometimes more on demand hype and inflation talk than on consumption, with U.S. fuel usage remaining tepid while Covid infections in the U.K. hit four-month highs.
West Texas Intermediate crude, the benchmark for U.S. oil, settled at $71.64 per barrel, up 60 cents, or 0.8%. For the week, WTI gained 1.2% after matching a 2018 high of $72.99 on Wednesday.
Brent crude, which acts as the global benchmark for oil, finished up 43 cents, or 0.6%, at $73.51 per barrel. For the week, Brent was on track to rose 1.1%, after it matched a 2019 peak of $74.96 on Wednesday.
Oil prices have been on a tear lately amid projections for one of the biggest ever summer demand periods for fuel in the United States as the country reopens fully from Covid-19 lockdowns.
Despite the optimism over global oil demand, U.S. gasoline demand has been questionable since the May 31 Memorial Day that marked the start of the peak summer driving period in the world’s largest oil consuming country. That suggests to some that more time is probably needed for U.S. fuel demand to accelerate.
U.S. pump prices soared to seven-year highs above $3 per gallon this week despite stockpiles of gasoline surging by 10.5 million barrels over the past three weeks – nearly four times above forecast.
The gasoline numbers have jarred with the drawdown in crude stockpiles, which have fallen some 19 million barrels over the past four weeks versus forecasts for a 9-million barrel drop, as refiners pushed out as much fuel as they could to the market in anticipation of take-up.
The Energy Information Administration says U.S. gasoline demand was around nine million barrels a day last week, back to pre-pandemic levels. But weekly numbers for the fuel have continued to show more builds than consumption.
Prices of oil, along with those of other major commodities, have also been egged higher for months now by talk of surging U.S. inflation as supply chains in the country struggle to keep up with economic expansion after more than a year of pandemic suppression. The U.S. Consumer Price Index rose by 5% over the year in May, its biggest climb since 2008.
There are also concerns about the economy outside the U.S. and how that could mesh with global oil demand.
In the UK, some 11,007 new coronavirus infections were reported Thursday amid the spread of the highly transmissible Delta variant of the virus. The U.S. Centers for Disease Control and Prevention said the variant could become the dominant COVID strain in the U.S. as well despite the country’s massive vaccination drive against the virus.
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Natural Gas (Hellenic Shipping News)
U.S. dry natural gas production and rig count continue to grow from pandemic lows
Our June Short-Term Energy Outlook (STEO) estimated that production of dry natural gas in the United States averaged 92.2 billion cubic feet per day (Bcf/d) during May 2021, compared with 87.8 Bcf/d in May 2020. The record high for U.S. natural gas production was set in December 2019, when dry production averaged 97.0 Bcf/d. Aside from February 2021, when weather-related well freeze-offs contributed to natural gas production shut ins, May 2020 marked the low point for U.S. natural gas production so far during the pandemic. As a result of COVID-19 mitigation efforts and warmer weather, natural gas demand diminished, which lowered prices. We expect dry natural gas production to continue to grow in the United States through the end of 2022, averaging about 94.8 Bcf/d for November and December 2022.
In August 2020, earlier in the pandemic, the number of active drilling rigs in the United States fell to 244, the lowest level since at least 1987, according to data from Baker Hughes Company. Drilling activity began to rise in the last quarter of 2020, increasing dry natural gas production. As of June 8, the reported total number of active rigs in the United States had risen to 461, and 96 of those active rigs were directed at drilling for natural gas (compared with a low of 68 in July 2020). Oil-directed activity can also increase natural gas production because of the associated natural gas recovered from rising oil production.
Source: Graph by U.S. Energy Information Administration (EIA), based on data from Baker Hughes Company (rig count) and EIA’s Natural Gas Monthly and Short-Term Energy Outlook (production)
The U.S. oil and natural gas plays that tend to focus on producing natural gas include the Marcellus and Utica formations in the Appalachia Basin and the Haynesville formation in the North Louisiana Salt Basin of northeast Texas and northwest Louisiana. The increase in active natural gas rigs has occurred primarily in the Haynesville formation. Haynesville’s proximity to liquefied natural gas export terminals and industrial demand along the U.S. Gulf Coast has made its natural gas production more valuable. The number of active natural gas rigs in the Haynesville as of June 8 stood at 48 rigs, or 9% lower than the same week in June 2019. Drillers have increased natural gas rig activity somewhat from 2020 lows in other formations, but natural gas rig activity has not returned to 2019 levels.
Source: EIA
See also:
- US working natural gas net build drops on reclassification to base gas: EIA (Hellenic Shipping News)
- The Renewable Boom Has Barely Impacted Oil & Gas (Oilprice.com)
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