A rally in oil prices and calmer currency market provide boost of confidence
U.S. stocks ended the roller-coaster week on a high note on Friday, 16 January 2015, as a rally in oil prices and calmer currency markets provided a rare boost of confidence. The main benchmarks broke a five-day losing streak, but still ended the fourth-straight week with losses. The stock market was on shaky footing in the early going, but the overall risk tolerance was improved by a rebound in crude oil, which continued climbing throughout the session to end higher by 4.6% at $48.50/bbl. That advance bolstered the energy sector which spent the day in the lead.
The Dow Jones Industrial Average gained 190.86 points, or 1.1%, to 17,511.57, and lost 1.3% over the week. The Nasdaq Composite ended the day with a gain of 63.56 points, or 1.4%, at 4,634.38, and recorded a 1.5% weekly loss. The S&P 500 closed up 26.75 points, or 1.3%, at 2,019.42, but was down 1.2% over the week.
Apart from the energy sector, the remaining cyclical groups ended a bit closer to their flat lines. The materials sector outperformed with help from steelmakers and miners while the discretionary sector settled in line with the broader market. As for the remaining three growth-sensitive groups, financials, industrials and technology sector spent the day behind the broader market.
In the financial sector, Goldman Sachs fell 0.7% despite better than expected results from the investment bank. Also of note, foreign exchange broker agreed to terms on a $300 million lifeline provided by Leucadia National after yesterday's surge in the Swiss franc caused about $225 million in negative client balances at FXCM.
Elsewhere, the technology sector struggled to keep pace with the market as Apple weighed. The largest sector component lost 0.8% while most other heavily-weighted tech names settled with gains. On the earnings front, Intel gained 0.7% after beating bottom-line estimates.
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On Friday, the U.S. reported the biggest drop in consumer inflation in six years. Consumer prices across the European Union fell for the first time on record.
The dollar, meanwhile, was generally higher, as the Swiss franc gave up some of Thursday's hefty gains that came when the Swiss National Bank scrapped its currency cap.
Latest economic data at Wall Styreet showed that the CPI declined 0.4% in December after declining 0.3% in November while the consensus expected a decline of 0.4%. Prices are up only 0.8% year-over-year, which is the smallest increase since October 2009. The energy index, which has fallen for the past six consecutive months, declined 4.7% in December. Food prices increased 0.3% in December, up from a 0.2% increase in November. Excluding food and energy, core CPI was flat in December (consensus +0.1%) after increasing 0.1% in November.
Also, industrial production declined 0.1% in December after increasing an unrevised 1.3% in November (consensus -0.1%). The decline in industrial production can be blamed on warmer-than-normal temperatures that reduced the demand for heating. According to the National Climatic Data Center, December 2014 was the second warmest December on record. That was a large reversal from November, which was the coldest November since 2000. The shift in temperatures resulted in a 7.3% decline in utilities production.
The University of Michigan Consumer Sentiment Index jumped to 98.2 in the preliminary January reading from 93.6 in December while the consensus expected an increase to 94.1. That was the highest reading since the index reached 103.8 in January 2004.
Bullion prices ended substantially higher on Friday, 16 January 2015 at Comex. Gold prices moved higher despite a weak reading on U.S. inflation which helped the dollar regain some strength. Gold generally benefits from volatile markets, as was the case on Thursday, and signs of inflation. Gold for February delivery rose $12.10 to close at $1,276.90 an ounce. March silver rose 65 cents to settle at $17.75 an ounce in New York trading.
Crude-oil futures rallied on Friday, 16 January 2015 at Nymex notching their first weekly gain in eight weeks as the International Energy Agency said collapsing crude prices would cut into supply growth from oil producers outside of the Organization of the Petroleum Exporting Countries.
Light, sweet crude futures for delivery in February advanced $2.44, or 5.3%, to settle at $48.69 a barrel on the New York Mercantile Exchange. On the week, oil rose 0.7%, snapping a seven-week losing streak.
The IEA slashed its forecast for the increase in non-OPEC supply this year by 350,000 barrels in a monthly report released on Friday. The collapse in oil prices could help boost demand for OPEC's own output, a sign that the cartel's tough-love strategy on oil prices is working.
Treasuries notched their highs in the early morning before spending the session in a steady retreat that sent the benchmark 10-yr yield higher by 11 basis points to 1.82%.
Friday's participation was ahead of average with 950 million shares changing hands at the NYSE floor.
Bond and equity markets will be closed on Monday, 19 January 2015 for Martin Luther King Day.
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