In U.S. trading on Thursday, small-cap companies outperformed large firms. This came as a result of a major decline in oil prices which put selling pressure on the energy sector as well as a result of downbeat economic reports. The Russell 2000 (RUT, +0.32%), which is an index that measures the performance of small-cap companies, scored its eighth record close this year and added 0.3%, or 3.9 points, to 1,239.00. Meanwhile, the Dow Jones Industrial Average (DJIA) traded lower away from the record it reached on Wednesday, closing off 10.15 points at 18,214.42. Also on the downside was the S&P 500 (SPX) which declined 0.2%, or 3.12 points, at 2,110.74. Six of the benchmark index’s 10 main sectors finished with losses. Breaking the downward trend was the Nasdaq Composite index (COMP) which advanced 0.4%, or 20.75 points, to 4,987.89. This tech-heavy index was only 12 points away from 5,000. Apple Inc. (NASDAQ:AAPL) also reversed early losses on Thursday in midday trading, after it extended an invitation to the media to attend an event on March 9th. It has been widely speculated that Apple could announce the release date of its new iWatch smartwatch at the event. Apple closed the day up 1.26% or 1.62 points to 130.41.
USD Index Reaches 3-Week High
In currency trading on Thursday, the U.S. dollar index soared more than 1% to a three-week high. This came after the release of economic data that sent the greenback higher against most major currencies. The U.S. dollar index, which measures the greenback’s strength against a basket of six other major currencies, rose 1.20 percent, or 1.12 points, to trade at 95.37. In economic news, data showed that the Consumer Price Index (CPI) fell 0.7% in January. This was above estimates of a 0.6% decline. This drop in inflation marked the largest decline since December 2008. Elsewhere, the U.S. Department of Commerce said that the total durable goods orders for the month increased 2.8 percent. This was above forecasts of a 1.7% increase. Also, core durable goods orders, excluding volatile transportation items, edged up 0.3 percent. In their weekly report, the U.S. Department of Labor also reported that the number of individuals filing for initial jobless benefits in the week ending February 21 increased by 31,000 to 313,000 from the prior week’s revised total of 282,000. In currency trading, the euro traded lower with EUR/USD at 1.1186, down 1.54 percent. The euro is currently down more than 18% against the dollar from its value last year at this time. Also, against the Japanese yen, the USD traded higher with USD/JPY at 119.49, up 0.50%. Meanwhile, GBP/USD fell 0.80% to 1.5404 and AUD/USD dropped nearly 1.0% to 0.7809. This came one day after the AUD reached a monthly high.
NYMEX Crude Higher on Demand Growth
In early Asian trading on Friday, crude oil prices gained. This came after data out of Japan showed solid growth in industrial output which signaled demand growth for the major oil importer. In a report, data showed that the national core CPI in Japan rose 2.2 percent. This was below the 2.3% year-on-year for January expected. Also, the unemployment rate in January ticked up to 3.6%, compared to an expected steady rate of 3.4% while household spending fell 5.1% in January year-on-year. Industrial production month-on-month jumped 4.0%, well above an expected gain of 2.7% and retail sales fell 2.0%, compared to a forecast of down 1.3% year-on-year. As a result, on the New York Mercantile Exchange, crude oil for April delivery jumped 1.55% to $48.92 a barrel. Meanwhile, on the Intercontinental Exchange (ICE) on Thursday, Brent crude for April delivery fell 1.78% or 1.10 points to $60.53 a barrel. The drop reversed a previous gain on Wednesday when Brent neared $62 a barrel.
In the Spotlight –Which Were the 5 Most Shorted Nasdaq Stocks in February?
February is coming to a close and there was no change in the ranking of the most heavily shorted stocks traded on the Nasdaq in early February. These included Sirius XM Holdings Inc., Frontier Communications Corp., Micro Devices Inc., Intel Corp. and Comcast Corp. Frontier Communications and Advanced Micro Devices both saw significant drops in the number of shares short between the January 30 and February 13 settlement dates. The top four also had more than 100,000 shares short at the end of the period.
- Sirius XM Holdings Inc. (NASDAQ: SIRI) – Early in February, the number of shares short increased by around 22.52 million to more than 151.80 million. This was 6.5 percent of the total float yet still less than half the 52-week peak short interest from last June. At the current average daily volume, it would still take about five days to cover all short positions. In early February, the company posted record earnings and short sellers watched the share price rise nearly 10% at one point during the two weeks between settlement dates. On Wednesday, shares closed at $3.88.
- Frontier Communications Corp. (NASDAQ: FTR) – The short interest in Frontier declined by 10 percent from the previous period to around 132.31 million shares, or 13.3% of the telecom’s float. That was the smallest number of shares short in the past year. Frontier also caught an upgrade from Citigroup during the short interest period, and shares advanced more than 24%, yet they have pulled back more than 5% since. Shares closed on Wednesday at $7.95.
- Intel Corp. (NASDAQ: INTC) – A 3.3% rise in short interest brought Intel to more than 131.69 million shares short at the end of the period. That totaled 2.7% of the company’s float, and it ended sixth straight periods of falling short interest. The days to cover increased to almost six. Intel shares gained about 4 percent, in the short interest period, compared to about 5% for the S&P 500. The stock is now down about more than 6% year-to-date and closed most recently at $33.94.
- Advanced Micro Devices Inc. (NASDAQ: AMD) – This company had more than 104.17 million shares short by mid-month, down 17.8% from the previous settlement date. The most recent reading totaled 16.5% of the company’s float, and the days to cover was more than four. AMD has recently been seen as a possible buyout candidate, and the share price ended the two weeks more than 22% higher. The stock closed at $3.10 Wednesday, or up about 16% year-to-date.
- Comcast Corp. (NASDAQ: CMCSA) – The number of shares short slipped by about 1.3% in a period. The approximately 99.76 million shares short as of February 13 represented 4.6 percent of the float. That was the first period of short interest of less than 100 million shares since last September. It would take about seven days to cover all short positions. On Wednesday, shares of Comcast closed at $59.62.
In trading on Wednesday, the U.S. dollar (USD) remained broadly lower against most major currencies. This came in response to investor concerns regarding the latest comments by Janet Yellen, the Federal Reserve Chairwoman, as well as downbeat U.S. new home sales data. According to the report by the U.S. Commerce Department, new homes sales in January declined 0.2 percent to 481,000 units. Analysts were expecting a decline of only 1.3 percent to 475,000. Meanwhile, the new home sales in December were revised up from the previously reported 481,000 units to 482,000 units. In the meeting on Tuesday, Yellen stated that it is unlikely that the central bank would raise interest rates for “at least the next couple of FOMC meetings”. This caused investors to shift their expectations for rate hikes only in the second half of the year. In currency trading, the EUR/USD traded up 0.15% to 1.1356 after the currency pair hit a high of 1.1388 earlier in the day. Despite this increase, the euro has been under pressure due to lingering doubts over the agreement to extend Greece’s bailout by four months. On Tuesday, the European Central Bank and the International Monetary Fund warned that Greece’s reform plans are not detailed enough and said Athens will need to do more to secure the release of further bailout funds. Against the Japanese yen, the greenback traded lower with USD/JPY down 0.08% at 118.86 while USD/CHF declined 0.12% to 0.9493. Against the British pound the USD traded lower with GBP/USD up 0.25% to 1.5491. Meanwhile, against the currencies in New Zealand and Australia the U.S. dollar traded lower with AUD/USD up 0.81% to trade at 0.7894 while NZD/USD was up 0.77% and trading at 0.7550. Also, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 94.30, down 0.24 percent.
Dow Jones Hits Record Level
In U.S. trading on Wednesday, stocks traded virtually unchanged yet the Dow Jones Industrial Average (DJIA) eked out a small gain to close at a fresh record. The blue-chip index advanced 0.1 percent, or 15.38 points, to 18,224.57 marking the index’s third record close this year. On the downside was the Nasdaq Composite index (COMP) which broke its ten-session win and ended less than a point off at 4,967.14. Also on the downside was the S&P 500 index (SPX) which closed down 0.1%, or 1.6 points, at 2,113.86. Half of the benchmark index’s ten main sectors ended lower while utilities sold off the most while consumer discretionary stocks led the gains. The decline in the Nasdaq and the S&P 500 were prompted by a 2.6% drop in Apple Inc.’s shares. Meanwhile, in her second-day testimony before Congress, Federal Reserve Chairwoman Janet Yellen continued to stress that the normalization of interest rates will begin when the Federal Open Market Committee is confident that inflation is on track to hit the central bank’s inflation target of 2% growth. As Bruce Bittles, chief investment strategist at RW Baird & Co., said, “There was nothing new and investors know that the Fed will not want to lose its credibility by raising rates too soon, only to cut them back again. We believe they will stay market-friendly for longer.”
NYMEX Crude Prices Drop On Fight for Market Share
In Asian trading on Thursday, crude oil prices fell with investors focused on the continued battle for market share which is being led by Saudi Arabia. On the New York Mercantile Exchange, WTI crude oil for delivery in April fell 0.71% to trade at $50.63 a barrel. On Wednesday, crude oil prices moved higher after the Saudi Arabian oil minister calmed markets with reassuring comments on global oil demand. This was short-lived as U.S. data indicated that the oil supply in the nation reached its highest level ever and prices of crude were around $48.95 a barrel just before the release of inventory data. In their weekly report, the U.S. Energy Information Administration (EIA) said that U.S. crude oil inventories rose by 8.4 million barrels last week. The increase more than doubled the forecasts of a 4.0 million barrel weekly spike. Also, in Cushing, Oklahoma, storage increased from 46.3 million barrels to 48.7 million which marked the highest level in over a year. With the supply increase, domestic crude production rose by 5,000 barrels to 9.285 million barrels per day. The daily total is the highest in the United States in more than 30 years. This production increase is being spurred in part by a host of refinery strikes throughout the nation that reportedly continue to gain momentum. That is, workers at a refinery plant in Port Arthur, Texas and a chemical plant in Louisiana joined the month-long strike between Shell Oil and the USW late last week. On Wednesday, Brent oil prices increased $2.94 or 5.01% to $61.60 a barrel.
In the Spotlight –Is the Apple Bubble Going to Burst?
Analysts believe that Apple Inc. (AAPL, -2.56%) shares might be ripe for a major correction so the question is – is the Apple bubble about to burst? Since the beginning of the year, the Apple stock has steadily climbed and it is in fact one of the top performers in the market year to date. Analysts are however saying that this success has placed Apple shares right in the heart of ‘extreme overbought’ territory. This is now causing fears that the shares are likely to undergo a major correction. In its analysis, Bespoke said, “It’s currently at the very top of its uptrend channel, so we would expect some sort of ‘cool-off’ period to begin soon.”
This year so far, Apple has advanced 20 percent. Since the 10th of February this year, the share price has increased 9 percent when it became the first company in the world with a market cap of $700 billion. Since then, the giant iPhone maker has added on $75 billion for a market cap of $775 billion. This puts Apple at a little more than what eBay Inc. (EBAY, -0.09%) is worth. Also, as of Tuesday, Apple is not only twice as valuable as Exxon Mobil Corp. (XOM, +0.20%) but it is also worth more than Exxon and Microsoft Corp. (MSFT, -0.23%) combined. Microsoft checked in with a market cap of $362 billion while Exxon came in at $377 billion. According to Wall Street, if Apple continues on its current path, the Apple market cap may even top $900 billion in a few months. According to FactSet data, Apple has surged 785% since the first quarter of 2009 when the U.S. stock market plunged to multi-year lows. In a recent report by Bank of America Merrill Lynch, during the same five years, the market cap of the U.S. stock market rose about 120% to $19.4 trillion. While analysts are indicating that the Apple stock is overvalued, the Apple fan and major investor Carl Icahn argues that the market is undervaluing Apple. Earlier this month, Icahn stated that the stock is worth $216 a share, which would give it a market cap of $1.3 trillion. So do you think the Apple bubble will burst soon?
In early Asian trading on Wednesday, crude oil prices advanced slightly. This increase came despite data which showed that U.S. crude oil stocks had increased. On the downside were distillate stocks as a result of heating oil sales in response to the cold weather in the country. In their industry report, the American Petroleum Institute said that last week, crude stocks rose 8.9 million barrels. Also, distillate holdings fell 2.4 million barrels while gasoline supplies dropped 1.6 million barrels last week. On Wednesday, investors will turn their attention to the more closely watched report from the U.S. Department of Energy regarding stocks in the country. On the New York Mercantile Exchange, crude oil for delivery in April traded at $49.30 a barrel, up 0.04 percent. Overnight, crude oil prices pushed higher after euro zone finance ministers agreed on a deal to extend Greece’s bailout by four months. Greece’s list of reform proposals was approved by the Eurogroup which paved the way for the extension of the country’s bailout program. Meanwhile, Brent oil for delivery in April hit an intraday low of $58.13 a barrel, before recovering to trade at $60.09 during U.S. morning hours. This was up $1.19, or 2.01 percent on the ICE Futures Exchange in London.
S&P 500 and Dow Jones Hit Record Levels
On Tuesday, U.S. stocks moved higher with the Dow Jones and the S&P 500 at record levels. This came in response to the dovish comments by the Federal Reserve Chairwoman Janet Yellen which reassured investors that rate hikes are not likely to occur until the second half of the year. At the close of U.S. trading, the S&P 500 index (SPX) advanced 5.82 points, or 0.3%, at 2,115.48. The top performers on the benchmark index were First Solar Inc. (FSLR) which rose 10.19% to 54.70 as well as Expeditors International Washington (EXPD) which was up 5.29% to settle at $47.88. Also on the upside was the Dow Jones Industrial Average (DJIA) which gained 92.35 points, or 0.5%, to end at 18,209.19. The best performers of the session on the blue-chip index included Home Depot Inc. (HD), which rose 3.98% or 4.47 points to trade at 116.75 at the close. Meanwhile, JPMorgan Chase & Co (JPM) also added 2.48% or 1.47 points to end at 60.82. Following the upward trend was the Nasdaq Composite (COMP) which advanced 7.15 points, or 0.1%, to end at 4,968.12. This left the tech-heavy index off its March 2000 peak by only 1.6 percent. The Nasdaq also advanced for the 10th session in a row, which marked its longest winning streak since June 2009 when the index rose for twelve straight sessions. Also, the CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was down 5.91% to 13.70 which marked a new one-month low.
Downbeat U.S. Data Pushes USD Down
In U.S. trading on Tuesday, the U.S. dollar (USD) traded lower against most major currencies. This came after U.S. consumer confidence data failed to impress while the comments from the Federal Reserve Chair Janet Yellen made it clear that interest rate hikes would not happen until the second half of the year. In their report, the market research group, the Conference Board, a market research group said its index of consumer confidence fell to 96.4 in February from a reading of 103.8 in January. Analysts were expecting the index to decline to 99.6 in February. Also, in her remarks to the Senate Banking Committee, Fed Chair Yellen said it was “unlikely” that economic conditions would warrant an interest rate increase for “at least the next couple of FOMC meetings”. Yellen also stated that if the economy in the U.S. continues to improve, the Fed “will at some point begin considering an increase in the target range for the federal funds rate on a meeting-by-meeting basis.” In currency trading, the euro held steady against the greenback with EUR/USD at 1.1337. This came after Greece’s package of proposed economic reforms was approved by its euro zone creditors on Tuesday which has now secured Athens an extension of its bailout for another four months. Also, the USD/JPY traded 0.21% higher at 119.06, while USD/CHF held steady near five-week highs at 0.9494. In other currency trading, the greenback traded little unchanged against the British pound with GBP/USD at 1.5453. The sterling remained supported after Bank of England policymaker Martin Weale said earlier that the central bank could start raising interest rates sooner than markets anticipate. Also, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was steady at 94.65.
In the Spotlight –Hewlett-Packard Shares Plummet on Poor Earnings
After the close of trading on Tuesday, Hewlett-Packard Co. reported earnings for the first quarter which failed to meet expectations. The computing and IT giant reported that earnings for the January quarter fell 4% as a result of a decline in desktop computer sales. In response, the shares of HP fell 3.6% to trade at $37.10 in after-hours trading. Over the past twelve months, the stock of Hewlett-Packard has gained 29%. Meanwhile, in their earnings report, HP also disclosed the impact from the stronger dollar on their revenue and earnings. For the current quarter ending in April, the company forecast per-share earnings of 84 cents to 88 cents, which includes a currency impact of 9 cents a share. Thomson Reuters’ analysts estimated 96 cents a share.
In October last year, Hewlett-Packard unveiled the company’s plans to separate its personal-computer and printer businesses from its corporate hardware and services operations, The No.2 PC maker has also has been undergoing a multiyear restructuring in an effort to stem sales declines. The company has laid off tens of thousands of employees and cut other costs to support its bottom line. For the fiscal first quarter ended January 31, Hewlett-Packard reported a profit of $1.37 billion, or 73 cents a share. This was down from $1.43 billion, or 74 cents a share, a year earlier. Also, excluding certain items, per-share earnings rose to 92 cents from 90 cents while the company had guided for 89 cents to 93 cents a share. Meanwhile, revenue also decreased 5 percent to $26.84 billion which was below analysts’ estimates of $27.34 billion.
In U.S. trading on Monday, the Nasdaq Composite Index (COMP) ended higher for the ninth straight day. This gain was boosted by gains in Apple Inc. (O:AAPL) which traded at $133.00, up 2.7%. Meanwhile, the Dow Jones and the S&P 500 traded lower and off their recent record highs as lower oil prices dragged down energy shares. The nine-session winning streak for the Nasdaq is its longest run since the end of 2010 and it has shifted the index closer to its all-time intraday high of 5,132.52 which it reached in March 2000. The COMP ended the trading session up 5 points, or 0.1%, at 4,960. Meanwhile, on the downside, the S&P 500 index (SPX) closed flat on Monday at 2,109.66. Investors turned to health-care and utilities stocks while moving away from consumer discretionary companies as well as energy and telecom stocks. Also on the downside was the Dow Jones Industrial Average (DJIA) which declined from its record close reached last Friday by dropping 0.1%, or 23.54 points, to 18,116.90. More than half of the blue-chip index’s 30 members finished lower with UnitedHealth Group Inc. the biggest gainer and Boeing Co. the biggest decliner. Also, the CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was up 1.82% to 14.56.
USD Trims Gains on Poor U.S. Home Sales Data
In currency trading on Monday, the U.S. dollar (USD) traded lower against most major currencies. This came in response to the release of disappointing U.S. home sales data. Despite this, the greenback was supported by investor concerns regarding whether Greece will announce the necessary reforms for its bailout extension. In their report, the National Association of Realtors said that existing home sales decreased 4.9% to 4.82 million units last month from 5.07 million in December. Analysts had expected existing home sales to fall 0.8% to 4.97 million units in January. In currency trading, the EUR/USD traded down 0.41% to 1.1336 from 1.1383 late Friday. Meanwhile, the traditional safe-haven Swiss franc traded lower with USD/CHF up 1.14% and trading at 0.9489 while the EUR/CHF was up 0.78% and trading at 1.0757. Against the greenback, the Japanese yen was steady with USD/JPY at 118.96, while EUR/JPY declined 0.44% to 1.0756. In other currency trading, the British pound traded stronger against the USD with GBP/USD up 0.24% at 1.5431. Against the currencies in Australia and New Zealand, the U.S. dollar traded mixed with AUD/USD down 0.65% to 0.7791 and NZD/USD steady at 0.7524. Also, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.30% to 94.69.
NYMEX Crude Oil Gains
In Asian trading on Tuesday, crude oil prices advanced with investors eyeing Greece as well as U.S. supply data expected out today. On the New York Mercantile Exchange, crude oil for delivery in April rose 0.11% to $49.37 a barrel. Elsewhere, on the ICE Futures Exchange in London, Brent oil for April delivery declined $1.18, or 1.95%, to trade at $59.05 a barrel, after touching a session low of $58.38 earlier on Monday. Today, investors are waiting for the more closely watched data from the U.S. Department of Energy regarding last week’s U.S. crude and refined product stocks. Also, according to Baker Hughes, the industry research group, the number of rigs drilling for oil in the U.S. fell by just 37 last week. This marked the smallest weekly drop this year compared to a decline of 84 rigs in the preceding week. Currently, the number of rigs drilling for oil in the U.S. is at 1,019 which is the lowest since August 2011. Despite this, government data showed that oil supplies in the U.S. rose to the highest level in at least 80 years last week, indicating that cheap prices have yet to affect output. Also, the spread between the Brent and the WTI crude contracts stood at $9.47 a barrel.
In the Spotlight – Will Earnings From Hewlett-Packard Meet Expectations?
When the markets close on Tuesday in the U.S., Hewlett-Packard Company will report results for the first fiscal quarter. Investors and analysts will also be focusing on the computing and IT giant’s plans to split in to two companies later this year after HP made this announcement last fall. Hewlett-Packard is planning on creating two companies. The one will be called HP Inc. and this will include the PC and printing business, while the other company called Hewlett-Packard Enterprise, will be dedicated to its corporate IT hardware and services business. Also, HP Inc. will take on most of the parent company’s operating debt.
According to Thomson Reuters analysts, HP is expected to post per-share earnings of 91 cents on revenue of $27.4 billion. Analysts are also projecting that HP will report 96 cents per share on sales of $26.8 billion in the second quarter ending in April. In the last quarter, the sales of PCs were an unexpected strength which was led mostly by notebooks and this trend is expected to continue in the first quarter while desktop PCs, servers and consumer printers are likely to come in lower than expected. Despite this, analysts feel that Hewlett-Packard is stabilizing and this makes this company attractive as a target for a potential buyout by a private equity firm after the company split is complete.
Also in focus will be the effect of currency exchange rates on HP’s revenue. The strong U.S. dollar (USD) makes conversion expensive in cases when HP is paid in other global currencies, especially the euro (EUR). Analysts expect exchange rates to dent revenue by as much as 2 percent. The shares of Hewlett-Packard are currently trading at $38.19 per share.
In early Asian trading on Monday, crude oil prices declined. With most of the region returning from the Lunar New Year holiday, the U.S. contracts hovered around $50.50 a barrel while Brent futures tested the support levels at $60 a barrel. Since June 2014, crude oil prices have dropped to a 6-year low yet since January 2015, the commodity has managed to recover at least by a third of its value. Last week alone, Brent crude oil prices advanced almost $20 to trade at $63 a barrel. This boost came in response to investors closing long-standing short positions as a result of a decline in the U.S. rig count. At 0100 GMT, benchmark Brent crude futures traded down 10 cents from their last settlement at $60.07 a barrel. Meanwhile, U.S. WTI crude also traded down 20 cents at $50.61 a barrel. These increases came in response to record inventories and has pulled WTI’s discount on Brent to over $9.50 a barrel. Despite this decline, analysts expect U.S. prices to recover later this year. That is, a decline in oil rigs will eventually translate into a lower output providing the commodity with the opportunity to advance. According to BNP Paribas (PARIS:BNPP), this impact will be seen later in the year as it is likely to occur “at a time when global oil fundamentals are becoming far more balanced, and will contribute to improved price sentiment in 2H15.”
USD Holds Gains on Upbeat U.S. Data
In currency trading on Friday, the U.S. dollar (USD) traded higher against most major currencies. This came in response to upbeat manufacturing data while markets also reacted positively to the agreement reached between Greece and its creditors. According to the preliminary data released on Friday, the U.S. manufacturing purchasing managers’ index (PMI) rose from 53.9 in January to 54.3 in February. This beat analysts’ expectations for a decline to 53.6. In currency trading, the EUR/USD traded at 1.1338, down 0.26 percent. This came after Germany rejected a proposed bailout extension request from Greece while later in the day; an extension agreement was reached which helped to boost the euro. Also on Friday, the research group Markit said that the euro zone’s preliminary composite purchasing managers’ index (PMI) rose from 52.6 in January to 53.5 in February. This beat expectations for a reading of 53.0. Also, the preliminary manufacturing PMI in Germany remained unchanged at 50.9 in February, while the services PMI rose from 54.0 in January to 55.5 in February. This was up from expectations for an increase to 54.2. In other currency trading, the GBP/USD traded at 1.5376, down 0.25% while USD/JPY dropped 0.30% to 118.58. Also on the downside was the USD/CHF which traded at 0.9437, down 0.60 percent. Also, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.13% to 94.59.
SPX & Dow Hit Record Levels
On Friday, U.S. stocks traded higher with the S&P 500 and Dow Jones Industrial Average reaching record levels. This came in response to news that eurozone ministers had agreed to a four-month extension of Greece’s bailout. In terms of weekly gains, all the main indices booked gains for the third consecutive week. In economic news, the new antiausterity Greek government sought an extension to its loan agreement. After hours on Friday, the country finally reached an agreement with eurozone ministers and Athens now has until Monday to submit a list of reform proposals. At the close of U.S. trading, the Dow Jones Industrial Average (DJIA) advanced 154.67 points, or 0.9%, to 18,140.44. This marked the first record close for the blue-chip index this year and also marked a 0.7% gain over the week. Also on the upside was the S&P 500 index (SPX) which climbed 12.85 points, or 0.6%, to 2,110.30. Over the week, the benchmark index gained 0.6 percent. Meanwhile, the Nasdaq Composite index (COMP) rose for the eighth consecutive session, adding 31.27 points, or 0.6%, to 4,952. This index gained 1.3% over the week and has outperformed other benchmarks so far this year, gaining 4.6%, compared with a gain of 2.5% for the S&P 500.
In the Spotlight – General Motors Caught By Surprise
On Friday last week, General Motors Co (NYSE:GM) was caught by surprise as a result of a strike that took place at its Brazilian car factory. Workers were protesting the proposed plans for a layoff of hundreds of staff and this strike marked an added blow to labor disruptions in the nation’s slumping auto industry. In an email, General Motors stated that they had requested a labor judge to mediate this dispute. As a result, a hearing has been scheduled for Monday afternoon.
According to the local metalworkers union, the workers at GM had voted for an indefinite strike in order to protest GM’s proposal to furlough nearly 800 workers for two months before laying them off in April this year. As a result, the production has come to a standstill. The GM strike took place in Sao Jose dos Campos, which is about 55 miles (90 kilometers) outside of Sao Paulo. It marks the most recent in a wave of industrial action this year in Brazil’s auto sector. Last year, 7% of workers were dismissed as the output plunged. Meanwhile, the metalworkers union of Sao Jose dos Campos, which holds leadership elections next week, has had numerous altercations with GM over the last few months. This came after General Motors cut its payrolls at the local plant from about 7,500 workers in 2012 to about 5,200 currently.
Until now, the representatives for General Motors have declined to comment on its labor proposal, yet they have criticized the union for the decision to strike. In an emailed statement, GM said, “The decision was a surprise, since GM’s proposal was not fully presented to employees by the union. As a result, GM will take necessary legal measures.” No details were provided regarding what measures GM would take.
In the thinly-traded session on Thursday, U.S. stocks ended mostly lower. This came in a response to Greece’s inability to come to an agreement with its creditors regarding loans while falling oil prices also negatively impacted the markets. Meanwhile, investor sentiment remained negative regarding the timing of rate increases by the Federal Reserve after the release of the minutes of their last policy meeting which left uncertainty regarding interest rate hikes. At the close of U.S. trading, the tech-heavy Nasdaq Composite index (COMP) closed higher for the seventh consecutive day, up 0.4%, or 18.34 points, at 4,924.70. Meanwhile, on the downside, the S&P 500 index (SPX) ended 0.1%, or 2.23 points, lower at 2,097.45. The utilities and telecoms stocks saw the biggest declines while technology and consumer discretionary stocks led the gains with six of the 10 main sectors closing lower. Also on the downside was the Dow Jones Industrial Average (DJIA) which dropped 0.2%, or 44.08 points, to 17,985.77. Two thirds of the benchmark index’s 30 members finished with losses while Wal-Mart Stores, Inc. was the biggest decliner. This came after the retail giant missed earnings estimates and also announced a plan to raise wages for its employees. Also, the Russell 2000, which is the index of small companies, ended flat at 1,227.74, breaking a six-day winning streak.
USD Gains After Mixed U.S. Data
On Thursday, the U.S. dollar (USD) gained marginally against the other major currencies. This came in response to investor concerns regarding Greece’s debt which weighed on market sentiment as well as to mixed economic reports out of the U.S. In their report, the Federal Reserve Bank of Philadelphia stated that its manufacturing index deteriorated to a 12-month low of 5.2 in February from a reading of 6.3 in January. Analysts had expected the index to rise to 9.3 in February. This data came after the U.S. Department of Labor said that the number of individuals filing for initial jobless benefits in the week ending February 14 decreased by 21,000 to 283,000. In the previous week, the total was 304,000 and analysts had expected initial jobless claims to fall by 11,000 to 293,000 last week. In currency trading, the euro was little changed against the greenback, with EUR/USD at 1.1392. This came after reports that Germany rejected a proposed bailout extension request from Greece. Meanwhile, against the British pound, the USD traded steady with GBP/USD at 1.5438 while the USD/JPY traded at 118.93, up 0.13 percent. Against the Swiss franc, the U.S. dollar traded higher with USD/CHF up 0.48% at 0.9469. Also, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.21% to 94.32.
Crude Oil Trades Higher on Declining Oil Rig Numbers
In Asian trading on Friday, the crude oil markets edged up after a two-day decline. This came in response to expectations that data expected later in the day would show a continuing decline in the U.S. oil rig count. This decline is a clear indication of the pressure the falling crude oil prices have put on oil producers. Last week, in their weekly survey, Baker Hughes (NYSE:BHI) showed that the U.S. oil rig count fell to its lowest since August 2011. Despite this decline, the government data also indicated that U.S. oil output has hit 9.2 million barrels a day which is the most since 1973. London Brent crude for April delivery was trading 49 cents higher at $60.70 a barrel by 0408 GMT. The contract is headed for its first weekly decline in four weeks, of approximately 1.5%. Meanwhile, U.S. crude for delivery in March, which expires later in the day, was up 50 cents at $51.66 a barrel. Trading was quiet in Asian hours as markets in China, Singapore and several other countries were closed for the Lunar New Year holiday.
In the Spotlight – BP Unsuccessful At Reducing Oil Spill Fine
On Thursday, a judge in the U.S. rejected BP Plc’s (L:BP) attempt to reduce the maximum civil fine it could face for its role in the Gulf of Mexico oil spill which occurred in 2010. This could mean that BP will be liable to pay $13.7 billion under the federal Clean Water Act. Judge Carl Barbier, a U.S. District Judge in New Orleans agreed with the federal government that the maximum civil penalty that BP could face is $4,300 per barrel spilled. BP however is trying to pay only $3,000 per barrel maximum which is equal to a maximum $9.57 billion civil fine. The settling of this fine is the final step in a civil trial overseen by Barbier to determine responsibility and penalties for the April 20, 2010 blowout of the Macondo oil well. At the time, eleven workers were killed and this blowout caused the largest U.S. offshore oil spill.
According to Geoff Morrell, the BP spokesman, the company disagrees with the decision and is considering its legal options. Barbier previously ruled that BP had acted with gross negligence or willful misconduct and that 3.19 million barrels of oil were spilled. These factors are used to set the maximum civil fine. BP has however argued that the Clean Water Act in 1990 capped the maximum fine at $3,000 per barrel in cases of gross negligence or willful misconduct. The judge has however agreed with the government that the U.S. Environmental Protection Agency could raise the maximum to account for inflation and was required to do so by Congress. Until now, BP has already paid out $42 billion of costs for the spill, including for cleanup, fines and compensation to victims.
On Thursday, in Asian trading, crude oil prices dropped more than 3 percent. This came in response to negative investor sentiment due to increased U.S. industry stockpiles data. In their report on Wednesday, the American Petroleum Institute stated that last week’s crude stocks increased by more than 14.3 million barrels. Also increasing were gasoline stocks to 1.3 million barrels while distillates fell by 2.7 million barrels. On Thursday, the U.S. Department of Energy will release figures for the same period that are more closely watched by the market. Meanwhile, earlier in the day, data showed that the January trade deficit in Japan came in at ¥1.178 trillion. This was above the expected amount of ¥1.691 trillion. Despite this, exports did increase by 17 percent which was above the expected increase of only 11.9 percent. This came in response to the U.S. economic recovery which supported demand for automobiles while Asian economies continued to import semiconductors and plastics from Japan. Also, imports in Japan fell 9.0% which was way above the expected 4.8 percent drop which was expected due to falling oil prices. On the New York Mercantile Exchange, crude oil for delivery in April declined 2.97 percent to hit $51.25 a barrel. Earlier in the trading session, crude oil prices declined more than 3 percent. Elsewhere, on the ICE Futures Exchange in London on Wednesday, Brent oil for delivery in April dropped 1.61%, or $1.00, to trade at $61.53 a barrel.
USD Gains After Fed Minutes
On Wednesday, the U.S. dollar (USD) traded marginally higher against most major currencies. This increase came despite ambiguity in the minutes released by the Federal Reserve on its latest policy meeting. Some officials stated that there would be a delay in increasing interest rates as this would impact the growing U.S. economy while others felt that a delay in rate increases could cause high inflation. Meanwhile, the Federal Reserve said that U.S. industrial production increased by 0.2% last month. This was below expectations for a gain of 0.3 percent. In their report, they also showed that the capacity utilization rate, a measure of how fully firms are using their resources, held steady at 79.4% in January. Analysts were expecting a reading of 79.9%. Meanwhile, in other economic news, the Commerce Department reported on Wednesday that U.S. producer prices fell by 0.8% last month, compared to forecasts for a 0.4% decline. Also, core producer prices dropped by 0.1% last month. In a separate report, the Commerce Department said that the number of building permits issued last month decreased by 0.7% to 1.053 million units from December’s total of 1.060 million. Also, U.S. housing starts declined by 2.0% last month to hit 1.065 million units from December’s total of 1.087 million units. This was worse than expectations for a decline of 1.7% to 1.070 million. In currency trading, the euro pushed lower against the dollar, with EUR/USD down 0.41% to 1.1363. Also, the USD/JPY held steady at 119.20, while USD/CHF gained 0.61% to 0.9426. Against the British pound, the greenback traded lower with GBP/USD up 0.58% to 1.5442. Also, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.32% to 94.44.
U.S. Stocks End Lower
On Wednesday, U.S. stocks traded marginally lower. This came in response to investors’ difficulty in interpreting minutes from the Federal Reserve’s latest policy meeting. The minutes showed that ‘several’ officials preferred rate increases to occur now in order to prevent high inflation while others were not in a rush to raise interest rates as they did not want to harm the current economic recovery in the U.S. The bond market was impacted by these minutes and Treasurys rallied, driving yields down 6 basis points to 2.08%. At the close of U.S. trading, the Nasdaq Composite index (COMP) traded higher and closed 7.10 points, or 0.1%, higher at 4,906.36. On the downside was the S&P 500 index (SPX) which closed less than a point below its previous closing record which it reached on Tuesday, ending at 2,099.66. Leading the gains were utilities which advanced 2 percent while energy stocks led losses following a drop in oil prices. Also on the downside was the Dow Jones Industrial Average (DJIA) which declined 17.41 points, or 0.1%, to 18,030.17. The biggest decliners on the benchmark index were Exxon Mobil and Chevron Corp.
In the Spotlight – What Can We Expect From Wal-Mart Earnings Today?
On Thursday, Wal-Mart Stores Inc. is scheduled to report fourth quarter earnings ahead of the opening bell. Ahead of this report, the shares of the retailer are currently trading around $85 per share and the company’s stock has already gained more than 13% over the last year. As the world’s largest retailer, this earnings report is significant as it will set the tone for the health of the retail sector during the last holiday shopping season. At the end of 2014, the retail spending in the U.S. fell more than anticipated. This was not expected especially with the falling oil prices which helped push gasoline prices in the country down to an average $2.27 per gallon at the end of 2014. Retail sales are also viewed by economists as a key economic indicator since consumer spending accounts for nearly two-thirds of U.S. economic activity.
Analysts have stated that Wal-Mart has had declining foot-traffic which could be a sign of weakness yet the retail giant has also compensated with sales increases in its booming e-commerce business. The previous earnings report for the third quarter of Wal-Mart was positive and the company reported a 21% increase in online sales as well as a 2.9% increase in quarterly revenue. Analysts are predicting that the fourth quarter earnings will remain the same especially because of the stronger U.S. dollar (USD). That is, currency fluctuations could limit Wal-Mart’s earnings growth because a stronger greenback is not positive for a company’s bottom line when a good portion of sales are derived overseas.
Economists expect Wal-Mart to report adjusted fiscal fourth-quarter net income of $4.98 billion, or earnings per share of $1.53, on revenue of $132.36 billion. Compare this to the same period a year ago when Wal-Mart reported a profit of $4.4 billion, or earnings per share of $1.60, on revenue of $129.77 billion.
On Tuesday, the U.S. dollar (USD) trimmed earlier losses against the other major currencies. Despite this, the greenback remained under pressure as a result of poor manufacturing data from the New York area which added to investor concerns regarding the strength of economic recovery in the U.S. In their report, the Federal Reserve Bank of New York stated that its general business conditions index decreased to 7.8 in February from a reading of 10.0 in January. Analysts had expected the index to drop only to 8.5 in February. Meanwhile, in a separate report, the National Association of Home Builders said that its Housing Market Index declined to a four-month low from 57.0 in January to 55.0 in February. The index results missed analyst expectations for a rise to 58.0 in February. In currency trading, the euro remained higher against the greenback, with EUR/USD trading at 1.1390, up 0.32 percent. The euro found support after the ZEW Centre for Economic Research said that its index of economic sentiment in Germany rose to 53.0 in February, up 4.6 points from January’s reading of 48.4. While this marked the highest reading since February 2014, the rate was still below expectations of 55.0. In other currency news, the USD/JPY traded up 0.48% at 119.05, while USD/CHF also advanced 0.18 percent to 0.9337. Against the British pound, the U.S. dollar traded higher with GBP/USD down 0.30% to 1.5319. Also, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.14% to 94.32.
Gold Prices Down Despite Lunar New Year
You would imagine that with the Lunar New Year about to kick off on the 19th of February, gold would get a boost. Normally at this time of the year, there is a lot of hype regarding the demand for this precious yellow metal in China since gold is traditionally given as a gift to usher in good fortune. It doesn’t seem that this commodity is in demand though and this is clearly evident in the gold prices. On the Comex last week, gold futures dropped 0.6 percent and as of Tuesday, the price of the precious commodity had dropped almost 5.5%, in February. On Tuesday, the price for April gold on the Comex division of the New York Mercantile Exchange dropped 1.5 percent to settle $1,208.60. This marked a 6-year low for gold. In a note released by Adrian Ash, head of research at BullionVault, said, “The Year of the Goat starts Thursday, but trading volumes sank today [on the Shanghai Gold Exchange] near multi-year lows in the wholesale gold contract for the world’s No.2 gold consumer nation.”
S&P 500 Makes Second Record Close in 2015
In U.S. trading on Tuesday, the S&P 500 index (SPX) made a small gain yet this benchmark index closed at a record level for the second time this year. This advance came in response to a report in The Wall Street Journal that Greece may ask for a six-month extension on its debt obligations on Wednesday. At the close of trading, the SPX had advanced 0.2 percent, or 3.35 points, to 2,100.34. This marked gains for the third consecutive session which was led by financial and health-care stocks. Also on the upside was the Dow Jones Industrial Average (DJIA) which ended less than 10 points from its record close, adding 0.2 percent, or 28.23 points, to 18,047.58. Following the upward trend was the Nasdaq Composite Index (COMP) which advanced 0.1 percent, or 5.43 points, to 4,899.27.
In the Spotlight – What Are the Billionaires Doing?
It seems the billionaires are buying and selling shares and large investors must disclose long positions held at the end of a quarter 45 days later in a so-called 13F filing with the Securities and Exchange Commission. According to a regulatory filing, Soros Fund Management, which is the hedge fund founded by billionaire George Soros, closed out positions in Apple Inc. and Intel Corp. in the final quarter of 2014. On the other side, the fund then increased its stake in Herbalife to nearly 3.45 million shares worth $130 million as of the 31st of December 2014. This is up from a stake of 1.89 million shares, worth $82.6 million, at the end of the third quarter. Meanwhile, Alibaba, the Chinese e-commerce site, remains the fund’s top holding at 4.4 million shares valued at $457.3 million as of December 31. This is equal to 5 percent of the total portfolio held by Soros Fund Management.
Meanwhile, Berkshire Hathaway, which is controlled by billionaire Warren Buffet, disclosed in a regulatory filing that it sold off its entire stake in Exxon Mobil during the fourth quarter. At the same time, the conglomerate added a new 24.7 million share stake in Deere & Co. during the fourth quarter. Deere & Co. is well known for its manufacturing of construction, agricultural and forestry machinery, diesel engines, drivetrains used in heavy equipment as well as lawn care equipment. Berkshire also increased its stake in IBM Corp. from 70,478,012 shares on September 30 to 76,971,817 shares as of December 31, 2014. Separately, Berkshire increased its stake in Visa Inc. to 2.5 million shares from 2.15 million shares and in MasterCard to 5.4 million shares from 4.7 million shares. The filings also showed that Berkshire maintained its share holdings of its largest holding, Wells Fargo, at 463.5 million, as well as in American Express at 151.6 million, Coca-Cola at 400 million and Goldman Sachs at 12.6 million.
On Tuesday, the euro (EUR) weakened further. This came as the talks between Greece and eurozone finance ministers failed on Monday even though the current bailout agreement will lapse on the 28th of February. During the meeting, Greece rejected a proposal to request a six-month extension of its international 240 billion euro bailout. According to Jeroen Dijsselbloem, the Dutch Finance Minister who chaired the meeting, Greece has until Friday to request an extension, otherwise the bailout will expire at the end of the month. New fears regarding the future of Greece in the eurozone were prompted. Meanwhile, Greece’s Finance Minister Yiannis Varoufakis said on Monday that he was ready to sign a document drafted by the European Commission, which outlined a deal between Greece and its partners. He stated though that the Eurogroup President Jeroen Dijsselbloem presented him with another document, which referred to past policies and was vague in key issues such as “flexibility”, which he could not accept. In currency trading, the EUR/USD traded down 0.18 percent, at 1.1334, while the AUD/USD traded up 0.14% at 0.7784. The AUD strengthened after the release of the minutes of the Reserve Bank of Australia’s most recent board meeting which showed concern over the pace of growth and also, the cash rate was cut 25 basis points to a record low of 2.25 percent. In other currency news, the USD/JPY traded at 118.36, down 0.11 percent. Also, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was quoted at 94.50, up 0.06 percent.
Brent Crude Continues Rally on IEA Warning
On Tuesday, in Asian trading, Brent crude prices extended their rally above $62 a barrel. This came after the International Energy Agency (IEA) warned of supply risks in the Middle East while some analysts stated that oil prices have risen too far from the six-year lows hit in the first month of 2015. According to Fatih Birol, the top economist at the IEA, the rise of the Islamic State (IS) in Syria and Iraq presented a major challenge for the investment necessary to prevent an oil shortage in the next decade. Birol said, “The appetite for investments in the Middle East is close to zero, mainly as a result of the unpredictability of the region.” As a result, at 0647 GMT, benchmark Brent crude futures traded at $62.09 a barrel, up 69 cents while U.S. WTI crude oil traded at $53.26 a barrel, up 48 cents. According to analysts at ANZ bank, the recent oil price rally may be overblown and that downward pressure may come from the refined products market in the next quarter. Brent prices have been outperforming U.S. contracts and as a result, the spread between the two benchmarks has risen to almost $9 a barrel. This marks the highest level since August last year. Analysts believe that this trend will continue.
First Quarter Does Not Look Positive
Until now, investors have been enjoying the better than expected fourth-quarter earnings season. It looks as though the good part is about to come to an end with the first quarter looking weak. For a second week in a row, stocks finished higher and the Dow Jones Industrial Average (DJIA) even finished above 18,000 for the first time this year. Also on the upside was the S&P 500 Index (SPX) which closed at a record high of 2,096.99 on Friday while the Nasdaq Composite Index (COMP) has also gained 3.3 percent. Until now, lower energy prices may have increased consumer spending. The problem however, is that the energy sector on the S&P 500 index is negatively impacting the first-quarter estimates compared with the fourth quarter. For the fourth quarter, energy earnings have declined 21.5 percent. This is above the expected drop of 17.5%. Meanwhile, positive earnings from the tech, consumer discretionary and health care sectors have managed to put the SPX on track for a 3.1% earnings gain. This is up from the expected growth of 1.7 percent. Meanwhile, for the first quarter, virtually every sector is expected to perform worse than was estimated at the end of 2014. For example, the energy earnings for the first quarter are now expected to drop 61.8 percent as opposed to the estimated 29.1 percent. This will help to push S&P 500 earnings expectations to a 3.6% decline from a year ago while nearly three months ago, a 4.1 percent gain was expected. Basically, even if first quarter earnings got a 2 to 3% boost, this will still be a first quarterly earnings decline since the third quarter of 2009.
In the Spotlight – Can Apple Take on Tesla?
It seems that Apple Inc. (O:AAPL) wants to get in on the self-driving electric car action. According to an anonymous automotive source, this technology giant is now learning how to make a self-driving electric car and is also talking to experts at automotive suppliers and carmakers regarding their new venture. Until now, the Cupertino, California-based company has been the successful maker of computers, watches and phones but Apple is now keen to make an entire car as opposed to only working on designing automotive software or individual components. Apple is currently gathering a lot of information regarding production methods, advice on parts and they have also shown no interest regarding conventional manufacturing methods or combustion engine technology. It clearly sounds like Apple is about to step out of the box when it comes to electric cars and one can’t help but wonder if this will impact Tesla Motors (O:TSLA) which has already produced a successful electric sports car.
On Saturday, an Apple spokesman in London declined to comment on the latest “rumors or speculation”. Meanwhile, Google, Apple’s rival software maker has developed a prototype self-driving vehicle. Despite this race to the finish line, the auto industry source explained that besides building a car, there is money to be made from the software operating system for a self-driving vehicle, as well as the services associated with autonomous driving, such as high-definition mapping, car-sharing and electric car recharging services. This makes the industry a software game. Apple is also well known in the industry for developing its own expertise as opposed to simply seeking full-scale partnerships. Two years before Apple released the iPhone, the company worked with Motorola which was then the world’s second-largest mobile phone maker. Together they developed the Rokr, a phone with integrated iTunes music and media-playing features. Capable of only holding 100 songs, the phone failed and this caused concern regarding Apple’s ability to break into new product categories. The tech giant seems to be moving in the right direction this time and they have hired Johann Jungwirth, President & CEO, Mercedes-Benz Research and Development North America. Meanwhile, a spokesman for Daimler (DE:DAIGn) said on Saturday that the team of engineers which developed the Mercedes-Benz autonomous car remains intact and that Jungwirth was mainly specialized in integrating smartphone functionality and developing advanced user experiences.