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Broadgate: Market News 16/8

16 August 2012

Stocks spent another session in a tight range on Wednesday, with the S&P 500 ending a few points higher and extending a rally that seems to be happening in slow motion.

The benchmark S&P 500 index finished just a hair away from its highest close in three months, but with earnings season winding down and many traders away, volume was light.

For the next couple of days the greatest influence may be the options market, which is seeing heavy volume in August call and put options clustered around the 1,400 level for the S&P 500.

If the index closes at or very close to 1,400, those options expire worthless on Friday. That means market-makers have an incentive to try to make that happen, or “pin” the index at 1,400.

The S&P 500 was up seven of the past nine sessions but the volume has been extremely light due to summer holidays and a lack of news from Europe. On Wednesday, about 4.79 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year’s daily average of 7.84 billion.

“I think we are facing technical resistance at 1,405 (on the S&P 500), which is the level of closing highs in early May. We haven’t been at that level since, and until we have a catalyst to move significantly above this, the market is likely to consolidate,” said Scott Port, managing director at TraderXP.

The S&P 500 rallied early in August and reached highs not seen since early May in anticipation that central banks in the United States and the euro zone will take action to stimulate their respective economies in September.

Shares of Deere & Co lost 6.3 percent to $75.10 after the world’s largest agricultural equipment maker reported a lower-than-expected quarterly profit on Wednesday, citing weak sales in China, India and other emerging markets. Rival Caterpillar Inc slipped 0.3 percent to $87.61 as the biggest drag on the Dow.

Staples Inc slumped 14.6 percent to $11.49 as the worst performer on the index after the office supply chain reported lower-than-expected quarterly revenue on weak demand in North America, Europe and Australia, and forecast flat sales for the fiscal year.

The Dow Jones industrial average was down 7.36 points, or 0.06 percent, at 13,164.78. The Standard & Poor’s 500 Index was up 1.60 points, or 0.11 percent, at 1,405.53. The Nasdaq Composite Index was up 13.95 points, or 0.46 percent, at 3,030.93.

In economic data, U.S. industrial output expanded 0.6 percent last month, the fastest pace since April. Manufacturing notched another solid advance, hinting at underlying resilience in an economy that has struggled to establish momentum.

The New York Fed’s general business conditions index for August missed expectations and contracted for the first time since October 2011. Meanwhile, Labor Department data showed consumer prices were flat in July for a second straight month and the year-over-year increase was the smallest since November 2010.

Data from the National Association of Home Builders showed homebuilder sentiment rose in August to 37, its highest level in more than five years, and above the 35 in July. The PHLX housing sector index rose 0.3 percent.

Commodities

Brent crude held steady on Thursday, staying near a three-month high above $116 on concerns about disruptions to supply from the Middle East and a steeper-than-expected drawdown in oil stocks in the world’s top consumer, the United States.

Brent slipped 2 cents to $116.23 a barrel by 0431 GMT, after ending $2.22 up at the highest settlement since May 2.

U.S. crude fell 8 cents to $94.25, after rising 90 cents to its highest settlement since May 14.

Gold hovered above $1,600 an ounce on Thursday as investors continued to hope central banks would take further steps to boost the global economy, even as recent U.S. data suggested the Federal Reserve may not need to intervene for now.

Spot gold had inched up 0.1 percent to $1,604.41 an ounce by 0347 GMT, off a 1-1/2 week low of $1,589.69 hit in the previous session.

U.S. gold futures for December delivery were little changed at $1,606.90.

Currencies

The dollar surged to a one-month high against the yen on Thursday, extending gains after this week’s upbeat U.S. data gave a boost to Treasury yields and cooled expectations of monetary easing by the Federal Reserve.

The dollar last changed hands at 79.34 yen, up 0.5 percent from late U.S. trade on Wednesday.

The euro eased 0.1 percent to $1.2282, with moves subdued as investors await details on a new European Central Bank programme to help reduce the borrowing costs of Spain and Italy that the central bank is now considering.

“Euro/dollar is in a range for now but we still expect it to move lower in September on the prospect of more headlines out of Europe, a lot of event risk in September, and rate cuts as well,” said Guy Young from TraderXP. “Our forecast for euro/dollar is $1.18 by the end of the quarter,” he added.

Source:  Reuters.com

The information set out herein has been obtained from various public sources and is by way of information only. Broadgate Financial can accept no liability of any sort in relation thereto and readers should obtain their own verification of any statement before making any decision which may have any financial or other impact.

Neither the information nor the opinions herein constitute, or are they to be construed as, an offer or a solicitation of an offer to buy or sell investments.

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