Fundamentals, US Markets

Stocks End Week Higher amid Weakness in Greenback

U.S. Session Key Developments

•    Dollar Weakness Lifts Stocks
•    Lower Confidence Fails to Dent Markets

US equities close near session highs following weakness in the greenback and commodities, while event releases provided mixed signals for the future. Early in the morning, data on trade showed a larger deficit as imports surged 5.8% while exports improved nearly three percent. The figure shows a recovery in demand, while much of that included a pickup in oil demand. Imports of crude rose by nearly one million barrels per day, accounting for more than $2B increase to the deficit. Also on the docket was the University of Michigan Confidence. The index was expected to see little change to the upside, but surprised lower to 66.0 from 70.6 in the initial November reading. Clearly investors saw little impact in such fundamentals while earnings data also should not have provided much incentive either. Retailer J.C. Penny reported a large 78% drop in third-quarter earnings as well as issuing sales guidance for a larger-than-expected decline in revenue. Another retailer, Abercrombie & Fitch, meanwhile reported better earnings than analysts were looking for, while sales dropped 22%. Ultimately, dollar weakness fueled today’s move as the greenback gave up gains across all majors, including more than one percent declines on the New Zealand and Australian currencies. Further depreciation would fuel further upside in stocks as US multi-national firms become more competitive with foreign rivals. At the same time, the dollar correlation to equities remains a considerable risk factor and upcoming events including a speech by Fed Chairman Bernanke, and the release of advance retail sales, could define the near-term move.

DJIA 30                      10,270.47                   +73.00               +0.72%
The Dow closed higher by nearly three-quarters of a percent while remaining below the 2009 high set on Wednesday. The index has now closed up for the second week in a row while the year-to-date gain improved to more than 17% on the back of strength across nearly all sectors. Ultimately most stocks saw minor gains while Disney led, up 4.78% following strong earnings.

S&P 500                    1093.48                   +6.24                 +0.57%
Similarly to the Dow, the broader S&P500 index closed higher by more than half-of-one percent with gains in all sectors except for Telecom and Financials. Weakness in the sector was led by banks, including losses in the five largest banks that ranged as high as 1.91% shed on Wells Fargo.

NASDAQ                         2,167.88                    +18.86             +0.88%
The tech-heavy NASDAQ closed higher by nearly one percent to outperform its peers as all sectors advanced along with more than 64% of the 2777 stocks tracked. Of the 15 largest firms on the composite, only one closed lower as optimism spread throughout equities. Leading the index point move was a minor 0.92% gain in Microsoft and a similar 1.22% rise in Apple shares.

Written by Roman Kadinsky, CFDTrading Research
Please send any comments about this report to Rkadinsky@fxcm.com