Weekly Recap and Outlook for the U.S. Financial Markets and Dollar - 6/7/2010
The U.S. Dollar was up against every major currency last week, with the exception of the U.K. Pound Sterling which was more or less unchanged.
The Greenback has continued to benefit considerably from an increasingly risk averse investment market that has been shying away from the sovereign debt crisis currently affecting some of the European Union nations, and most notably Greece. Also, similar concerns have now spread to Hungary.
In terms of stocks, the United States stock market began the week on a positive note, racking up gains most of the week. Nevertheless, the 2% gain which had accumulated through Thursday was completely erased by Friday's bearish action, as the S&P 500 dropped over 3%.
This resulted in an overall one percent drop in the S&P 500 last week, and represented the fourth consecutive weekly decline of more than one percent in six weeks.
In addition, the Dow Jones Industrial Average closed at 9,931.97 on Friday, below its key psychological 10,000 level, and after dropping 323.31 points or 3.15% that day alone.
Furthermore, commodities prices generally softened last week, with the exception of gold. Silver and palladium both fell, as the weak global economy puts pressure on industrial assets affected by weaker global demand. Crude oil was also lower last week, falling sharply on Friday as NYMEX Crude Futures closed at $70.18 a barrel.
Last Week's U.S. Data Review
In terms of U.S. economic data, the numbers out last week continued showing mixed results as the week began in earnest on Tuesday after the U.S. Memorial Day holiday closed markets on Monday.
Overall, Tuesday's numbers came out better than expected, starting with the ISM Manufacturing PMI which came out at 59.7, slightly better than the 59.3 expected. Also, Construction Spending showed an impressive 2.7% rise month on month, much better than the consensus of only a 0.1% increase.
On Wednesday, Pending Home Sales showed a 6% increase month on month versus a consensus of a 4.9% increase, and with the previous number revised upwards from 5.3% to 7.1%.
On Thursday, the ADP Non-Farm Employment Change report showed a disappointing 55K new jobs were created last month, versus an expected 68K. Nevertheless, the previous number of 32K was revised up to 65K, having a net positive effect on the Dollar.
Friday's Non-Farm Payrolls were the highlight of the week, and the big number came out at 431,000 new jobs added. Importantly, this rise was primarily due to the fact that the U.S. government had just hired 411,000 temporary U.S. Census workers. Excluding these temporary government jobs, the actual number of private sector jobs added was only 20,000.
Furthermore, the market's consensus for this key number was for an increase of 521K jobs. As a result, the data was quite a disappointment to forex traders.
Also, the U.S. stock market gave back all of its previous gains for the week and pretty much ignored the good news that the Unemployment Rate had improved to 9.7% versus an expected 9.8%.
Fundamental Data Outlook for the United States
This week's economic release calendar for the United States offers some important data, featuring the Trade Balance report due out on Thursday and a number of important policymaker speeches.
Monday begins the week with the release of Consumer Credit (1.1B M/M).
Tuesday has the IBD/TIPP Economic Optimism index (49.3) due out, in addition to a speech scheduled to be given in Washington D.C. by Fed Chairman Bernanke and a speech in Hollywood by FOMC Member Duke.
Wednesday offers Wholesale Inventories (0.6% M/M) and the Fed's Beige Book. In addition, Wednesday has a speech scheduled in Kansas City by FOMC Member Hoenig, plus some important testimony in front of the House Budget Committee in Washington D.C. by Federal Reserve Chairman Ben Bernanke. Bernanke is also scheduled to speak later in the day in Richmond.
Thursday is the week's highlight, featuring the major Trade Balance data (-40.8B), in addition to Initial Jobless Claims (447K), plus the Federal Budget Balance (-138.6B).
Friday closes the week with the release of Retail Sales (0.1% Core and 0.2% M/M) and Business Inventories (0.6% M/M), in addition to the Preliminary University of Michigan Inflation Expectations (last 3.2%) and Consumer Sentiment index (74.7).
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