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FinNews for January 4, 2013



January 04, 2013 – Comments (0)

A deal to avoid the fiscal cliff was finally passed by Congress this week.  Estimates show that 77 percent of Americans will encounter higher federal taxes in 2013.  However, the package does extend most “Bush-era tax cuts for individuals making less than $400,000 and married couples making less than $450,000.” (1)  During the U.S. Fed Reserve’s December meeting, concerns over financial stability and portfolio assets – topping 2 trillion dollars – had policy makers looking to back away from quantitative easing sooner than expected. (2)  Claims for unemployment benefits rose by 10,000 to 372,000 for the week ended Dec. 29, surpassing economists forecast of 360,000 claims. (3) Despite the rise in unemployment claims and a steady 7.8 unemployment rate, the U.S. added 155,000 new jobs in December.  Analysts’ forecasts were only slightly lower, calling for a gain of 150,000. (4)  Strong hiring in both manufacturing and construction were behind the growth. (5)

Economic Releases & Statistics

The Institute for Supply Management’s factory index only slightly exceeded economists’ expectations, reaching 50.7 verses estimates for a reading of 50.5. (6)  After being below 50 for six months, export orders finally rose to growth territory at 51.5 percent. (7)  Employment in manufacturing also rose above 50 to 52.7 percent. (8)  According to Thomson Reuters Same-Store Sales Index, retail sales gained 4.5 percent in December, surpassing analysts' forecasts of a 3.3 percent increase. (9)  Construction spending declined for the first time in eight months.  The 0.3 percent decrease brought total spending down to a seasonally adjusted annual of $866 billion.  Analysts had forecasted a gain of 0.6 percent. (10) 

Stocks & Earnings

Monday, the last trading day of the year, brought about many ups and downs for the U.S. stock market as government leaders voiced their opinions as to whether a last minute deal to avoid the fiscal cliff could be met.  As optimism rose, so did the S&P 500, which closed 2012 with its strongest yearly gain since 2009 of 13.4 percent. (11)  Now that the Tribune finished its bankruptcy filings on Monday, they are expected to begin selling assets in the coming months.  Until then, they have been granted “a $300 million loan to finance its continuing operations, as well as a $1.1 billion loan to finance its reorganization.” The company also intends to provide “100 million shares of new class A common stock and new class B common stock” to former creditors. (12)  Wegelin, Switzerland's oldest bank, will shut down after paying $57.8 million in tax evasion fines to U.S. authorities. (13) 

Global Currencies

The dollar rose 1.2 percent to 88.30 yen after the release of the Fed Reserve’s intentions to end asset purchases. (14)  However, the U.S. jobs data released Friday put-off such intentions, thus causing the dollar to fall from its highest point versus the yen since July 2010. (15)  Strong employment data showing an increase of 39,800 jobs in Canada had the Canadian dollar trading at C$0.9858 to the U.S. dollar, or $1.0144. (16)

Oil & Energies

The American Petroleum Institute reported a 12.032 million barrel drop in crude-oil supplies, which is a stark contrast to the 1 million barrel-drop projected by analysts.  Distillate stocks also varied from forecasts, rising 6.7 million barrels verses a 1.6 million barrel increase expected by analysts. (17)  According to the EIA, natural gas inventories fell more than anticipated last week, dropping by 135 billion cubic feet to 3.517 trillion cubic feet.  Analysts forecasted a 130 bcf drop. (18) Consequently, natural gas futures rose for the first time in four sessions in response to Friday’s report.  Futures for February delivery were up a little over 2 percent to $3.267 per million British thermal units. (19)

Grains & Field Crops

India has increased the minimum purchase price of wheat procured by the government to $24.61 per 100 kilograms.  The 5 percent increase will take effect April 1st and “may boost local wheat prices unless the government sells more grain in the open market at subsidized rates.” (20)  Argentina government dropped its first wheat crop estimate of 11.5 million tonnes to 10.5 million tonnes, as previous wet weather conditions brought about fungus-based diseases resulting in bad yields. (21)  Thursday, the USDA reported that China canceled a soybean delivery of 315,000 tonnes planned for the 2012-13 crop year. (22)

Precious Metals

After the report that the U.S. Fed Reserve intends to stop asset purchases before the end of the year, gold dropped 1 percent to $1,647.35 an ounce.  This week will mark its sixth weekly loss and its longest weekly decline since 2004. (23)  The news also resulted in a 3 percent, or 94 cents, drop in silver for March delivery bringing it to $29.78 an ounce. (24)

Other Commodities

The U.S. Department of Agriculture reported a 0.5 percent increase in the U.S. hog-breeding herd from last quarter.  Analysts predicted a 0.8 decline due to the rising cost of corn.  A lock in on feed costs is thought to be behind the increase.  In spite of an expected drop of 0.5 percent, there was little change in hog and pig inventories – up 66.361 million from a year earlier to 66.348 million as of Dec. 1. (25)  The unexpected increase in sow herd caused hog futures for February settlement to fall 1.4 percent, its lowest point in nearly two weeks, to 85.2 cent a pound. (26)  The price of Arabica coffee fell 52 percent during 2012, due to a record setting crop of 50.8m bags in Brazil and analysts forecasting a surplus of 4.1m-bags in 2012-13. With a market surplus, coffee price estimates for 2013 continue to look bearish. (27)  Futures of frozen orange-juice concentrate for January delivery fell 7.5 percent, or 9.45 cents, to $1.1605 a pound.  A decrease in U.S. demand, as well as good weather forecasts for Florida, brought orange juice to its lowest point since November. (28)  For the year, orange juice futures lost a staggering 31 percent. (29)


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