The financial markets’ response to the jobs data was rather muted, as so many revisions were made to the report and the weaker-than-expected average hourly earnings. The Financials sector ($SPF), however, jumped almost 2% on Friday and recouped its previous loss during the week, after President Trump signed an executive order directing the Treasury secretary to consult with regulators about what needs to be done to fix the Dodd-Frank Wall Street Reform and Consumer Protection Act and report back within “a relatively short period of time.”.
For the week, the U.S. Dollar index (DXY), a measure of the U.S. dollar value relative to a basket of foreign currencies, was down another 0.68%, closing at 99.84 on Friday, following remarks from Peter Navarro, the head of Mr. Trump’s new National Trade Council, who told the Financial Times on Tuesday that the euro was like an “implicit Deutsche Mark”, whose low valuation gave Germany an advantage over its main trading partners.
The spot gold price surged 2.73% for the week, to close at $1,220.80 per ounce on Friday, along with the Japanese yen, which was up 2.11% against the U.S. dollar. Gold was under buying pressure after Britain's parliament voted on February 1 to trigger the Brexit process. The yield of 10-year U.S. Treasury Notes was down 0.76% this week, to close on Friday at 2.467%, while the yield spread between the 10-year and 2-year U.S. Treasury Notes widened to 1.28 percentage points.
The WTI crude spot price closed up 1.24% for the week, at $53.83 per barrel on Friday, while the Brent crude spot price gained 2.01% for the week to close at $55.74 per barrel, despite mixed EIA weekly reports. The Brent crude spot price jumped 1.52% to an intraday high of $57.45 per barrel on Thursday after U.S. National Security Advisor Michael Flynn told the press that Washington is putting Tehran "on notice" in response to an Iranian missile test.
Short positions in WTI crude oil futures contracts held by producers or merchants totaled more than 655,171 contracts as of January 31, 2017, a record high, according to data from the U.S. Commodity Futures Trading Commission, or CFTC. The open interest also stands at a record high of 2,181,656 contracts, equivalent to about 2.18 billion barrels of WTI crude oil. Crude oil producers could take short hedge positions to lock in a future selling price to protect against a falling crude oil price. Some banks also require producers to hedge against future price risks as a condition for lending.
The EIA weekly U.S. oil inventory report on Wednesday showed that domestic crude supplies increased by another 6.5 million barrels to 494.8 million barrels, excluding the Strategic Petroleum Reserve, in the week ending January 27, compared to the S&P Global Platts forecast for a stockpile increase of 2.2 million barrels. The American Petroleum Institute, or API, inventory data on Tuesday showed a U.S. crude inventory build of 5.8 million barrels.
Separately, the EIA said the weekly U.S. crude oil production declined 46,000 barrels per day, or bpd, for the week ending January 27, to 8.915 million bpd. U.S. crude oil output increased 179,000 bpd to an average 8.942 million bpd in January, compared to a December average of 8.763 million bpd. Output has fallen about 6.85% from the peak level of 9.60 million bpd in June 2015. Houston-based oilfield services company Baker Hughes Inc. said on Friday that the U.S. oil rig count jumped another 17 to 583, compared to 316, when the rig count hit the low on June 6, 2016.
S&P 500 Summary: +2.62% YTD as of 02/03/17
Barclay Hedge Fund Index: +1.24% YTD
Outperforming Sectors: Information technology +5.87 YTD, Materials +4.82% YTD, Consumer discretionary +3.81% YTD, and Healthcare +3.62% YTD
Underperforming Sectors: Consumer staples +2.21% YTD, Industrials +1.74% YTD, Financials +1.71% YTD, Utilities +0.53% YTD, and Real Estate +0.53% YTD, Energy –2.97% YTD, and Telecommunication services –5.02% YTD