Market Review By TraderXP:
Hedge funds cut bets on a rally in gold the most since 2007 and was the most bearish ever on sugar and coffee, as concern that the Federal Reserve will slow the U.S. stimulus program drove commodity prices the biggest loss this year.
"Expectations and the rhetoric from the Fed's exit strategy frightened people into thinking that the Fed will tighten isgoing stimulus," James Dailey, who manages $ 215 million in the team Financial Asset Management LLC in Harrisburg, Pennsylvania, said in a telephone interview. "There's a confluence of weak gold owners, and people who do not have a strong urge to buy gold."
Market News
Investors face another term Washington
Investors face another Washington imposed a term of government spending cuts next week, but this is not a thesame level of fear, like two months ago, when the "financial cliff" rampant.
Investors in the sectors most likely, beaffected from cuts, such as defense, seems untroubled that the budget negotiations could send stocks tumbling.
Negotiations on the budget crisis, the U.S. began again this week leading up to the March 1 deadline so-called absorption, when $ 85 billion in automatic federal spending cuts to take effect.
"It is at this time the political hot button in Washington, but a very low level of anxiety of investors," said Fred Dickson, chief market strategist at DA Davidson & Co. in Lake Oswego, Oregon. The fight pits President Barack Obama and fellow Democrats against Republican Congress.
Stocks rallied in early January after a compromise to temporarily avoid a financial cliff, and 500 Standard & Poor's index rose 6.3 percent year to date.
But the benchmark index has lost steam this week, posting the first week of losses since the beginning of the year. Minutes on Wednesday from the last Fed meeting, which suggested that the central bank can slow or stop its incentive policy earlier than expected, provided the catalyst.
National elections in Italy on Sunday and Monday also may add to investor concern. Most investors expect the government headed by Pier Luigi Bersani, to win and to continue reforms to address Italy's debt. However, the revival of the former leader, Silvio Berlusconi, is in doubt.
"Europe has been in the last six months is less subject to the stock market, but the problems have not disappeared. This can bring attention to the investor," said Kim Forrest, senior analyst at Capital Fort Pitt Capital Group in Pittsburgh.
OPTIONS BULLS GAINS TARGET
Spending cuts, if they go ahead, could hit defense industry particularly hard.
However, in the options market, the Bulls success in targeting Lockheed Martin Corp, the Pentagon's largest supplier.
Calls to stock far outstripped the way, suggesting that many investors expect the stock to move higher. Overalloptions amount of stock is 2.8 times the daily average with 17,000 calls and 3,360 puts trading, according to options analytics firm Trade Alert.
"Up Call shop at Lockheed reinforces the idea that investors are not pricing option for a lot of risk reducing inventory of most protection from the possible influence of absorption," said Jared Woodard, founder of research and consulting firm condoroptions.com inForest, Virginia.
The action ended up 0.6 percent at $ 88.12 on Friday.
If lawmakers can not reach an agreement on reducing the U.S. budget deficit in the next few days, sequestration will include a significant reduction in defense spending. Companies such as General Dynamics Corp and Smith & Wesson Holding Corp may be affected.
General Dynamics Corp shares rose 1.2 percent to $ 67.32, and Smith & Wesson added 4.6 percent to $ 9.18 on Friday.
Eye on the GDP data, APPLE
According to the latest data, in the fourth quarter USgross domestic product, is expected on Thursday, and some analysts expect the revision following trade data, which showed the deficit of America fell in December to the narrowest in nearly three years.
U.S. GDP unexpectedly shrank in the fourth quarter, according to previous government estimates, but analysts said there was no reason for panic, given that consumer spending and business investment picked up.
Investors will be looking for any hint of a change in policy the Fed monetary easing when the Fed Chairman Ben Bernake speaks before congressional committees on Tuesday and Wednesday.
Shares of Apple, will be watching closely next week when the annual meeting of the shareholders of the company "takes place.
On Friday, a U.S. judge gave outspoken hedge fund manager David Einhorn, a victory in a battle with the iPhone maker, blocking the company to move forward with the shareholders vote on the controversial proposal to limit the company's ability to issue preferred stock. reuters.com
Currencies
The yen and sterling decline, euro eyes Italian elections
Ian brought a 33-month low against the dollar on Monday as speculation strengthened that the Japanese government is set to name two strong supporters of aggressive monetary easing to top positions in the central bank.
Sterling in the UK also lost ground against the dollar, falling to 16-month low against the dollar after dropping Moody Securities triple the country's sovereign rating late on Friday.
Tokyo plans to appoint Haruhiko Kuroda, an ardent supporter of the aggressive monetary expansion, the Bank of Japan governor and Kikuo Iwata, a scholar who has criticized the central bank does not take decisive action to combat deflation, as one of two deputy governors.
"Kuroda is a fan of a weaker yen and deflation-bashing," said Kit Juckes, strategist at Societe Generale.
The dollar rose to 94.77 yen from 93.39 yen in New York late on Friday, reaching a peak not seen since May 2010.
"Iwata is a leading anti-Bank of Japan's academic and his appointment was a shock that caused the aggressive selling yen foreign speculators," said a trader at a Japanese bank.
The dollar gave up some of the proceeds from the sale of heavy around 95 yen, some of which are believed to be related to hedging activity options players of a barrier option at this level.
But it was up to 0.8 percent from late U.S. levels stand at 94.22 yen.
As the dollar has risen almost 20 percent against the yen in the past three months or so on expectations of weakening the Bank of Japan, some traders believe the yen rate of decline is likely to slow.
"We are likely to see more moderate and gradual decline of the yen here. Finally, the one who leads the Bank of Japan, Bank of policy options are more or less the same," said a trader at a Japanese bank.
The euro jumped to a height of 125.25 against the yen, but remained shy of its 34-month high of 127.71 set at the beginning of this month. This is the last standing on 124.41 yen, up 0.9 percent from the end of last week.
Traders took aim at the pound, and, pushing it to a 31-month low of $ 1.5073 and a 16-month low of 0.8775 pounds per euro. Pound to $ 1.5124 recently, down 0.3 percent from the end of last week.
Moody `s rating to reduce the UK by one notch to Aa1 from Aaa, citing weak growth prospects. Britain joined the United States and France lost its triple-A rating of at least one major agency.
The rating outlook is stable, that is, any further changes are unlikely in the next year or so, but sterling is still seen under pressure due to expectations the Bank of England could expand its further quantitative easing to support the fragile UK economy.
Implied volatility of the pound surged in recent weeks, one-month volatility of growth to the highest level in eight months.
ITALY ELECTIONS
The yen and the pound fell, the dollar index against a basket of major currencies, rose to its highest level since early September. The dollar index rose to a height of 81.642. DXY.
Some traders say doubts about how long the U.S. Federal Reserve will keep its bond buying program in place to help the dollar, though many market participants still think Ben Bernanke has no plans to rest stimulus in the near future.
In such problems, Bernanke's testimony in the Senate on Tuesday is seen as a vital factor in determining the general direction of the dollar, as well as the broad financial markets.
Against the dollar, the euro took place almost at the level of $ 1.3200, just above a six-week low around $ 1.3145 hit on Friday, but its further growth is limited visible now as investors eye unpredictable elections in Italy.
Exit polls will be published shortly after the polls closed at 1400 GMT on Monday. Full official results are expected Tuesday morning.
Weak government may enter into a new instability in the third-largest eurozone economy and trigger a new crisis of confidence in the single currency of the European Union.
Australian dollar took a beating after the HSBC China flash purchasing managers' index (PMI) in February fell to 50.4, its lowest level in four months, indicating that the growth of the giant manufacturing sector has retreated from two-year highs hit in January.
Aussie is very sensitive to news from China, which is the top export market for Australia. It fell 0.4 percent to $ 1.0275, bringing us closer to a four-month low of $ 1.0221 hit last week. Reuters.com
