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Financial Markets Roundup: Friday’s Top Stories At A Glance

U.S. stocks mustered solid gains Friday, ending a five-day losing string, as investors considered data that signaled the U.S. economy was on track for solid growth. U.S. consumer sentiment reached to its best in 11 years in January, while factory output grew in December, reports showed.

“You had a pretty strong consumer confidence report that seemed to turn the market right around,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

“Along with that came sturdier oil prices, and I think that’s the elixir for ultimately better equity prices … dampening concern that low oil prices are a reflection of weak demand.”

The markets completed another volatile week for domestic and international markets while tallying a third weekly drop. The Nasdaq Composite Index grew 63.56 points or 1.39% to reach at 4634.38, and leaving with a weekly fall of 1.5 percent.

The S&P 500 rose 26.75 points or 1.34% to settle at 2019.42, advancing for the first time in six days, as energy stocks led gains with U.S. crude rising. The index lost 3.4 percent from Jan. 8 to Jan. 15, suffering its second drop of five consecutive trading sessions. However, in 2014 it had no losing streak of more than three days. The gauge is off 3.4 percent from its record high marked on Dec. 29 and is down 1.9% this year.

“The market is reacting to economic data that is more good than bad, to energy being up 3 and 4 percent, and before a long weekend, when investors don’t tend to be bearish,” said Art Hogan, chief market strategist at Wunderlich Securities.

Market Focus

On Friday, market participants paid more attention to corporate earnings reports and oil prices.

Crude oil futures advanced 5.3% to end Friday at $48.69 a barrel as the International Energy Agency reduced projections for supplies from outside OPEC and said prices could recover. Shares of energy companies in the S&P 500 were top gainers with an increase of 3.2%. Oil prices have lost more than 50% of its value since June amid oversupply concerns and weak demand in a faltering world economy. The sharp declines put a major dent on the energy sector, with shares of energy companies in the S&P 500 down about 24% in the past six months.

“A relief rally is probably what we’re having here, with some of the very beaten down sectors, like energy, looking better and performing well,” Paul Nolte, senior vice president, portfolio manager at Kingsview Asset Management, said.

In a broader view, however, the energy rout has added a cautious note to a generally upbeat forecast for the U.S. economy as the once-booming energy sector has started cutting jobs.

“Investors have been waiting for a bounce in energy shares, and we’re finally seeing it,” says Jonathan Corpina, senior managing partner at brokerage firm Meridian Equity Partners. “Whether that bounce is sustainable we don’t know, but I think it’s making investors feel a little better about this market.”

Earnings reports are also being given importance by investors to assess effects of the plunging oil on corporate profits. About 200 S&P companies are set to release their earnings through the end of the month.

The three biggest U.S. banks, JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc., have recorded their most horrible combined quarterly trading revenue since 2011, mainly due to a 23 percent drop in fixed-income, currencies and commodities, or FICC.

Earnings disappointments by all three banking giants dragged down other companies in financial sector that was spread to the broader market on Wednesday and Thursday.

The fragile reports came as a result of high litigation costs and poor trading returns. Analysts also showed concern about a delay in the US Federal Reserve’s plan to raise interest rates and said that could spell more pain down the road. Rate hikes are seen as an upbeat news for large banks.

“The banks are definitely disappointing,” said Tom Cahill, portfolio strategist at Ventura Wealth Management.

“That was one of the leading groups and one that people were looking towards to be strong this year, and this is starting to look less credible.”

Goldman Sachs suffered the lowest since October as it failed to break the string of disappointing bank earnings reports. The investment bank reported a 7 percent decline in the fourth quarter as trading activity declined.

The Dow Jones Industrial Average rallied 190.86 points or 1.10% to end the day at 17511.57. On Tuesday, the Dow it suffered a point swing of nearly 425 points during the session before ending slightly lower. Stocks continued to move lower on Wednesday and Thursday, mainly due to concerns related to global economic growth and disappointing corporate earnings.

“It has been quite a confusing week as volatility picked up meaningfully,” said Anastasia Amoroso, global market strategist for J.P. Morgan Asset Management, which oversees about $1.7 trillion. “The biggest source of confusion is coming from whether falling oil prices is a good thing or bad thing for a global economy and for global stocks.”

So far 2015 the has Dow lost 1.8% and currently stands 3.3% below its late-December record high.

Volatility Rising

As renewed volatility has shaken Wall Street in recent days, American equities have comes under pressure. For much of 2014 stock prices sustained upward momentum amid low price swings. But recent weeks have seen more dramatic moves in both the upward and downward directions.

“We’ve traded with oil tick for tick all week, and until we get news from the ECB next week, that’s going to continue,” Matt Maley, an equity strategist at Miller Tabak & Co LLC in Newton, Massachusetts, said in a phone interview. “You also have more fears that it’s going to be very difficult for the economy to grow fast enough for the Fed to raise rates sooner rather than later. Expectations for a rate hike are starting to get pushed out.”

Some traders showed disappointment with the wild shifts in recent stock-trading sessions.

“It’s a very scary environment where stocks can move multiple percentage points on a speculative headline,” said RJ Grant, associate director of equity trading at KBW Inc. “It’s very difficult to trade in this environment.”

The broader gains appeared in a situation when investors are not willing to participate in the stock market.

“There’s lackluster demand to buy stocks right now,” said Brett Mock, managing director at brokerage JonesTrading Institutional Services LLC. He partially blames investors’ concerns about global economies.

European stocks extended declines on the decision of Switzerland’s central bank to drop its currency cap at 1.20 against the euro. Switzerland’s blue-chip SMI benchmark saw a decline of 6%. On Thursday, the index had seen a drop of 8.7%.

“For U.S. investors, things are looking pretty healthy from a consumer standpoint, and the Swiss National Bank news seems pretty esoteric,” said Erik Davidson, chief investment officer for Wells Fargo Private Bank, which manages $190 billion.

Looking forward, traders are now waiting for Thursday’s meeting by the European Central Bank to see if the ECB unveil new efforts to ease monetary policy through purchases of bonds as part of a move to stimulate economic growth and lift inflation expectations.

“Volatility has been on the rise since the beginning of the year and the SNB’s announcement adds to the growing list of developments that could trigger greater volatility in the financial markets, like the ECB rate decision and Greek elections in the first quarter of the year,” said Kathy Lien, managing director at BK Asset Management.

The Stoxx Europe 600 moved up 1.1%.

In commodity markets, gold prices continued to move higher on Friday to post a weekly gain of 5% as worries about global growth and turbulence in currency markets increased gold’s safe-haven appeal. The bullion marked its best settlement since August 29 and the top weekly rise since July 2013.

Copper prices, which hit fresh multi-year lows at mid-week, extended their rebound on Friday but locked in a 4.9 per cent fall for the week, the steepest weekly drop since November. The commodity viewed as proxy for global growth suffered its worst intraday fall in more than three years on Wednesday, after the World Bank reduced its forecast for global growth in 2015.

The rebound was partly attributed to the announcement by China’s State Grid, the government-owned power grid operator, that it will increase its infrastructure spending by 24 per cent in 2015.

“The aggressive targets announced reinforce our expectation of strong copper (and aluminium) demand growth from the Chinese power sector,” analysts at Citigroup said in a note to clients. “Chinese copper demand should outperform overall economic growth in 2015 and should help drive higher copper prices from first quarter lows,” they said.

The yield on the benchmark 10-year U.S. government bond closed up 1.815% from 1.777%.

The dollar remained broadly supported near 12-year highs against a basket of six major currencies on Friday after a mixed bag of economic reports.

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