The Dow Jones industrials closed Friday at 16,412.71, down 159.84 points or 1% but for the week still managed a gain of 0.5%. The heavy selling in the biotech and internet companies led the way down as the U.S. jobs growth was disappointing. The S&P 500 closed at 1,865.09, down 23.68 points or 1.3% but for the week still managed a 0.4% gain. The Tech heavy Nasdaq was the hardest hit closing at 4,127.73, down 110.01 points or 2.6%. Investors are nervous as talk of a 20-30% correction is making the rounds among analysts. We have suggested the possibility of a sharp equity market decline for a while now and concur with the general analysts expectations. We once again strongly suggest the implementation of hedging strategies for holders of large equity portfolios.
The June U.S. dollar index (NYBOT:DXH14) closed at 80.565 down 7.5 points after the Friday employment report showed fewer jobs were created in March than analysts expected. The weak labor situation precludes any rate increase suggestions by the U.S. Federal Reserve and low rates detract from dollar investment. Since the European Yields are also weak on a relative basis the U.S. rates are holding and that could provide support for the dollar. Also the Euro declined after a German newspaper reported that the ECB was considering bond purchases but no determination of how quantitative easing could be implemented according to ECB Vice President Vitor Constancio.
ECB President Draghi made it clear that quantitative easing is a policy option and that prompted the Euro weakness. Other currencies were mixed but the Japanese Yen improved against the dollar closing at 0.09688c, up 62 points. The Euro lost 11 points to $1.3701, the Swiss Franc lost 5 ticks to $1.1220, and the British Pound lost 11 points to $1.6568. The Canadian dollar gained 46 points to 90.91c and the Australian dollar gained 58 points to 92.40c. While we prefer the sidelines for now, we continue to favor the dollar if only on the basis of its relationship to the European countries still concerned over Russia’s move on Crimea and fear of continue question of Ukraine.
May crude oil (NYMEX:CLK14) closed at $101.15 per barrel, up 86c on shortcovering in front of the weekend. Reports of Libyan rebels willing to reopen Libyan oil ports could pressure crude from here but with the API report of inventories falling by 5.8 million barrels supported prices. Some concern over reports of Ukraine "stealing" Natural Gas and withholding supplies failed to garner support for nat gas which closed at $4.429 per MBTU, down 41 points. We prefer the sidelines for crude but favor the long side of Nat Gas. With high crude oil prices consideration is given to alternate uses for Nat Gas applications.
June gold (C OMEX: GCK14) closed at $1,303.50 per ounce, up $18.90 or 1.5% after the U.S. jobs report showed growth in March was under expectations and led to ideas of Federal Reserve rate relaxation. Bargain hunting and renewed media attention to owning gold also a factor. We prefer the sidelines. May silver closed at $19.95 per ounce, up 14c but had traded as high as $20.23 during the session. Silver gained 0.8% for the week against golds gain of 0.7%. We continue to prefer silver over gold for those that "must have" a precious metal in their portfolio. July platinum gained $5.40 or 0.4% to close at $1,450.90 per ounce, and up 3.1% for the week.
June palladium gained $1.90 or 0.2% to close at $790.75 per ounce, and for the week gained 2.2%. Our preference in the white metals continues to be palladium. Demand from China’s automotive production could help palladium further. price forecast of $825 an ounce for palladium on rising automotive demand from China and North American.