Preliminary U.S. Consumer Sentiment Misses Estimate

After posting several rounds of volatile trading earlier, the week-ended with a slight whimper as a U.S. bank holiday led to a mostly low volume, low volatility trading session. There were no government reports, but the Preliminary University of Michigan Consumer Sentiment report did come in well under expectations at 97.8. Traders were looking for a reading of 100.8. Preliminary University of Michigan Inflation Expectations rose to 2.6%, up from 2.4%.

The consumer sentiment data reflected uncertainty over the current tax cut proposals. In addition, Americans are also preparing for another rate hike in December, which could be the first of a series of rate hikes over the next 12 months.

U.S. Equity Markets

The major U.S. equity indexes finished mixed on Friday, with two out of three closing lower. The Dow and the S&P 500 Index ended eight-week winning streaks, their longest since 2013; the NASDAQ Composite closed lower for the first week in six.

In the cash market, the benchmark S&P 500 Index settled at 2582.30, down 2.32 or -0.09%. The blue chip Dow Jones Industrial Average closed at 23422.21, down 39.73 or -0.17% and the tech-based NASDAQ Composite finished at 6750.56, up 0.51 or +0.01%.

With earnings season winding down this week, investor were primarily focused on U.S. tax reform and the direction of interest rates. Pressuring the markets the most were concerns that U.S. tax reform would be pushed into 2019. Investors also reacted to a pullback in high-yield bonds.

Forex

The U.S. Dollar was up against a basket of currencies early in the session, but gave up the gains to finish lower for the session. The dollar ended the week with its biggest loss in a month as investor disappointment that implementation of part of a planned major U.S. tax overhaul may be delayed until 2019 capped the greenback’s recent rally.

Weaker U.S. equity markets helped drive the USD/JPY down about 0.46% this week. The GBP/USD finished up 0.89% for the week as better-than-expected data on British industry and rising confidence in the process of Brexit talks supported the currency.

Gold

Gold prices unexpectedly plunged on Friday to finish down 1.03%. This erased most of its weekly gains, but it still managed to finish higher for the week by 0.39%. Traders cited no reason for the drop, but it was likely related to thin U.S. holiday trading conditions.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures finished lower on Friday, but still managed to close over 2.00% higher for the week.

The catalysts behind the weakness were forecasts showing U.S. production will continue to grow with prices holding near better than two-year highs. Losses were likely limited by expectations OPEC and other major producers will extend their output cuts beyond the March 2018 deadline.

Further pressuring the market was a report from oil services firm Baker Hughes which showed U.S. drillers added 9 rigs, bringing the total up to 738.