Despite the release of soft economic data and rising energy prices, US markets have advanced moderately this morning, building on yesterday’s rally. Earlier today, a number of disappointing US economic figures were released. For example, US jobless claims for last week rose to 371,000 above the 370,000 expected. The Empire Manufacturing reading for May was (3.2) below the flat reading expected. Industrial production fell by 0.7% in April, more than the 0.3% decrease expected, while capacity utilization fell to 79.7% also below expectations. Despite these numbers, each of which could have sparked profit-taking in the markets, equities have been steady suggesting that investor sentiment seems to still be reasonably supportive.
Sentiment also appears to be positive toward energy and precious metal commodities today. Crude oil has shrugged off early weakness and advanced to test the $126/bbl level once again, while natural gas has held near $11.65 heading into the weekly inventory report. This week, inventories rose by 93 BCF, below the 95 BCF increase of the same week last year, but above the 88 BCF injection expected by the market, which could keep gas trading near current levels in coming sessions.
Gold and silver have both advanced 2.0% toward the $880/oz and $17.00/oz levels respectively. While a measured objective for crude oil remains in place near $130/bbl, gold appears to be stuck in a trading channel between $860/oz and $895/oz.
There seems to have been some softness in the base metals with copper down 1.3% and the agricultural sector with rough rice falling 2.7%. Note that a decline by rice through the 20.5 cent level could indicate that the uptend that has been in place for the last several months may have ended and a significant correction has commenced.
Canadian share update: Gold and energy producers lead equities higher
With the prices of crude oil and gold surging this morning, sentiment appears to be improving toward commodity producers.
Leading advancers in the energy sector today include First Calgary (TSX: T.FCP, Bullboard) up 8.0% and InterOil (TSX: T.IOL, Bullboard) up 4.5%. Interoil announced this morning that Q1 revenues grew to $191.3 million from $125.9 million last year while losses per share fell to 8 cents from 18 cents. With the company having reduced its debt load dramatically over the last two weeks, and operational and exploration momentum apparently building, sentiment toward this international energy producer may continue to improve. InterOil recently broke out of a long-term trading range and rallied to a new high this morning, suggesting that measured objectives based on previous trading near $30.00 or $34.00 could be attainable over time.
There appears to be a broad-based rally underway in the precious metals today with Yamana (TSX: T.YRI, Bullboard) up 4.4%, Eldorado Gold (TSX: T.ELD, Bullboard) up 3.8%, Agnico-Eagle (TSX: T.AEM, Bullboard) up 3.8%, and Silver Wheaton (TSX: T.SLW, Bullboard) up 4.0%. Investors should note, however, that at the moment, the group seems to still be range bound with breakouts through levels such as $15.00 for both Yamana and Silver Wheaton, for example, still needed to suggest the start of a new uptrend.
There also have been two significant declines on the last day of this quarter’s earnings season. Allen-Vanguard (TSX: T.VRS, Bullboard) fell 10.3% after announcing that it lost $34.2 million in its last quarter on sales of $91.3 million. While two acquisitions appear to have driven a significant revenue increase, management expressed disappointment that results were negatively impacted by delays in some large US defense orders. Meanwhile, FirstService (TSX: T.FSV, Bullboard) fell by 10.7% after announcing that it lost 34 cents per share last quarter, well below the 5 cents per share expected by investors.
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This commentary is based upon technical analysis. Technical analysis is the study of price and volume and the interpretation of trading patterns associated with such studies in an attempt to project future price movements. Technical analysis does not consider any of the fundamentals of an underlying company, and as such is inherently uncertain and should not be the only factor considered by an investor in making an investment decision.
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