Last Friday's surge in new US jobs went largely unnoticed by stock investors, but it caught the attention of those in the commodities market, particularly due to the jump in US bond yields and the strengthening of the US dollar.
Despite the addition of 353,000 new jobs in January, along with 126,000 in December and November, and a rebound in wage growth to an annual 4.5%, Wall Street's major indices, including the Dow, S&P 500, and Nasdaq, closed the week higher. The Dow and S&P 500 reached record highs.
The increase in the 10-year US Treasury bond yield to just over 4.02% caused the US dollar to rise. However, oil traders reacted differently, leading to the largest weekly loss in four months for the two major global crude oil markers.
Concerns about the data potentially prompting the Federal Reserve to maintain higher interest rates outweighed any benefits from ongoing tensions in the Middle East. The recent US air raids on Syria and Iraq added another layer of uncertainty to the oil market.
West Texas Intermediate (WTI) crude oil futures for March delivery closed down $1.54 at $72.28 per barrel, reaching a three-week low. April Brent crude, the global benchmark, decreased by around $1.50 to $77.33 a barrel.
As a result of the strong jobs report, the US dollar surged, ending up 0.91 points at 103.96 by Friday's close on the index.
Both Brent and WTI crude oil experienced their worst week since October, with Brent down 7% and WTI down nearly 8%. This decline was significant, considering that both crudes only fell 105 over the entirety of 2023.
Saxo Bank noted, "Crude oil suffered its biggest loss since November with the risk premium deflating amid talks for Gaza ceasefire. The negotiations are still in the early stages with plenty of risks still around, including a US response to the Jordan attacks."
Investors also observed the solid (but lower) results from America's two oil and gas majors, Exxon and Chevron. Chevron's fourth-quarter net profit decreased by 65% to $2.3 billion compared to the same period in 2022, mainly due to charges from regulatory issues in California and decommissioning costs from assets sold in the Gulf of Mexico. Despite this, Chevron returned a record $26.3 billion to shareholders in 2023 through dividends and buybacks, and it raised its quarterly dividend by 8%.
Exxon reported quarterly net earnings of $7.63 billion, a 40% drop from the same quarter in 2022, also impacted by an impairment charge in California. Exxon returned $32.4 billion to shareholders in 2023.
Chevron anticipates a production growth of 4% to 7% in 2024, while Exxon expects a slight increase with net average production of 3.8 million barrels per day this year, compared to 3.73 million barrels per day in 2024.
In the commodities market, Comex gold for April delivery closed down $17.40 at $2,053.70 an ounce, despite the strong job numbers. However, it still managed to gain 1.9% for the week, with the weekend US bombing raids in the Middle East potentially influencing its performance.
Iron ore futures fell to $125.06 a tonne on the SGX for 62% fe fines delivered to northern China, down from just over $133.84 a tonne the previous week and well below the January 3 peak of $142.66 a tonne. SGX coking coal futures also settled lower at $315 a tonne, down from $322 a tonne the week before.
Comex copper finished around $3.82 a tonne, marking a 0.9% decline for the week.
