Friday, December 2, 2016

Markets little changed after jobs report

Dow gave back 22, advancers over decliners about 5-4 & NAZ was up 4.  The MLP index added 2+ to the 298s & the REIT index went up 3+ to the 325s,  Junk bond funds edged higher & Treasuries had a modest rally after recent selling.  Oil rose in the 51s & gold was a little higher (more on both below).

AMJ (Alerian MLP Index tracking fund)

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Live 24 hours gold chart [Kitco Inc.]

OPEC's agreement to cut production has the potential to balance the oil market, as long as everyone sticks to it, former Saudi Arabia Oil Minister Ali al-Naimi said.  "The only tool they have is to constrain production," al-Naimi said of OPEC.  "The unfortunate part is we tend to cheat."  OPEC agreed to cut production by 1.2M barrels a day, while Russia & other oil producers committed to reducing their own output by another 600K.  The deal spearheaded by Saudi Arabian Energy Minister Khalid Al-Falih represents a departure from the pump-at-will policy promoted by al-Naimi when he was oil minister. OPEC adopted that policy in 2014.  Al-Naimi said he wasn't opposed to production cuts in 2014, as long as everyone participated.  They wouldn't, he said.  "There’s not much you can do if there is no maximum cooperation between the producers."  He also expressed skepticism that Russia, considered a wildcard during talks, would follow thru on its promise to reduce output.  "Will Russia cut 300,000?" he said.  "I don’t know. In the past, they didn’t."

OPEC Deal Can Work, But ‘We Tend to Cheat,’ Al-Naimi Says

US banking regulators must defend tough rules governing the stock market & resist efforts to dilute regulations that might prevent a future financial crisis, Federal Reserve Governor Daniel Tarullo said.  "It is critical that we not forget our still quite recent history,"  Tarullo told a meeting of financial market researchers, referring to the 2008 housing bust that pushed global financial markets to near-collapse.  Some financial rules may be due a review, he added, "but in considering these and other changes, we will not weaken the essential elements of the existing regime that guard against another financial crisis."  He said the meeting offered "a good moment to caution against backsliding on the considerable progress that has been made."

Fed's Tarullo Warns Against 'Backsliding' on Bank Regulations

Data from Baker Hughes revealed that the number of active US rigs drilling  for oil climbed by 3 to 477 rigs this week.  Total active US rig count, including oil & natural-gas rigs, rose 4 to 597.  Jan crude was up 25¢ (0.5%) to trade at $51.31 a barrel.

Baker Hughes Reports Increase In Weekly U.S. Oil-rig Count

Gold futures settled higher, with a retreat in the $ & weakness in Treasury yields boosting the metal's investment appeal.  Feb gold rose $8.40 (0.7%) to settle at $1,178 an ounce.  For the week, prices were essentially even..

Gold Futures Gain For The Session, Slip Lower For The Week

Ford 's stock slumped in midday trading, reversing an earlier gain, after the auto maker issued 2 safety recalls involving more than 650K Ford Fusion & Lincoln MKZ model cars.  "In the affected vehicles, increased temperatures generated during deployment of the seat belt anchor pretensioner could cause pretensioner cables to separate, which may inadequately restrain an occupant in a crash, increasing risk of injury," Ford said.  The recall is for Fusions built from 2013-2016 & for Lincolns built from 2013-2015.  Ford said 680K vehicles are affected, including 602K in the US, 35K in Canada & 9K in Mexico.  The stock fell 19¢.   If you would like to learn more about Ford, click on this link:

Ford's Stock Reverses Lower After Recall Of 681,000 Cars

Ford (F)

Stocks finished the week with a whisper.  The jobs report did not provide a lot of excitement & the market has a lot to digest after its advance since the presidential election. The rate hike is becoming more vivid to traders & that will also dampen enthusiasm for stocks.  However, the Dow went up solidly over 19K, warming the hearts of bulls.

Dow Jones Industrials

stock chart  

Mixed markets on mixed data from jobs report

Dow lost 6, advancers over decliners almost 2-1 & NAZ gained 13.  The MLP index rose 3+ to 303 & the REIT index went up 4+ to the 326s.  Junk bond funds were little changed & Treasuries had a modest rally following recent selling.  Oil crawled higher in the 51s (more below) & gold rebounded 13.

AMJ (Alerian MLP Index tracking fund)

Crude Oil Feb 17

Gold Futures,Feb-2017

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US hiring picked up in Nov, while the unemployment rate tumbled to a 9-year low on a drop in the number of people in the workforce & wages unexpectedly declined, providing a mixed picture of the labor market.  The 178K gain followed a 142K rise in Oct that was less than previously estimated, according to the Labor Dept.  The forecast  called for a 180K advance. The jobless rate fell 0.3 percentage point to 4.6% as labor participation dropped for a 2nd month.  A steady job market signals employers were willing to keep hiring in the days before & after the presidential election.  At the same time, while the Federal Reserve is almost certain to raise borrowing costs this month, sustained weakness in wages or participation would weigh on the economic outlook.  The unemployment rate, was projected to hold at an 8-year low of 4.9%.  Even with the tight labor market, the news on wages was disappointing.  Average hourly earnings fell by 0.1% from the prior month to $25.89, the first decline since Dec 2014.  They climbed 2.5% over the 12 months ended in Nov, following a 2.8% year-over-year gain in Oct.  The average work week for all workers was unchanged at 34.4 hours.

Payrolls in U.S. Rise; Jobless Rate Falls to 4.6%

China urged the US to abandon a surrogate country approach it uses to calculate anti-dumping measures against Chinese exports, as a related clause in China's World Trade Organization (WTO) deal is set to expire.  When China joined the WTO in 2001, it agreed to let WTO members treat it as a non-market economy when assessing dumping duties for 15 years.  That gave trade partners the advantage of using a third country's prices to gauge whether China was selling its goods below market value.  But that clause is due to expire on Dec 11 & China has demanded that countries abide by the agreement.  Commerce Secretary Penny Pritzker said the time was "not ripe" for the US to change the way it evaluates whether China has achieved market economy status, & there was no intl trade rules requiring changes in the way US anti-dumping duties are calculated.  Chinese Commerce Ministry spokesman Shen Danyang said the US should stop using its own market economy evaluations to deny China's "rights".  "It's a right that China must enjoy as a WTO member and an obligation that all WTO countries must fulfill," Shen said.  "China advises the United States to stop mixing things and escaping its international obligations. China calls for the United States to fully comply with the rule in a timely manner, and push for healthy development of China-U.S. trade relations."  The US has repeatedly argued that China's market reforms have fallen short of expectations, especially in aluminum & steel where state intervention has led to oversupply and overcapacity, threatening industries around the world.

OPEC Deal Upends Everything in Oil Market, Not Just Prices

Oil prices steadied at around $53.50 a barrel after the biggest weekly rally since 2009 following OPEC's decision this week to cut crude output in order to rein in a global glut.  The market focus now shifts to the implementation & impact of OPEC's first production agreement since 2008, which will be joined by non-OPEC producers, after data showed output in Russia rose in Nov to a post-Soviet high. Front-month Brent crude futures were down 45¢ at $53.49 per barrel.  The contract was up more than 13% this week, its biggest gain since Mar 2009.  West Texas Intermediate (WTI) futures were at $50.68, down 38¢.

Oil Steadies After OPEC Decision 


The jobs report was about what was expected & that's good enough along with other data to support a long overdue rate hike in a few days.  Enthusiasm from the Trump rally is fading as the rate hike becoming more real traders.  Dow remains extremely overbought, needing a correction to flush out nervous investors.

Dow Jones Industrials