Friday, October 8, 2010

Mixed markets after a dismal jobs report

Stocks are digesting a weak jobs report while Treasuries keep soaring.  Dow is up 22, advancers  barely ahead of decliners & NAZ is flat.  Bank stock were flattish but the Financial index was able to eke out a gain. 


Value 197.60 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change  +0.19   +(0.1%)

The Alerian MLP Index has been marching forward almost daily since the beginning of Sep.  Today it paused for a rest, down 1 from its record to "only" the 345s (yielding 6.4%).  The REIT index fell 1 to the 214s.  Junk bond funds were mixed near or at yearly highs.

Alerian MLP Index   ---   2 weeks

Dow Jones REIT Index   ---   2 weeks

10-Year Treasury Yld Index   ---   2 weeks

Oil & gold were slightly higher after strong gains in recent week.  Gold is only about 1% below its records reached earlier this week.

CLX10.NYM...Crude Oil Nov 10...81.86 ...Up 0.19  (0.2%)

GCV10.CMX.......Gold Oct 10...1,339.50 ..Up 5.60  (0.4%)

Gold Super Cycle Link!  

Employers in U.S. Cut More Jobs Than Forecast in September

Photo:  Bloomberg

Gov layoffs in Sep outpaced weak hiring in the private sector, pushing down total payrolls by a net total of 95K.  But the unemployment rate held at 9.6% according to the Labor Dept. The jobless rate has topped 9½% for 14 straight months, the longest stretch since the 1930s.  The private sector added 64K jobs, the weakest showing since Jun.  159K gov jobs were lost in Sep & local govs cut 76K jobs (mostly teachers), the largest cut by local govs in 28 years. About 77K temporary federal census jobs ended & state govs shed 7K jobs.  The recession is taking its toll on state & local gov budgets.  Nearly 14.8M were unemployed last month, almost 100K fewer than in Aug. Including those who have given up looking for work & those who were working part time but wanted full-time jobs, the so-called "underemployment" rate jumped to 17.1% last month from 16.7% in Aug reflecting an increase of more than 600K involuntary part-time workers.  Even areas that were strong are weakening.  Manufacturers cut 6K jobs, the 2nd straight month of losses.  This sector drove job growth earlier this year, adding 134K positions in the first 5 months of 2010, but factory employment has been flat since then.  Construction firms cut another 21K jobs.   Employers, faced with slow sales & a weak economy, see little reason to ramp up hiring.  The weak job market makes it more likely that the Federal Reserve will take additional steps to boost the economy.

 Employers in U.S. Cut More Jobs Than Forecast in September

Unemployment rate - 1 year

One-Year Chart for Total SA (USURTOT:IND)

Two & five year Treasury note yields slid to record lows after the jobs report was released on  speculation the Federal Reserve will buy more bonds to stimulate the economy.10-year notes headed for a 5-day gain on bets the floundering labor market will lead to weaker-than-expected growth in the broader economy. The 2-year note decreased 1 basis point to 0.3431%, the lowest ever & marked the 6th straight day the yield has set or matched a record low. The 5-year note yield fell 3 basis points to 1.09% after touching 1.088%, setting a record low for the 5th consecutive day. The yield on the 10-year note fell 3 basis points to 2.36%.  These falling yields are scary for sustaining gains in the stock market!  

U.S. Two- and Five-Year Yields Fall to Record Lows on Jobs, Fed Outlook

Treasury yields

U.S. 3-month
U.S. 2-year
U.S. 10-year

Yield on 2 year Treasury note - 1 year

One-Year Chart for 2 Year (USGG2YR:IND)

Yield on 5 year Treasury note - 1 year

One-Year Chart for 5 Year (USGG5YR:IND)

The jobs report came in pretty much as expected, dreary, adding more evidence that the  recovery is stumbling.  That fact that the Federal Reserve is even considering purchasing more Treasuries indicates how fragile the economic recovery is.  Next week earnings season will begin when some of the biggest banks announce Q3 results.  Treasuries remain hot, signaling a negative view on these reports & the recovery in general.

Dow Jones Industrials   ---   2 weeks

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