Wednesday, March 2, 2011

Higher markets after favorable jobs report

Dow rose 49, advancers ahead of decliners 2-1 & NAZ was up 24 (anticipating good news from Apples product announcement meeting).  Bank stocks were a little higher, after yesterday's down market.


Value 222.42 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   0.59  (0.3%)

The MLP index gained a fraction to over 380 while the REIT slipped a fraction to the 233s.  Junk bond funds inched higher & Treasuries were slightly lower.  The yield on the 10 year Treasury bond went up 2 basis points to 3.44%, where it has been for 3 months.

Treasury yields:

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

Alerian MLP Index   ---   2 weeks

Dow Jones REIT Index   ---   2 weeks

10-Year Treasury Yield Index   ---   2 weeks

Oil traded near a 29-month high, topping $100 again, & Persian Gulf stocks slid, while gold rose to a record for a 2nd day, amid concern unrest in the Mideast will escalate.

CLJ11.NYM...Crude Oil Apr 11...100.30 ...Up 0.67 (0.7%)

Gold            .......1437.30 +6.10 +0.43%

Gold Super Cycle Link! Click Here

ADP Estimates Companies in U.S. Added 217,000 Jobs February

Photo:   Bloomberg

Private employers added 217K jobs in Feb, beating expectations, estimated by the ADP Employer Services report,,  Expectations were for a rise of 175K & the Jan figure was revised 2K higher to 189K.  The ADP report comes ahead of the gov much more comprehensive labor market report on Fri, which includes public & private sector employment.  That report is expected to show a rise in overall nonfarm payrolls of 185K last month & a rise of 190K in private payrolls.  Be careful about inferring too much from today's report, prior reports have overstated the gains in jobs.

Unemployment problems continue.  The number of planned layoffs rose in Feb to its highest level in 11 months as gov & non-profit employers let workers go.  Employers announced 50K planned job cuts last month, the highest level since last Mar & a jump of 32% from 38K in Jan, according to Challenger, Gray & Christmas. Layoffs were 20% higher than the 42K announced in Feb of last year, marking the first year-over-year increase since May 2009.  However, the report said the pace of job cutting remains relatively subdued. Job cuts for Jan & Feb stand at 89K, below the 113K job cuts that were announced in the first 2 months of 2010.

ADP Estimates U.S. Companies Added 217,000 Jobs in February

Pacific Investment Management Co.'s Bill Gross

Photo:   Bloomberg

Bill Gross, in charge of the world’s biggest bond fund - Pacific Investment Management (PIMCO), said yields on Treasuries may be too low to sustain demand for US gov debt as the Federal Reserve (FED) approaches the end of QE2 in Jun. He figures Treasury yields are about 150 basis points too low when viewed on a historical context & when compared with expected nominal GDP growth of 5%. “A successful handoff from public to private credit creation has yet to be accomplished,” Gross said. “That handoff ultimately will determine the outlook for real growth and the potential reversal in our astronomical deficits and escalating debt levels.”  In Jan, the holdings of US gov & related debt in Pimco’s $239 billion Total Return Fund (PTTRX) were reduced to the smallest proportion in 2 years. The “25 basis-point policy rates for an ‘extended period of time’ may not be enough to entice arbitrage Treasury buyers, nor bond fund asset allocators to reenter a Treasury market at today’s artificially low yields,” Gross wrote. “Yields may have to go higher, maybe even much higher to attract buying interest.”  PTTRX has done well for investors with high levels of risk aversion, a relatively modest decline in the bear market followed by a steady but modest recovery.

Gross Says U.S. Yields Too Low as Fed Approaches End of QE2

Pimco Total Return Fund  ---  3 years

Barron's pointed out a technical signal.  When a stock breaks out to the upside from resistance, it is usually a bullish sign.  But a failure to hold on to that breakout is unusual, sending bearish signals.  One fifth of the Dow 30 just did that. I'm more concerned with overbought conditions which continue. Oil markets are very unsettled, sending oil over $100.  Stock markets don't behave well when oil shoots up.  Chaos in Libya shows no sign of ending soon & oil pumped out in Libya is not making it onto the world market.  Significantly higher prices have to cut economic growth which will not be appreciated in stock markets.

Dow Jones Industrials   ---   2 weeks

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