Friday, March 4, 2011

Markets fall on $104 oil

Stocks fell at the start following mixed news of encouraging economic data & higher oil prices.  Go figga, although higher oil prices would be a drag on any stock market advance.  Dow is down 71, decliners over advancers 2-1 & NAZ fell 12.  Bank stocks are leading the decline.


Value 222.25 One-Year Chart for S&P 500 FINANCIALS INDEX (S5FINL:IND)
Change   -2.85   (-1.3%)

The weaker stock market took the MLP index down 1½ to the 379s & the REIT index fell the same to the 233s.  Junk bond funds werre mixed at their lofty levels with only moderate yields & Treasuries were flattish.  The yield on the 10 year Treasury bond slipped a fraction of a basis point to 3.52%.

Treasury yields:

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

Oil advanced, heading for its 6th weekly gain, as civil unrest in Libya fueled concern that supply disruptions will be prolonged while employment data from the US showed signs of growing demand. Gold also was strong on continued civil unrest in the Mideast.

CLJ11.NYM....Crude Oil Apr 11...103.80 .....Up 1.89  (1.9%)

GCH11.CMX...Gold Mar 11.......1,426.20 ...Up 10.20  (0.7%)

Gold Super Cycle Link! Click Here

Private employers added 222K jobs last month, the most since Apr, showing that companies are feeling more confident in the economy & about their own financial prospects. It also bolstered hopes that businesses will shift into a more aggressive hiring mode to boost the economic recovery.  The unemployment rate is now at the lowest point since Apr 2009 after falling for 3 months, down from 9.8% in Nov (the sharpest 3-month decline since 1983).  The number unemployed dipped to 13.7M (almost double since before the recession).  After factoring in the number of part-time workers who would rather be working full time and those who have given up looking for work, the percentage of "underemployed" people dropped to 15.9%, the lowest in nearly 2 years.  The number of "long-term" unemployed, out of work 6 months or more, sank to 5.99M, a decline of 217K from Jan.  That's what you call good news on the jobs front.

U.S. Payrolls Rose 192,000; Jobless Rate at 8.9% in February

Businesses ordered more manufactured goods from US factories in Jan, but excluding a big surge in demand for airplanes, the rise in demand was the smallest in 3 months.  Excluding the volatile transportation category, orders rose 0.7%, the weakest showing since Oct, according to the Commerce Dept.  Helped by the surge in demand for commercial aircraft, total business orders rose 3.1%, the biggest gain in more than 4 years. That pushed total orders up to $445.6B, a level viewed as healthy & 26.3% above the recession low hit in Mar 2009.  Demand for durable goods rose 3.2%, an upward revision from a preliminary estimate last week of 2.7%. Demand for nondurable goods such as chemicals, paper & food rose 3.1%, the same as the Dec increase.  But orders for nondefense capital goods excluding aircraft fell 6.2%, the biggest drop in 2 years. This category is closely watched because it is viewed as a good indicator of business plans to invest to expand & modernize their operations.

Orders to U.S. Factories Climb by Most in More Than Four Years on Recovery

Fed Policy Makers Signal Abrupt End Bond Purchases June

Photo:   Bloomberg

The Federal Reserve (FED) is signaling its favors an abrupt end to $600B in Treasury purchases in Jun, jettisoning a prior strategy of gradually pulling back on intervention in bond markets.  “I don’t see a lot of gain to reverting to a tapering approach,” said Dennis Lockhart, Atlanta FED President said. “I don’t think that is necessary,” Charles Plosser, Philadelphia FED President, said last month.  Central bankers, who next meet Mar 15, are about half way through the 2nd round of bond purchases.  It's believed the New York FED is buying around $80B a month in Treasuries.  When these purchases end, it will be felt in all markets.

Fed Policy Makers Signal Abrupt End to Bond Purchases in June

I mentioned yesterday that the good news from the jobs report could have been already baked into the markets.  It seems that's what happened.  Oil is pushing on $104, higher oil prices are not friendly to rising stock markets.  The continued chaos in Libya & nervousness about what's next in the Mideast is dominant today in traders' thinking.  Dow is back to where it was a month ago despite a the flow of news stories about the economic recovery in the US.  Sorry there are no charts, but I'm having problems fitting them into the space allocated.  Hope to have that fixed soon.

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