Friday, May 6, 2011

Stocks surge on strong jobs growth data

Dow shot up 161, advancers over decliners 4-1 & NAZ gained 41. Banks stocks eagerly participated in this rally although the Financial Index continues to muddle along longer term.

S&P 500 FINANCIALS INDEX

Value	218.73
Change	2.76 (1.3%)

The Alerian MLP Index climbed back 8 to 372 after falling almost 30 in the previous 4 days. It plunged (by its standards) on nervousness about changing the tax advantage rules for distributions. Higher markets also contributed to the rise. The REIT index was flat in the 244s. Junk bond funds rose, some were up more than 1%. Treasuries fell on the jobs report. The yield on the 10 year Treasury bond rose 4 basis points to 3.20%, but remains near its lowest levels this year. Note that 90 day T-bills are still yielding virtually nothing. Oil fluctuated on a better-than- expected US jobs report after a 12% plunge in the past 4 days left futures poised for their biggest weekly decline in a year. Bargain hunting in the last hour brought it back over $100. Gold & silver are settling into their lower levels with silver rebounding to $36 after dipping below $35 earlier today. .

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month		0.01%
U.S. 2-year		0.58%
U.S. 10-year		3.20%

CLM11.NYM

...Crude Oil Jun 11

...102.05

...

2.25 (2.2%)

GCK11.CMX

Gold May 11

1,493.30

12.40 (0.84%)

U.S. Payrolls Increased 244,000 in April

Photo: Bloomberg

Employers added more than 200K jobs in Apr for the 3rd straight month, the biggest hiring spree in 5 years. The Labor Dept reported that the economy added 244K highlighted by private employers created 268K jobs. Job gains were widespread: retailers, factories, financial companies, education & health care along with construction companies while federal, state & local govs were cutting. However, the unemployment rate ticked up to 9% from 8.8% in Mar, the first increase since Nov. The Labor Dept said job gains in Mar & Feb were even stronger than first reported. All told, 13.7M were unemployed in Apr, still almost double since before the recession began in Dec 2007. Including part-time workers who would rather be working full time, plus people who have given up looking altogether, the percentage of "underemployed" people rose to 15.9%, showing the harsh effects high unemployment still have on the economy & its recovery.

U.S. Payrolls Grew 244,000 in April; Unemployment at 9%

Bill Gross
Photo: Bloomberg

Bill Gross, heads the world’s biggest mutual fund at Pacific Investment Management Co (PIMCO)., said US growth isn’t sufficient to support asset & labor markets nor enough to compensate for the nation’s growing debt level. “The private economy is moving ahead as evidenced by today’s number but at a measured pace,” Gross said on “Bloomberg Surveillance.” “Year- over-year real gross domestic product is holding at 2 percent, while nominal GDP is only 3.9 percent. That’s hardly sufficient to support both asset and labor markets in combination, nor is it sufficient to grow our way out of a steadily increasing debt to GDP ratio. It’s not enough.” While employment growth will be probably be strong the next few months, investors will need to see whether that is sustainable once the Federal Reserve 's policy of quantitative easing ends in Jun, according to Gross. The federal gov will debate on raising the debt ceiling for the Treasury. By some measures, it needs to be raised within about 10 days, more liberal thinking is that it can be delayed until the end of next month (when QE2 ends).

Pimco’s Gross Says U.S. Economic Growth Isn’t Enough to Sustain Job Market

Some say the jobs report was a big surprise, but I saw guesses earlier this week calling for gains of around 200K. The upward revision of prior months was well received by the markets. But that is old information. High priced gas (pushing $4 a gallon) will crimp gains. MLPs had an unusually wild ride this week, especially when compared to REITs which suffered only a mild sell off. Their trade association (NAPTP) issued a release that there was a proposal by the Treasury to tax pass-thru-entities (i.e. MLPs). The House leadership rejected the idea, but nervousness in the markets was evident. That eased today, as with commodities.