Higher markets on improved jobless data

Dow gained 30, advancers over decliners 5-2 & NAZ was up 14 after taking a drubbing yesterday.  Bank stocks led the market rise with the Financial Index at a 6 week high.

S&P 500 Financials Sector Index

Value	175.14
Change	2.44    (1.4%)

The MLP index was up a fraction to 381 & the REIT index rose 3+ to the 232s.  Junk bond funds were higher as were Treasuries.  Oil rose for a 4th day as the number of applications for unemployment benefits decreased to a 3-year low.  Gold declined for the 3rd time in 4 days on signs of a strengthening US job market, falling $10 to $1604.

AMZ   Alerian MLP Index

DJR   Dow Jones Equity REIT Index

Treasury yields:

U.S. 3-month	0.000%
U.S. 2-year	0.275%
U.S. 10-year	1.920%

CLG12.NYM

...Crude Oil Feb 12

...99.60

... 0.93  (0.9%)

Get the latest market update below:

Photo:   Bloomberg

The number of Americans filing new claims for jobless benefits hit a 3½ year low last week, bolstering views the economy was gaining momentum even though Q3 growth was revised down.  Initial claims for unemployment benefits dropped 4K to 364K according to the Labor Dept, the lowest level since Apr 2008.  This claims data helped to take the sting out of a separate report showing that GDP grew at a 1.8% annual rate in Q3.  The 4-week moving average dropped to 380K, the lowest since Jun 2008, from 388K in the prior period.  The number continuing to receive jobless benefits fell 79K to 3.55M, the lowest since Sep 2008.  Those who’ve used up their traditional benefits & are now collecting emergency & extended payments decreased by 136K to 3.5M in the latest week. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, fell to 2.8% from 2.9%, in today’s report.  More moderately good news on the jobless front.

Jobless Claims in U.S. Decrease to Lowest Since April 2008


The US economy was weaker than previously thought in Q3, although expectations are for stronger growth in Q4.  GDP grew at a 1.8% rate in Q3, down from the previous estimate of 2% growth.  Growth less than 2% is considered so weak that it can essentially feel like a recession, leaving consumers & businesses worried about spending & the economy at risk of actually falling into a new downturn should there be a financial shock.  But economists are forecasting that growth rebounded to a 3.5% rate in the soon-to-be-completed Q4, although there could be another slowdown in the beginning of 2012.  The economists have also cut their odds of a new recession in the next 6 months down to 15%, from a 25% chance only 3 months ago.  The downward revision for Q3 GDP was mostly due to a weaker reading for personal consumption, a measure of consumer spending which grew at only 1.7%, down from the previous estimate of 2.3% growth.  Lower spending on services was the main cause of the decline.  Again, moderately better news.

U.S. Economy Expands Less Than Estimated

Photo:   Bloomberg

Consumer sentiment improved in Dec to its highest level in 6 months as Americans felt better about the economy's prospects for the year ahead.  The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment rose to 69.9 from 64.1 in Nov, topping the median forecast of 68.0 among economists & beat the preliminary figure of 67.7.  Overall, real spending is expected to increase by 1.8% in 2012 as long as action is taken on extending the payroll tax cut.  The barometer of current economic conditions rose to 79.6 from 77.6, while the gauge of consumer expectations gained to 63.6 from 55.4.  All 3 indices were at their highest level since Jun.  Good economic times were expected in the year ahead by 29% of respondents, up from 19% in Nov as more consumers heard news of employment gains.  Still, they did not expect it to have much impact on the unemployment rate.  However consumer views of their finances remained gloomy with the majority of families expecting no income increase next year.  Again, better news.

Michigan Consumer Sentiment Index Rose More Than Forecast

Photo:   Bloomberg

Greek creditors are resisting pressure from the IMF to accept bigger losses on holdings on the nation’s gov bonds.  Lenders want the €70B ($91B) of new bonds in return for existing securities to carry a coupon of about 5%.  The IMF is pushing for creditors to accept a smaller coupon in order to reduce the Greek debt-to-GDP ratio to 120% by 2020, a key element of the Oct 27 agreement by the EU.  Greece’s debt will balloon to almost twice the size of its economy next year without a write-off accord by investors.  As part of Greece’s €130B 2nd bailout, investors would take a 50% hit on the nominal value of €206B of privately owned debt.  Exchanging bonds for securities with a 5% coupon would leave investors with a 65% loss in the net present value of their holdings of Greek debt.  The Greek drama is far from over.

Greece’s Creditors Resist Push for More Losses

The news was fairly good today, but markets did not respond in a meaningful way.  The Europe debt cloud is still hanging over the market, although bank stocks were bid up.  Extending lower Social Security taxes is going nowhere, but chances are the politicos will give in at the last minute.  Dealing with major financial issues this way shows large decisions are being hand in a sloppy & political ways.  But markets have learned to live with this until the next crisis explodes, which could be any time.  The 12.2K ceiling for the Dow continues to hold, not good after the huge gain on Tues.

Dow Jones Industrial Average

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