Friday, January 6, 2012

Mixed markets after favorable jobs report

Dow fell 37, advancers just ahead of decliners & NAZ gained 3.  The Financial Index was off a fraction.

S&P 500 Financials Sector Index

Value 181.36 One-Year Chart for S&P 500 Financials Sector Index GICS Level 1 (S5FINL:IND)
Change    -0.25    (-0.1%)

The MLP index pulled back 1+ from its record high reached yesterday & the REIT index was up fractionally in the 232s.  Junk bond funds edged higher & Treasuries rose.  Oil slipped for a 2nd day as European confidence in the economic outlook fell to a 2-year low & the € declined.  Gold found strength from the growing uncertainties over European debts.



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CLG12.NYM...Crude Oil Feb 12...101.09 ...Down 0.72   (0.7%)

GCF12.CMX...Gold Jan 12........1,621.90 ....Up 2.50  (0.2%)

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Unemployment Falls to 8.5% as U.S. Adds 200K Jobs

Photo:   Bloomberg

The economy added 200K jobs last month according to the Labor Dept, closing out the year with 1.6M jobs gained in 2011.  Only 940K jobs were added the year before.  Meanwhile, the unemployment rate fell to 8.5%, its lowest level in 3 years.  While private businesses have been adding jobs consistently since Mar 2010, the gov has been slashing payrolls.  In Dec, private employers added 212K while the public sector cut 12K jobs.  The manufacturing, health care & education industries were all bright spots, each adding more than 20K jobs.  Even the construction industry hired 17K.  Retail & the food services jobs were also on the rise, but there is cautioning that these positions could be related to holiday hiring.  Still, more than 13M remain unemployed in the US, & 42.5% of them have been so for 6 months or more.  The job market atill has a long way to go to fully recover from the financial crisis with the economy needing to add 6M jobs to get back to 2008 employment levels.  Fairly good news, but not good enough today for the markets.

U.S. Unemployment Falls to 8.5% as Jobs Gain

  • <p>               French prime minister Francois Fillon, right, greets his Italian counterpart Mario Monti prior to their meeting at the Hotel Matignon in Paris, Friday Jan. 6, 2012 (AP Photo/Remy de la Mauviniere)
Photo:   Yahoo

The leaders of France & Italy were greeted with grim economic news from across Europe as they prepared to discuss the spiraling debt crisis.  The crisis is now knocking at the door of core economies like Italy & France.  It's pushing much of the region toward a new recession & is sending the € to 16-month lows. The interest rate on Italy's 10-year bond rose above 7% again, a level that has eventually forced other countries to seek bailouts but Europe cannot afford to rescue Italy as it has smaller economies.  In addition, economic indicators also show that even the richer countries, like Germany, are no longer immune to the debt market jitters.  Economic sentiment & retail sales are falling across the region, while unemployment in the eurozone is stuck at 10.3%.  Markets are responding to this threat.

French, Italian leaders meet as crisis rolls on AP

Confidence in the economic outlook for the eurozone fell to the lowest in more than 2 years & German factory orders plunged as its struggled to contain a worsening fiscal crisis.  An index of executive & consumer sentiment in the area fell to 93.3 in Dec according to the European Commission.  Factory orders in Germany, the largest economy, dropped 4.8% in Nov, the most in almost 3 years.  Another European Union summit is scheduled for the end of the month as govs tighten austerity measures amid high unemployment, households & businesses are more reluctant to spend with the prospect of a recession looming.  The Luxembourg Prime Minister said on Wed that the EU is on the brink of a recession of unknown scope.  The ECB forecasts that the euro region’s economy will expand 0.3% in 2012, while the European Commission sees growth at 0.5%.  The € is headed for a 5th weekly loss against the dollar.

Confidence in Euro Region at Two-Year Low as German Orders Slide: Economy

What was a friendly jobs report didn't get respect.  The Euro debt mess is growing worse & markets sense that.  The € is just above $1.27, the leading indicator of the severity of the debt crisis.  The US economy is doing reasonably well, but unemployment remains at uncomfortably high levels.  Then there is next month when extending tax cuts & unemployment benefits decisions have to be made.  More uncertainty is not what markets like.

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