Friday, March 9, 2012

Markets edge higher despite a favorable jobs report

Dow was up a measly 14, advancers over decliners 5-2 & NAZ gained a more impressive 17.  The Financial Index was up only a moderate 1+ to 200, pretty much matching its recent highs.  The MLP index rose 1+ to the 404 & the REIT index was up 1+ to the 244s.  Junk bond funds were strong while Treasuries settled back.  Oil had a good day on hopes of stronger economies buying more oil & gold is back over $1700.

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CLJ12.NYM...Crude Oil Apr 12...107.29 T...Up 0.71  (0.7%)

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A Pedestrian Passes The Greek Parliament

Photo:   Bloomberg

The agency that oversees financial derivatives says a massive debt relief deal for Greece constitutes a so-called credit event, meaning it will trigger payouts on bond insurance. The International Swaps and Derivatives Association (ISDA) said that its determinations committee "resolved unanimously that a Restructuring Credit Event has occurred with respect to The Hellenic Republic."  Holders of credit default swaps on Greek bonds will be able to claim insurance payments as a result of Greece's decision to force its debt holders into a bond swap.  ISDA has said that overall payouts on CDs linked to Greek debt will be less than $3.2B, relieving fears that they could fell a big financial firm.  The radical swap aimed to put the country's debt-ridden economy on the road to recovery, & was a key condition to secure a €130B ($172B) rescue package from other eurozone countries & the IMF.  Big picture, life will go on after this type of default (whatever you call it). 

Local gov payrolls increased last month for the first time since Aug, easing the drag on the economy brought on by budget-cutting cities, counties & school districts.  The  Labor Dept reported that local-gov employment expanded 2K (WOW!) in Feb as school districts boosted hiring.  State payrolls slipped 1K after rising 11K in Jan.  State tax revenue has been growing at the fastest pace since 2006, helping to narrow the budget deficits that governors have dealt with for the past 4 years.  Economic growth has been restrained as state & local govs reduced payrolls to make up for declines in tax collections.  Together, 647K state & local gov jobs have been cut since public sector employment peaked in 2008.  The Feb payroll increase was driven entirely by education with employment in other areas of gov continuing to slip.  Excluding school- related jobs, sate gov payrolls slid 2.7K while the number of workers at localities dropped 3.9K.  Their employment picture remains gloomy.

U.S. Local Governments Show First Payroll Boost Since August; States Slip

Trade Deficit in U.S. Widens to Largest Since October 2008

Photo:   Bloomberg

The US trade deficit widened in Jan to the largest since Oct 2008 as imports rose to a record high.  The gap increased 4.3% to $52.6B, more than forecast, from a revised $50.4B in Dec, according to the Commerce Dept.  Exports of capital goods, as well as cars & automobile parts, climbed to a record.  Imports may keep rising as labor markets gains give consumers more money to spending while businesses rebuild stockpiles.  Rising energy costs can also keep the trade gap widening.  The cost of petroleum imports in Jan slipped to $17.2B from $17.4B in Dec.  Overall imports advanced 2.1% to $233B.  In addition to petroleum, more capital goods were purchased such as computer accessories & telecommunications equipment from overseas.  Exports increased 1.4% to $180.8B, boosted by aircraft sales & computers to buyers overseas.   That caused the trade gap excluding petroleum to narrow to $22.9B from $23.2B in Dec.  Rising imports are a drag on the US economy.  Imports represent money that could have been spent on US products made by US workers.  

The week did not end on a happy note even though the jobs numbers were favorable, the Greek debt swap was accepted & Apple (AAPL) held a new product event.  This was not a joyous time.  Dow finished the week down 55.  The yearly chart below shows it keeps bumping against the 13K ceiling, failing to go thru it.  Next week, odd ends from the Greek debt swapped will be tidied up (which may not go all that smoothly).  Bulls will have to come up with new magic to take the market higher.

Dow Industrials

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