Thursday, March 15, 2012

Markets waver after favorable jobless claims

Dow is even, advancers & decliners were equal & NAZ gained 2 (mostly from a 3 point gain for Apple, it's largest component).  The MLP index fell another 2 to 395, an almost 2 month low, & the REIT index was off a fraction in the 249s (4 below its highs in the last year).  Junk bond funds were mixed as were Treasuries after their worst 2 day stretch in years.  The yield on the 10 year Treasury had been at 2% & lower for more than 4 months.  Now it's 2¼%, a major move up.  Oil was even & gold is rebounding after it suffered from heavy selling in the last 3 weeks.

JPMorgan Chase Capital XVI (AMJ)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLJ12.NYM.....Crude Oil Apr 12...105.44 ...Up 0.01  (0.0%)

GCH12.CMX...Gold Mar 12.......1,647.10 ...Up 4.60  (0.3%)

Get the latest daily market update below:

Jobless Claims in U.S. Decrease, Matching Four-Year Low (2)

Photo:   Bloomberg

Fewer sought unemployment benefits last week.  Applications for unemployment aid dropped 14K to 351K according to the Labor Dept, matching a 4-year low reached last month.  The 4-week average was unchanged at 355K.  Applications have leveled off in the past few weeks after falling for 6 months & the average has declined 14% since Oct.  The steady decline in applications has coincided with the best 3 months of hiring in 2 years.   Job growth is being driven by a stronger economy, which grew at an annual rate of 3% in Q4.  But the total number receiving unemployment benefits is up slightly.  More than 7.4M received aid in the latest week, about 36K more than in the previous week.  The total includes more than 3M who are receiving extended benefits under an emergency program put in place during the recession.  The job market has a long way to go to fully recover from the great recession.  Almost 13M remain unemployed & the economy still has 5M fewer jobs than before the downturn.

Jobless Claims in U.S. Decrease, Matching Four-Year Low

  • <p>               In this March 2, 2012 photo, Al Milani of Staten Island, pumps gas in Manhattan at a BP mini-mart. Higher gas costs drove U.S. wholesale prices up last month. But excluding the big jump in gas, inflation was mostly tame. (AP Photo/Gene J. Puskar)
Photo:   Yahoo

Higher gas costs drove wholesale prices up last month. But excluding the big jump in gas, inflation was mostly tame.  The Labor Dept said that the producer price index (PPI) rose 0.4% in Feb.  Food prices declined to offset some of the increase in energy costs.  The "core" index, which excludes food & gas prices, increased 0.2%, the smallest gain in 3 months (an increase in pharmaceutical prices accounted for roughly one-third of the gain).  In the past 12 months, wholesale prices have increased 3.3%, the smallest year-over-year gain since Aug 2010.  Modest wholesale inflation reduces pressure on manufacturers & retailers to raise prices to help keep consumer prices stable.  Low inflation also allows the Federal Reserve to keep short-term interest rates near zero.  Energy prices rose in Feb after falling in the 2 previous months.  Wholesale gas costs jumped 4.3%, the biggest rise in 5 months.  Oil & gas prices have surged since the beginning of the year.  The average retail price for a gallon of gas was $3.81 yesterday, 50¢ higher than a month ago.

Wholesale Prices in U.S. Increase by Most in Five Months

Foreign demand for Treasury debt rose to a record high in Jan.  China, the largest buyer, increased its holdings for the first time in 6 months.  Total foreign holdings rose 0.9% in Jan to $5T, the 6th consecutive monthly increase, according to the Treasury Dept.  China boosted its holdings 0.7% to $1.16T.  Japan, #2 buyer, increased its holdings 2% to a record $1.08T.  Treasury debt is considered one of the safest investments & demand for it has increased as Europe's debt problems have intensified.  The demand has remained strong despite the first downgrade of the gov credit rating last Aug when S&P lowered its rating on long-term Treasury debt one notch from AAA to AA+.  Strong foreign demand is important,since it's financing much of the massive deficits the Treasury is running.

International Demand for U.S. Assets Rises

Following 2 strong days on Mon & Tues, the markets are pausing to collect their thoughts.  Some of the biggest news this week is the dramatic increase in Treasury yields.  This is happening the same time that MLPs have been weak.  There could be a connection, investors looking for higher yields.  Economic signs are encouraging for the US economy, if higher priced gas prices don't get in the way.  But Europe looks to be in a recession & that is a major market for US companies.  The 13K ceiling for the Dow held for so long.  After it was topped so easily, buyers are hesitating.  Dow still has had a dramatic run in the last 6 months, up almost 3K.  It may need time for profit taking.

Dow Industrials

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