Friday, May 4, 2012

Markets sink as fewer jobs than expected added in April

Dow dropped 119, decliners over advancers 4-1 & NAZ fell 48.  Bank stocks led the selling, taking the Financial Index down 3 to 203, near a 2 month low.

The MLP index plunged 5 to the 389s (10 in 2 days) & the REIT index fell a more mild 1+ to 260.  Junk bond funds were weak but Treasuries rose, pushing yields to almost a 3-month low, as companies in the US added fewer jobs than forecast.  Oil briefly fell below $100 a barrel for the first time since Feb as US. employers added fewer workers than forecast.  But that brought buying interest in gold.

JPMorgan Chase Capital XVI (AMJ)

stock chart

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLM12.NYM...Crude Oil Jun 12...100.19 .....Down 2.35  (2.3%)

GCK12.CMX...Gold May 12......1,644.60 ...Up 10.40  (0.6%)

Get the latest daily market update below:

  • A man and woman enter a job fair at the Phoenix Workforce Connection in Phoenix, Arizona. REUTERS/Joshua Lott
Photo:   Yahoo

Employers cut back on hiring in Apr & the jobless rate fell as people gave up the hunt for work, a somber note on the economy.  Employers added just 115K workers last month according to the Labor Dept, the 3rd straight month in which hiring slowed, keeping fears alive that the US economy is losing momentum.  It also dampens hopes that a stretch of strong winter hiring signaled a turning point for the recovery.  The unemployment rate ticked a tenth of a point lower to 8.1%, a 3-year low, as people left the workforce.  Still, the report was not all negative. The gov revised upward its initial estimates for payroll growth in Feb & Mar by a combined 53K, leaving the 6-month average of job growth at 197K, nearly where it would have been had Apr job growth come in as expected at 170K.  The unemployment rate, which soared to as high as 10%, held near 9% for most of last year before falling sharply over the winter but remains about 2 percentage points higher than its average over the last 50 years.  The Federal Reserve thinks the labor market probably will not post a full recovery for at least several years.  So far this year, the labor market has given mixed signals.  During the winter, fast growth in payrolls led many to think the economy was turning a corner.  Then jobs growth braked in Mar, fueling fears the recovery was losing momentum.

Employers in U.S. Added Fewer Jobs Than Forecast in April

  • <p>               A member of New democracy party shouts slogans during Greece's conservative leader of New Democracy Antonis Samaras speech at the Zappeio conference hall in Athens, Thursday, May 3, 2012. Samaras who joined the majority Socialists in a coalition for the past six months, is leading in opinion polls but is facing a strong challenge from rightist splinter parties and a fascist party that have campaigned heavily on illegal immigration in the crisis-hit country. (AP Photo/Thanassis Stavrakis)
Photo:   Yahoo

After more than 2 years of financial crisis, bailouts, a huge debt writedown & Europe's harshest austerity program, Greek voters have been given a chance to hit back at the parties that got them into this mess on Sun when an electorate fuming at repeated income cuts, tax hikes & rapidly rising unemployment will vote in parliamentary elections.  It's expected to abandon old political loyalties & give no party an outright majority.  But this could well leave Greece without a gov when it needs it the most & jeopardize the program of intl bailouts the country depends on.  After years of excessive spending & dismal fiscal stewardship, in 2010 Greece was priced out of the intl markets.  It had to take 2 separate rescue loan agreements with its European partners & the IMF worth more than €240B ($317B) & the biggest debt writedown in history.  To secure the bailouts, the gov had little choice but to agree to a harsh round of austerity measures that cut everything from wages to pensions & healthcare & had to promise to dismantle the protected trades that choked the economy.  Blame for the problems that led to the rescue has been placed firmly with the 2 main political parties that governed Greece over the past 4 decades which have been accused of uncontrolled overspending, cronyism & lack of accountability.  Since Nov 2011, the country has been governed by a coalition led by caretaker Prime Minister Papademos.  During that time, Greece managed to secure the 2nd bailout & debt relief deal.  Over the past 2½ years, however, the parties that agreed on the bailouts & debt writedown appear to have lost nearly half their support, according to recent polls.  Stay tuned as the Greek drama plays on.

Austerity-weary Greece faces electoral impasse AP

BofA Sees $5 Billion Collateral Need in Credit Downgrade

Photo:   Bloomberg

Bank of America, a Dow stock, that has bought back debt to strengthen its balance sheet, & said credit downgrades in a hypothetical scenario may trigger demands for about $6.2B in collateral.  A 2-level downgrade of long-term senior debt ratings would have prompted the bank to post $5.1B of collateral tied to derivatives contracts & other trading agreements as of Mar 31.  It would have had to post an additional $1.1B of collateral if trading partners opted to tear up contracts in a 2-level cut.  Moody’s, which is reviewing banks & securities firms with global capital markets operations, has said it’s considering downgrades of lenders including BAC, ranked 2nd by assets in the US.  Ratings cuts typically raise borrowing costs & force banks to increase collateral.  “Capital markets firms are confronting evolving challenges, such as more fragile funding conditions, wider credit spreads, increased regulatory burdens and more difficult operating conditions,” Moody’s said in Feb.  “These difficulties, together with inherent vulnerabilities such as confidence-sensitivity, interconnectedness and opacity of risk, have diminished” the industry’s prospects, Moody’s said.  Another dark cloud hanging over the banks.  The stock fell 27¢ & has a dreary chart over the last 2 months.

Bank of America Sees $6.2 Billion Collateral Hit in Worst-Case Rating Cut

Bank of America Corporation (BAC)

stock chart

Markets were waiting for the jobs report.  When it was reported. it got a dismal rating partially because it extended the trend of sluggish jobs growth.  MLPs are getting less attention in 2012, they are no longer market leaders.  The index just had a good month, but lost much of those gains in the last 2 days.  The yield on the index is above 6.1%, low by historical standards.  Speaking of yields, the yield on the 10 year Treasury is back below 1.9%, another negative sign for the stock market.  Dow keeps hanging in there, but can't get away from the 13K level..

Dow Industrials

stock chart

Get your favorite symbols' Trend Analysis TODAY!  

No comments: