Friday, August 3, 2012

Markets leap higher on jobs data

Dow shot up 217, going back over 13K, advancers ahead of decliners better than 4-1 & NAZ gained 58.  The Financial Index was up 5 to just under 200, an almost 3 month high.

The MLP index was flat in the 389s & the REIT index rose 2 to the 268s (near its yearly highs).  Junk bond funds were higher & Treasuries pulled back, that money went into stocks.  Oil surged the most in a month after US payrolls climbed more than estimated & service industries expanded at a faster pace, bolstering optimism about economic strength in the world’s biggest crude-consuming country.  Gold had a $15 gain, bets against an improving economy.

AMJ (Alerian MLP Index tracking fund)

stock chart

Click below for the latest market update:

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLU12.NYM...Crude Oil Sep 12....91.62 ...Up 4.49  (5.2%)

Live 24 hours gold chart [Kitco Inc.]

  • <p>               In this July 9, 2012 photo, construction workers continue work on the job in Boston. U.S. service companies, which employ 90 percent of Americans, grew at a slightly faster pace in July. The Institute for Supply Management reported Friday, Aug. 3, 2012, that its index of non-manufacturing activity picked up slightly last month with a reading of 52.6. That was a tiny improvement from June's reading of 52.1, which had been the lowest since January 2010. Still, any reading above 50 indicates expansion. (AP Photo/Elise Amendola)
Photo:   Yahoo

US service companies, which employ 90% of the workforce, grew at a slightly faster pace in Jul.  The Institute for Supply Management reported that its index of non-manufacturing activity picked up slightly last month with a reading of 52.6, up from the Jun reading of 52.1 (the lowest since Jan 2010).  Any reading above 50 indicates expansion.  The service sector has now grown for 31 straight months.  But even with the Jul gain, the index remains far below its recent high of 57.3 in Feb.  Part of the strength came from a rise in the index component which tracks new orders.  Service companies include retail, construction, financial services, health care & hotels, among other industries.  The reading was considered encouraging because it at least showed a small rebound after a decline in Jun.  However, it appears as though the economy began Q3 on the weak side.

Service Industries in U.S. Expanded at Faster Pace in July

Spain’s Prime Minister Mariano Rajoy

Photo:   Bloomberg

Spanish Prime Minister Rajoy said he would only consider asking for financial aid for his country once the ECB has fleshed out its crisis-fighting plans for buying gov bonds.  This is the closest he has come to admitting he is considering a bailout after months of denials.  Rajoy urged Europe's leaders & the ECB to speed up the introduction of key reforms to fight the debt crisis & strengthen the struggling banking sector.  "I haven't made a decision (on a bailout) yet," Rajoy said after a cabinet meeting.  "I want to know what the unconventional measures proposed by the ECB are.  We do not know what is being proposed."  Rajoy was speaking a day after the ECB warned it would only help lower a country's borrowing costs if that country's gov applied for rescue aid from the rescue funds set up by the 17 countries that use the € which sent Spain's borrowing costs spiraling again as investors expressed their disappointment & continuing concern over whether Spain can manage its finances & pay its debts.  The interest rate on Spain's 10-year bond was at 6.82% just after Rajoy spoke, dangerously close to the 7% considered unsustainable in the long term.  Such rates could likely push Spain to seek a bailout, deepening Europe's financial woes & sending repercussions to economies beyond the continent.

Ameican International Group, majority-owned by the Treasury, said profit increased 27% on investments & improvements at its property-casualty unit.  EPS rose to $1.33, up from $1 last year earlier.  Operating profit, which excludes some investment results, was $1.06 a share, beating the average estimate of 60¢.  The Treasury has sold about $17.5B of AIG shares in 3 offerings, reducing its stake to 61%.  AIG bought about $5B of its stock in the 2 sales this year.  The Treasury is expected to sell additional shares in Q3.  The stock gained 52¢ to $31.36.

AIG Profit Climbs 27% to $2.33 Billion on Investments

American International Group (AIG)

stock chart

Stocks were in demand after the jobs data was announced before trading.  It was a surprise to all, accounting for today's surge.  But there are questions about how long this enthusiasm will last.  The unemployment rate ticked up 0.1%, not a good sign especially when the high rate of unemployment has been a national problem for years.  What the stock buyers forgot is that the 163K jobs gain would have been considered weak in Q1.  Today was the case of beating low estimates.  Euro debt problems are not going away anytime soon.  A Spanish bailout could be around the corner.  Enjoy the increased portfolio values & have a good weekend.

Dow Jones Industrial

stock chart

Get your favorite symbols' Trend Analysis TODAY!  

1 comment:

Dividend Yield said...

As a value investor I have often found myself highly dependent on thinking in terms of “margin of safety” when it comes to value.

Dividend Date