Friday, August 3, 2012

Markets soar on a better than expected jobs number

Dow surged 204 going over 13K, advancers over decliners 7-1 & NAZ rose 57. The Financial Index was up almost 5 to the 199s, its best level in 3 months. The MLP index added 2 to the 391s & the REIT index shot up almost 3 to the 269s (nearly matching its yearly highs).  Junk bond funds gained & Treasuries pulled back as stocks rallied.  Oil rallied, trying to get back over 90 while gold edged higher.

AMJ (Alerian MLP Index tracking fund)

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CLU12.NYM....Crude Oil Sep 12...89.79 ...Up 2.66  (3.1%)

GCQ12.CMX...Gold Aug 12......1,594.20 ....Up 6.80  (0.4%)

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  • <p>               FILE - In this July 25, 2012, file photo, people looking for work talk at a Primerica job booth at a job fair in San Jose, Calif. U.S. hiring was likely sluggish in July for a fourth straight month, held back by slower economic growth and an uncertain outlook. (AP Photo/Paul Sakuma, File)
Photo:   Yahoo

Employers added 163K jobs in Jul, a hopeful sign after 3 months of sluggish hiring.  But the Labor Department said that the unemployment rate rose to 8.3% from 8.2% in Jun.  Jul hiring was the best since Feb.  Still, the economy has added an average of 151K jobs a month this year, enough to keep up with population growth but not enough to drive down the unemployment rate.  A better outlook on hiring could make the Federal Reserve (FED) reluctant to take more action to spur growth.  The FED, which ended a policy meeting yesterday, signaled in a statement a growing inclination to take further steps if hiring doesn't pick up.

U.S. Payrolls Rise More Than Forecast; Unemployment 8.3%

Procter & Gamble Profit Tops Estimates Amid Price Increases

Photo:   Bloomberg

Procter & Gamble, a Dow stock & Dividend Aristocrat, posted a higher-than-expected quarterly profit despite a drop in sales, just weeks after it took the blame for its disappointing performance & said it was focusing on ways to improve.  The forecast for the current qtr (fiscal Q1) is below the estimate by analysts, suggesting it could take several more months before the bulk of the company's restructuring efforts pay off.  PG also said it would repurchase $4B worth of its shares this fiscal year.  In Jun it said it did not expect to do so because it wanted to preserve its credit rating.  CFO Moeller said PG had changed its mind because it had growing confidence in its turnaround plan & more cash on hand than it had anticipated in Jun, while interest rates continued to fall.  EPS for fiscal Q4 was $1.24, up from 84¢, a year earlier.  Excluding some items, EPS was 82¢ versus an estimate of 77¢.  The stock rose 1.78. 

Procter & Gamble Profit Tops Estimates Amid Price Increases

Procter & Gamble (PG)

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European Central Bank President Mario Draghi

Photo:   Bloomberg

After more than 2 years of incremental crisis management & false starts, a bargain is beginning to emerge between Europe's politicians & central bankers over how to calm bond markets & end the debt tumult that threatens the survival of the €.  The ECB sketched out its side of the deal yesterday, offering to buy Italian & Spanish bonds on the market as long as the bailout fund makes purchases directly from the 2 countries’ treasuries & ties them to tough conditions.  Mario Draghi offered only a glimpse of the new strategy, with the actual interventions weeks or months away & a host of obstacles standing in the way before Europe can claim to be on a path out of the crisis that emerged in Greecce in late 2009.  Investors looking for a quicker fix sold the € & stocks of at-risk countries.  The € jumped over $1.24 on the initial ECB announcement, falling back as Draghi’s caution that “it was not a decision, it was guidance” sank in.  Then the currency slipped a penny.  The yield difference between 10-year Italian bonds & similar-maturity German bunds narrowed 7 basis points to 502 basis points, after jumping 54 basis points.  Spain’s yield difference compared to bunds rose 7 basis points to 600 basis points.  Skeptics recalled the failure of European authorities to deliver on prior crisis-fighting pledges, whether by restricting the use of the original €440B ($535B) rescue fund or forcing through a restructuring of Greece’s debt after promising not to.  No quick fix here.

ECB-Politicians’ Anti-Crisis Bargain Starts to Emerge

This is a day for the bulls.  Markets loved the jobs data & buyers are in a very good mood.  However fundamental problems remain.  The euro debt mess dribbles on, the US economic recovery is not getting a passing grade & the status of the Chinese economy is unclear.  But bulls are happy to see the Dow back over 13K.  Of course, it has not strayed far from that level for months, so maybe it's not all that important of a signal.

Dow Jones Industrials

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