Tuesday, September 11, 2012

Higher markets anticipating stimulus from the Federal Reserve

Dow added 69, advancers ahead of decliners 2-1 but NAZ was up pocket change.  The Financial Index rose 1½ to go over 210.  The MLP index was down a fraction in the 395s & the REIT index gained a fraction in the 269s.  Junk bond funds were higher & the 10 year Treasury pulled back a notch.  Oil rose for a 5th day on speculation that the Federal Reserve will announce additional measures to stimulate the economy, increasing fuel demand. Gold inched higher & remains in an upward trend.

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CLV12.NYM...Crude Oil Oct 12...97.16...Up 0.62 (0.6%)
Live 24 hours gold chart [Kitco Inc.]

Wen Jiabao, Chinese Premier, signaled there’s more room for fiscal & monetary policy to support growth, saying the nation has full confidence it will meet its economic goals for the year.  “Be it monetary or fiscal, we still have ample strength,” Wen said yesterday in Tianjin.  The gov has 100B yuan ($16B) in a fiscal stabilization fund & “we will appropriately use that for preemptive policy and fine-tuning to propel stable economic growth,” he said.  The gov is trying to prevent growth this year from slipping below the 7.5% target set in Mar, which would already be the weakest since 1990.  Some economists have lowered expansion forecasts as China grapples with slowing industrial output & export gains, increasing pressure to ease policy.  The country will continue to place more emphasis on ensuring stable growth, Wen said.  He reiterated that China will maintain a proactive fiscal policy & prudent monetary policy, & said the nation has implemented a series of steps to promote domestic demand.  The economic goings on in China are important in the worldwide economy.

Wen Signals China Has Ample Policy Room to Meet Growth Target

House Speaker John Boehner said that he's not confident Congress can reach a budget deal & avoid a downgrading of the US debt rating.  But Harry Reid, was far more hopeful that "some kind of agreement" would be reached after the elections.  Boehner was asked how confident he was that negotiations would prevent the gov from hitting a fiscal cliff, an economy rattling set of across-the-board spending cuts & higher taxes caused by the expiration of tax cuts that are set to hit in Jan.  "I'm not confident at all," he said.  Boehner reminded reporters that the House has passed legislation to both avoid the automatic, across-the-board cuts next year & renew cuts for one year as well. Reps warned of the impact of the impending cuts on the military & implored Senate Dems to act to avoid them.  "I'm hopeful we will reach some kind of agreement," countered Reid, suggesting that the results of the election will weaken the GOP's resolve to block tax increases on wealthier earners & that Reps will be more willing to compromise.  The fiscal cliff is an immediate issue & legislation is dead in the water.  Meanwhile, businesses are playing cards close to the vest, limiting expansion plans which include hiring more workers.  Not good for the markets.

Boehner expresses no confidence on budget deal AP

  • <p>               FILE-In this Tuesday, July 17, 2012, file photo, business employment specialist Linda Reynolds, right, helps job searcher D'Andre Preston at WorkSource Oregon  in Tualatin, Ore. U.S. employers posted fewer jobs in July than in June, the latest evidence that hiring is weak. Job openings fell to a seasonally adjusted 3.67 million, the Labor Department said Tuesday. That down from June's 3.72 million job openings, which was revised lower.(AP Photo/Rick Bowmer, File)
Photo:   Yahoo

US employers posted fewer jobs in Jul than in Jun, further evidence that hiring may stay weak in the coming months.  Job openings fell to 3.67M according to the Labor Dept, down from 3.72M in Jun (which was revised lower).  This follows the disappointing employment report, which said the economy added only 96K jobs in Aug.  The drop in available positions has made job hunting more competitive.  Nearly 12.8M people were unemployed in Jul, meaning 3.5 were competing for each open position.  While down from a post-recession high of 7 to 1 in Jul 2009, in a healthy economy the ratio is usually 2 to 1.  Job openings have increased 68% from 2.2M over the past 3 years.  But companies aren't filling them quickly as total hiring has increased only 11% in that stretch.  Companies may not be offering sufficient pay to entice workers to take the jobs & some employers say they can't find enough skilled workers.  Businesses are also worried about Europe's financial crisis, slowing growth in China & the pending expiration of tax breaks in the US.

US employers posted fewer open jobs in July AP

Tomorrow the German high court will decide whether the European Stabilization Mechanism, overseen by Mario Draghi, & the ECB can buy the sovereign debt of member states in financial trouble.  Then Big Ben speaks.  The markets have already decided the outcomes.  But I don't know.  Whatever the Federal Reserve does, DC remains stuck in the mud & that fiscal cliff keeps getting closer.  Nothing will be done until after elections & probably not finalized until Xmas.  That's the politicos in DC looking out for us folks.  Expansion plans are being put on hold, but Dow doesn't care because it's near a 4 year high.

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