Thursday, October 18, 2012

Markets slide after jobless claims rise

Dow inched up 5, decliners ahead of advancers 5-4 & NAZ fell 10.  The Financial Index was up a fraction in the 219s, a new yearly high.  The MLP index slipped 1 from its record high to the 413s & the REIT index was up1 to the 265s, hardly straying from its center-line for  a month.  Junk bond funds were a little weaker & Treasuries rose.  Oil fell for the first time in 3 days after a report showed more Americans than forecast filed applications for unemployment benefits last week.  Gold pulled back.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLX12.NYM...Crude Oil Nov 12...90.99 ...Down 1.13  (1.2%)

GCV12.CMX...Gold Oct 12......1,747.70 ...Down 3.80  (0.2%)

Jobless Claims in U.S. Rise More Than Forecast on Seasonal Shift

Photo:   Bloomberg

More applications were filed for unemployment benefits last week, reflecting an unwinding of adjustments for seasonal swings at the start of Q4.  Jobless claims increased 46K to 388K in the current week from a revised 342K in the prior period which had been the lowest since Feb 2008 according to the Labor Dept.  The forecast was for a rise to 365K.  The typical pattern of large increases in unadjusted claims at the start of the qtr seems to have shifted by a week in one state, causing the adjusted data to become volatile.  But thru the ups & downs, the level of layoffs has been little changed, indicating that a lack of hiring is the main reason payrolls have failed to strengthen.  The 4 week moving average rose to 366K last week from 365K.  The average number of claims over the past 2 weeks was in line with the 4 week average, indicating little change in the pace of layoffs outside the seasonal swings.

U.S. Jobless Claims Rise 46,000 on Seasonal Shift

  • German Chancellor Angela Merkel attends a debate after delivering a government policy statement during a session of the Bundestag, the German lower house of parliament, in Berlin October 18, 2012. REUTERS/Thomas Peter
Photo:   Yahoo

Angela Merkel proposed a new European aid fund to bolster competitiveness as she highlighted disagreements over budget rules, joint borrowing & bank supervision in a pre-summit address.  Speaking to lawmakers in Berlin before heading to Brussels for a gathering of EU leaders,  Merkel laid out her vision for more economic coordination, while expressing “surprise” at negative reaction to a proposal for a watchdog with veto power over national budgets.  Her vision includes a fund “limited in time and project-based” & possibly stocked by the proposed financial transaction tax.  “To give all member states the opportunity then to improve their competitiveness and to actually be able to implement these commitments, I propose that we introduce a new element of solidarity,” Merkel said.  “Yes, we need solidarity, but we need a form of solidarity that leads to what we need: more competitiveness.”  Exactly 3 years after Greece touched off the financial crisis by revealing a bigger-than-expected budget cuts, leaders will gather to discuss joint banking supervision & a report by the EU  that lays out options for closer economic & fiscal union.  Included in his blueprint is a proposal for pooling euro-area debt that is supported by France, Spain, & Italy but rejected by Merkel.

Merkel Proposes European Aid Fund as Disagreements Mount Before EU Summit

Index of U.S. Leading Economic Indicators Rose 0.6% in September

Photo:   Bloomberg

The index of US leading economic indicators rose in Sep by the most in 7 months, boosted in part by a jump in permits for home construction that’s helping underpin the expansion.  The Conference Board’s gauge of the outlook for the next 3-6 months increased 0.6% after a revised 0.4% drop in Aug that was bigger than initially reported & beat the estimate for a 0.2% increase.  A recovery in the housing market & a surge in stock prices may also be fueling optimism among consumers.  But the fiscal cliff, $607B in federal spending cuts & tax increases scheduled to take effect in Jan unless Congress acts, is a hurdle for business investment & hiring.

Index of U.S. Leading Economic Indicators Rose 0.6% in September

Dow remains stuck on its 13½K level, hardly budging for more than a month.  The bulls have outrun the underlying economic news but they continue to have the upper hand.  Relatively risky investments such as MLPs, junk bonds & REITs are doing well while Treasuries have backed off their recent highs, bringing higher yields.  Earnings seem be getting so-so kind of reviews, to be expected with uncertainties in global economic conditions.  And Dow continues in its sideways trench.

Dow Jones Industrials

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