Wednesday, April 3, 2013

Markets decline on weaker March economic data

Dow dropped 53, decliners over advancers 5-2 & NAZ fell 12.  The Financial Index lost 2+ to the 243s.  The MLP index pulled back 3+ to 450 & the REIT index was off a fraction in the 287s.  Junk bond funds were soft & Treasuries found buyers.  Oil & gold also retreated.

AMJ (Alerian MLP Index tracking fund)

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CLK13.NYM...Crude Oil May 13...96.74 Down ...0.45  (0.5%)

CJ13.CMX.......Gold Apr 13.......1,573.80 Down ...1.30  (0.1%)

IMF Managing Director Christine Lagarde

Photo:   Bloomberg

The IMF said it will contribute €1B to a`financial rescue package of €10B ($12.8B) for Cyprus.  The IMF managing director Christine Lagarde said the contribution would be made via a 3-year loan that's expected to be cleared by the fund's executive board in early May.  Earlier this week, the final terms of the Cyprus bailout were agreed between Cyprus & the EY along with the IMF.  Lagarde & Olli Rehn, the top monetary affairs official at the European Commission, the EU's executive arm, said "significant challenges lie ahead for Cyprus" as the gov sets in motion a multi-year program of reforms to rebuild its banking sector & austerity.  Apart from spending cuts & tax increases worth around 5% of Cyprus' annual GDP, Lagarde said the country will need to do more.  Cyprus will have to raise another 2% thru measures such as a corp tax rate hike from 10 to 12.5%, & the doubling of the interest rate tax to 30%.  The IMF chief said an additional 4.5% will be needed over the medium term if the country is to achieve a budget surplus worth 4% of its annual GDP by the target date of 2018.  That surplus is needed to get the country's debt "on a firmly downward path."  "This is a challenging program that will require great efforts from the Cypriot population," Lagarde said.  "We believe that it provides a durable and fully financed solution to the underlying problems facing Cyprus and provides a sustainable path toward a recovery."

IMF to Contribute 1 Billion Euros to Cyprus Rescue

ADP Data Shows U.S. Economy Added Fewer Jobs Than Forecast

Photo:   Bloomberg

Companies added fewer workers than projected in Mar, held back by limited hiring in construction.  The 158K increase in employment was the smallest since Oct & followed a revised 237K gain the prior month, according to ADP Research Institute.  The forecast called for a 200K advance.  “The job market continues to improve, but in fits and starts,” Mark Zandi, chief economist at Moody’s Analytics said (Moody’s produces the figures with ADP).  Payrolls at construction companies stagnated last month as the boost from rebuilding efforts following superstorm Sandy faded, Zandi said.  Concern over the impact of changes in health- care law may have also curbed hiring at companies with around 50 employees, he added.  The prior month’s figure was revised from a previously reported increase of 198K.

U.S. Company Add 158,000 Workers to Payrolls, ADP Says

ISM Services Gauge in U.S. Decreased to 54.4 in March From 56

Photo:   Bloomberg

Service industries in the US expanded in Mar at the slowest pace in 7 months as new orders & employment cooled.  The Institute for Supply Management non-manufacturing index declined to 54.4 from a one-year high of 56 in Feb.  The forecast was for a drop to 55.5.  A reading above 50 indicates expansion.  The figures follow a decrease in the factory index & signal the economy may find it hard to accelerate in  Q2 in the face of across-the-board federal budget cuts.  Before today, the gauge averaged 53.6 since the recession ended in Jun 2009.

ISM Services Gauge in U.S. Decreased to 54.4 in March From 56

The ADP jobs data & ISM report clearly disappointed traders.  After auto sales reports, these are the next in line & they reflect the broader economy.  Federal budget cuts are biting & they can produce a bigger drag in the coming months.  Meanwhile Cyprus is learning about tough standards from lenders.  The Mar report on employment due on Fri may be gloomier after today's ADP report.  But so far, Dow is not greatly disturbed.

Dow Jones Industrials

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