Thursday, May 9, 2013

Dow settles back after reaching record highs

Dow dropped 12, decliners over advancers 2-1 & NAZ slid 4.  The MLP index was up fractionally in the 457s & the REIT index fell 2 to 306.  Junk bond funds were mixed to lower & Treasuries hardly budged after recent selling.  Oil fell as the dollar strengthened against the € after the number of Americans filing jobless claims decreased to the lowest level in more than & years.  Gold also 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


CLM13.NYM...Crude Oil Jun 13...95.95 Down  ...0.67  (0.7%)

GCK13.CMX...Gold May 13....1,464.50 Down ...9.40  (0.6%)

People wait in line to meet a job recruiter at the UJA-Federation Connect to Care job fair in New York March 6, 2013. REUTERS/Shannon Stapleton

Photo:   Yahoo

The number of new claims for unemployment benefits dropped to its lowest level in nearly 5½ years, signaling labor market resilience in the face of fiscal austerity.  Initial claims for unemployment benefits fell 4K to 323K, the lowest level since Jan 2008, according to the Labor Dept.  Claims for the prior week were revised to show 3K more applications received than previously reported (call that flat for the 2 weeks combined). The forecast called for applications to rise to 335K.  The 3rd straight weekly decline pushed them further below the 350K mark, associated with a firming labor market.  The 4-week moving average for new claims dropped 6K to 337K, the lowest level since Nov 2007.  But the improvement in employment contrasts sharply with other data, including retail sales & manufacturing, that have suggested a cooling in the economy at the end of Q1, which persisted early in Q2.

Wholesale businesses stepped up restocking supplies in Mar while their sales fell sharply.  The Commerce Dept said that stockpiles held by wholesalers rose 0.4% in Mar compared with Feb, when they had fallen 0.3%.  But sales dropped 1.6%, the biggest setback since Mar 2009.  Sales had risen 1.5% in Feb. Inventory rebuilding can be a positive for economic growth because it means stronger production at the nation's factories.  The Mar increase left inventories at $503B, up 4.7% from a year ago & 30.7% above the recession low.  Q1 growth accelerated largely because consumer spending rose at the fastest pace in more than 2 years.  That also provided more incentive for businesses to restock their shelves after many cut back on inventory building at the end of last year.

US wholesale stockpiles up 0.4 percent in March AP

Shoppers, encouraged by signs of an improving economy, picked up spending in Apr from Mar despite cold weather that stopped them from buying spring clothes.  According to a preliminary tally of 11 retailers by the International Council of Shopping Centers, revenue at stores open at least a year rose 3.4% in Apr from last year.  That's up from a 2.2% gain in Mar but still shows modest growth.  For the Mar-Apr period, the measure rose 2%.  While only a sliver of the nation's retailers now report monthly figures, the data offers a snapshot of consumer spending.

Retailers report modest gains for April AP

Even the bulls have to take a day off to absorb the fantastic run by the stock market in the last 11 months.  Dow is up an eye popping 3K with only one hiccup along the way.  You don't see those kind of runs very often.  Buyers have come out of the woodwork even though economic data behind the move is nothing to write home about.  The search for yield & the thought of "missing the boat" may be motivating buyers.  This is fun while it lasts, but reality remains in the background, ready to rear its ugly head which will bring back sellers.

Dow Jones Industrials

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