Thursday, May 23, 2013

Lower markets on weak economic data from China

Dow dropped 87, decliners over advancers almost 4-1 & NAZ was off 17.  The MLP index fell 6 to the 462s & the REIT index lost 5 to the 302s.  Junk bond funds were mixed to higher & Treasuries were flattish.  Oil fell, but gold found buyers with increased nervousness about the global economy.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLN13.NYM...Crude Oil Jul 13....92.83 Down .....1.45  (1.5%)

GCK13.CMX...Gold May 13...1,394.80 Up ...27.20 (2.0%)

China Manufacturing Contracts for First Time in Seven Months

Photo:   Bloomberg

China's manufacturing contracted in May for the first time in 7 months, adding to signs that economic growth is losing steam for a 2nd qtr. The preliminary reading of 49.6 for a Purchasing Managers Index from HSBC Holdings & Markit Economics compares with a final 50.4 for Apr & the 50.4 estimate.  A reading above 50 indicates expansion.  But a separate Markit index for euro-area services & factory output increased more than forecast.  China’s growth rate unexpectedly slowed to 7.7% in Q1 while remaining above the gov full-year target of 7.5%.  Data earlier this month on fixed-asset investment & factory production missed forecasts, & gauges of manufacturing & service industries declined.  The economy expanded 7.8% in 2012, the slowest pace in 13 years.

China May Factory Output Contracts in Test for Premier

<p> FILE - In this April 4, 2013 file photo, people line up for entry to a job fair in Montpelier, Vt. The Labor Department reports on the number of Americans who applied for unemployment benefits last week on Thursday, May 23, 2013. (AP Photo/Toby Talbot)

Photo:   Yahoo

The number applying for unemployment benefits fell by 23K last week.  Applications for unemployment declined 340K according to the Labor Dept, down from 363K the previous week & is a level consistent with job gains.  The less volatile 4-week average ticked down just to 339½K, close to the 5-year low of 338K reached during 3 week ago.  The 4-week average is 9% lower than in Nov.  But much of the improvement has come from fewer layoffs, not robust hiring.  Employers laid off just 1.7M in Mar, only slightly above the 12-year low reached in Jan.  Overall hiring remains far below pre-recession levels.  More than 4.7M were receiving unemployment benefits, down 23% from nearly 6.2M a year earlier.  The US still has 2.6M fewer jobs than it did when the recession began in Dec 2007.

US unemployment aid applications fall to 340K AP

The bulls went into hiding today, so markets sold off.  Sorry to sound like a broker record, but the markets are vastly overbought, with the Dow still up a staggering 3.3K in less than a year.  The US economy is probably more important to most investors & that is just bumbling along, not being helped by federal budgets cuts which are biting.  Between yesterday & today, this hardly qualifies as a meaning ful correction.

Dow Jones Industrials

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