Friday, May 3, 2013

Markets zoom on job growth

Dow soared 142, advancers over decliners 5-2 & NAZ shot up 38. The MLP index gained 3+ to the 451s & the REIT index was up 1 to 20.  Junk bond funds were mixed & Treasuries sold off in the rising market.  Oil gained along with stocks but gold was marking time.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


Live 24 hours gold chart [Kitco Inc.]

Federal Reserve Bank of Richmond President Jeffrey Lacker

Photo:   Bloomberg

Federal Reserve Bank (FED) of Richmond President Jerffrey Lacker voiced opposition to bond purchases by the FED, saying the buying probably won’t spur growth beyond 2% while making an exit from stimulus more challenging.  “The benefit-cost trade-off associated with further monetary stimulus does not look promising,” Lacker said in a speech.  “The Fed seems to be unable to improve real growth, despite striving mightily over the last few years, and further increases in the size of our balance sheet raise the risks associated with the ‘exit process’ when it’s time to withdraw stimulus.”  The FMOC said it will keep buying $85B in bonds each month & may increase or reduce the pace depending on the outlook for inflation & the labor market.  The FED has expanded its balance sheet to $3.3T with bond purchases aimed at spurring economic growth & bolstering employment.  “The April employment report shows we are on track with the kind of labor market behavior we have been seeing over the last six months or so -- pretty steady gains at a pretty healthy pace,” Lacker said to reporters after his speech.  The labor market outlook has made “substantial improvement,” the threshold the FED needs to reach to halt asset purchases, Lacker said.  In light of the “broad sweep of the last four to six months” in job growth, “you ought to evaluate the likelihood of us reducing the pace of asset purchases accordingly,” he added.  This is the minority view at the FED.

Here is a review of milestones for the Dow.  The Dow Jones Industrial average broke through 15K today, 6 years since the Dow went through its last big milestone, closing above 14K.  Here's a look at the previous times that the Dow first closed above round-number levels, measured in increments of 1K points.

First                     Date
14,000 July 19, 2007
13,000 April 25, 2007
12,000 Oct. 19, 2006
11,000 May 3, 1999
10,000 March 29, 1999
9,000 April 6, 1998
8,000 July 16, 1997
7,000 Feb. 13, 1997
6,000 Oct. 14, 1996
5,000 Nov. 21, 1995
4,000 Feb. 23, 1995
3,000 April 17, 1991
2,000 Jan. 8, 1987
1,000 Nov. 14, 1972

Former J.C. Penney Chief Executive Officer Ron Johnson

Photo:   Bloomberg

Ron Johnson's tenure at JC Penney will be associated with a 25% sales plunge.  Lost amid the criticism since his departure last month is the $170M it cost to install Johnson & his top 3 executives.  The sum covers cash payments & restricted stock offerings to the 4 executives & outgoing CEO Myron Ullman, & doesn’t include salary or incentive pay.  Now after less than a year & a half, former CEO Johnson & his trio are gone, & some are being been paid on the way out too. Upon his Apr 17 exit, COO Michael Kramer pocketed $2.1M.  He recruited executives from across the retail industry to revamp the department-store chain & spent $236M, including the recruitment of the top 4 executives.  Thanks to a termination agreement, Francis received $4.3M on his way out.  In about 8 months, $16M was spent on hiring & firing Francis.  Because he left before the restricted stock vested, he kept about 100K of the 1M shares he was granted.  Meanwhile, the company cut its workforce by more than 40K.  Kramer & Chief Talent Officer Daniel Walker left the company last month after Johnson resigned.  In Nov 2011, Walker received a signing bonus of $8M & restricted stock valued at $12M to join the company from a human resources firm he founded.  Kramer earned $4M cash & $29M in stock. Nice work if you can get it!!  The stock was up 47¢ today but has a dismal chart while the stock market has been climbing higher.

J.C. Penney Spent $170 Million to Install Johnson Executive Team

J.C. Penney (JCP)

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Stocks had a glorious day, but the chart above shows it's had a tougher time advancing in recent years.  In the last 14 years it's only up 4K, or 36%.  This is a reminder of the growing importance in divs for growing portfolio worth.  But today just about all investors are feeling good.  Next week, reality will return to the markets when Dow will try for a close above 15K.

Dow Jones Industrials

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