Friday, June 7, 2013

Dow surges on jobs data

Dow jumped 163, advancers over decliners 2-1 & NAZ went up 26.  The MLP index recovered another 4 to the 447s while the REIT index slipped a fraction to the 284s.  Junk bond funds were mixed as Treasuries lost ground.  Oil advanced for the 4th time in 5 days, rebounding from an earlier decline of 1.1%.  There was selling in gold, taking it well below 1400.

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...94.13 Down .....0.63  (0.7%)

GCN13.CMX...Gold Jul 13.....1,384.90 Down ...30.90  (2.2%)

Payrolls in U.S. Increased 175,000 in May, Unemployment at 7.6%

Photo:   Bloomberg

US employers took on more workers than forecast in May as the economy weathered the impact of higher taxes & federal spending cuts.  Payrolls rose 175K after a revised 149K increase in Apr (smaller than first estimated), according to the Labor Dept.  The forecast called for a gain of 163K.  The unemployment rate rose to 7.6% from 7.5% as more people entered the labor force.  The report is a sign companies are optimistic about the prospects for demand in H2 after a payroll-tax increase curbed consumer spending power.  Employment gains were broad-based, with jobs added in industries ranging from retailing & construction to education & health services.  But manufacturers cut payrolls for a 3rd month.

Payrolls in U.S. Rose 175,000 in May, Unemployment 7.6%

Draghi Disappoints as Firepower Becomes Fig Leaf

Photo:   Bloomberg

ECB President Mario Draghi isn’t racing to the rescue of Europe’s banks or economy this time.  Almost a year since his promise to do “whatever it takes” to protect the € soothed investors, & a month since cutting interest rates, Draghi signalled yesterday that govs, not the ECB, should do more to fight recession & boost credit to businesses in cash-strapped countries such as Spain.  As he predicted a resumption of growth by the end of the year, Draghi’s maintenance of the status quo sent bonds falling & the € rising as investors questioned the ECB’s crisis-fighting resolve, which previously reinforced its president’s “Super Mario” nickname.  If the economy improves in H2, the ECB may refrain from further action as “the easy instruments have all been used,” Austrian central bank governor Ewald Nowotny said.  Draghi said the central bank currently sees no reason for “immediate action” after listing potential measures, including charging banks for leaving money on deposit with it & lending institutions cash over the long term.

Draghi Disappoints as Firepower Becomes Fig Leaf

Wal-Mart, a Dow stock & Dividend Aristocrat, announced a $15B share buyback program at its annual meeting as it faces increasing scrutiny over how it has handled allegations of bribery in its Mexican operations that surfaced a year ago.  But festivities took a serious turn as shareholders stood to make proposals related to safety in Bangladeshi factories, the Mexican bribery scandal & executive paychecks.  The company is facing pressure to increase its oversight of factory conditions abroad following a building collapse in Apr in Bangladesh that killed more than 1100 workers. The discounter is also under scrutiny for how it treats its workers.  Those problems are happening as WMT is wrestling with slower sales growth.  The $15B share repurchase program replaces the current $15B share repurchase program begun in 2011 of which about $712M is left under that program.  The stock rose 92¢.

Wal-Mart plans $15B more in stock buybacks AP

Wal-Mart (WMT)

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The jobs number kept the bulls happy & encouraged traders to buy.  The idea behind the rise is that growth is good enough but not so good that the Federal Reserve (FED) will slow or end its bond buying program.  The MLP index has recovered an enormous 11 in the last 2 days while the REIT index & junk bonds funds (stocks with high yields) have limited buying.  The next FED meeting is Jun 18-19.

Dow Jones Industrials

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