Tuesday, October 22, 2013

Markets rise on hopes of extending stimulus by the Federal Reserve

Dow rose 62, advancers ahead of decliners better than 5-1 & NAZ lost 7.  The MLP index added another 2+ to the 461s & the REIT index went up 3+ to the 285s.  The MLP index was under 440 less than 2 weeks ago.  Junk bond funds were higher & Treasuries are in a rally mode.  Oil did little but gold is now up 24 to 1340.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLX13.NYM...Crude Oil Nov 13............99.26 Up .....0.04 (0.0%)

ZGZ13.CBT.....Gold 100 oz. Dec 13...1,280.00 Down ...35.90  (2.7%)

US job report

Photo:   Bloomberg

US employers added fewer workers to payrolls than projected in Sep, indicating the economy had little momentum leading up to the federal gov shutdown.  The addition of 148K workers followed a revised 193K gain in Aug that was larger than initially estimated by the Labor Dept.  The forecast called for a 180K advance.  Unemployment fell to 7.2%, the lowest level since Nov 2008.  Sep figures reflect the pay period that includes the 12th of the month, 2 weeks prior to the 16 day shutdown.  The unemployment rate, derived from a separate survey of households rather than employers, was forecast to remain at 7.3%.  It will take some time to determine whether the shutdown & political brinkmanship in DC led to a sharp pullback in activity this month.  Employment climbed at temporary-help agencies, wholesalers, transportation & warehousing businesses & retailers (lower paying jobs).  State & local gov hiring also picked up.

Payrolls in U.S. Rise Less Than Forecast

Spending on US construction projects rose at a solid pace in Aug, helped by further gains in residential building.  Overall construction activity climbed to the highest level in more than 4 years.  Construction spending increased 0.6% in Aug compared with Jul when spending increased a strong 1.4%, the Commerce Dept reported.  The July gain was revised to show an increase that was more than double the initial estimate.  Total construction rose to an annual rate of $916B, the fastest pace since Apr 2009.  The strength in construction should help the overall economy, which has been struggling this year with the adverse effects of gov tax increases & spending reductions.  The Aug gain reflected a solid rise in housing activity, which was up 1.2%.  The housing increase included a 1.6% rise in single-family construction & a 3.2% increase in the smaller apartment sector.  Non-residential construction rose a slight 0.1% after a much stronger 3.7% Jul advance.  In Aug, there were solid gains in office building & motel & hotel construction but the category that includes shopping centers fell.  Spending on gov projects rose 0.4%, reflecting a 0.8 % increase in state & local gov activity which offset a 3.8% drop in spending on federal projects (the lowest level since Jun 2008).  Total construction is 7.1% higher than a year ago with residential activity up 18.7%, nonresidential up 4.3% & gov construction activity down 1.8% from a year ago.

Construction Spending in U.S. Increases for Fifth Straight Month

Coach's net income edged down 2% in the fiscal Q1 as the company dealt with weaker sales in North America.  Revenue slightly missed expectations.  It is facing tough competition in the US as it tries to reinvent itself as a lifestyle brand anchored in accessories to fend off competition from rivals.  The decline comes as the company gears up for the critical holiday season, when retailers can make up to 40% of annual revenue.  CEO Lew Frankfort said the company is "focused on addressing the competitive handbag and accessories category in North America."  EPS was 77¢, matching last year's figure & a penny above the forecast.  Revenue was $1.15B, essentially matching last year but slightly under expectations of $1.19B.  In North America, revenue in stores open at least one year fell 6.8%, while total revenue fell 1% to $778M.  Intl revenue edged down to $365M from $367M.  The stock sank $4.23.

Coach Profit Falls 1.6% as North American Store Sales Sink

Coach (COH)

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Increasing stock prices are supposed to come from higher sales & earnings.  Not today.  Now rising markets are based on hopes the Federal Reserve will continue buying bonds & keep interest rates rates low.  The jobs data was mediocre news, but welcome by the bulls since it suggests the bond buying program will continue into next year.   Q3 GDP data will be out shortly & that will probably give more second-rate figures.  As long as data supports that kind of thinking, markets will keep rising.  When that attitude changes, there will be problems in the stock market.  Increased demand for Treasuries & gold today are negative bets on the stock market.

Dow Jones Industrials

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