Friday, November 8, 2013

Higher market averages on the jobs report

Dow climbed 75, but decliners slightly ahead of advancers & NAZ jumped 41.  The MLP index dropped 5 to the 445s & the REIT sank 6 to the 272s.  Junk bond funds were weak & the yield on the 10 year Treasuries shot up a huge 14 basis points to 2.74% on the jobs report.  Oil was higher but gold sank below 1300 again.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLZ13.NYM....Crude Oil Dec 13...94.33 Up .....0.13 (0.1%)

GCX13.CMX...Gold Nov 13.....1,281.30 Down ...27.10 (2.1%)

Payrolls Jump by 204,000 as U.S. Economy Weathered Shutdown

Photo:   Bloomberg

American employers added more workers to payrolls in Oct than forecast, betting that the economy would weather the impact of the federal gov shutdown.  The addition of 204K workers followed a revised 163K gain in Sep that was larger than initially estimated, according to the Labor Dept.  The forecast called for an increase of only 120K.  The jobless rate rose to 7.3% from an almost 5-year low.  The figures indicate companies adhered to hiring plans with an outlook for stronger sales in the aftermath of the budget impasse & a debate over raising the nation’s debt ceiling.  Payrolls increased at manufacturers by the most since Feb, retailers added about twice as many workers as the month before, & leisure & hospitality employment was the strongest in 6 months (mostly low paying jobs).

Payrolls Jump 204,000 as U.S. Economy Weathers Shutdown

Consumer spending in the US increased modestly in Sep as households boosted savings & inflation remained benign, pointing to sluggish domestic demand.  The Commerce Dept said consumer spending rose 0.2% after advancing 0.3% in Aug.  Economists expected consumer spending to gain 0.2% in Sep.  The data was included in the Q3 GDP report.  Inflation stayed muted in Sep, a potential source of concern for the Federal Reserve (FED).  A price index for consumer spending nudged up 0.1%, rising by the same margin for 3 consecutive months.  Over the past 12 months, prices rose 0.9%, the smallest advance since Apr & the index had increased 1.1% in Aug.  Excluding food & energy, the price index for consumer spending also rose 0.1% for a 3rd straight month.  Core prices were up 1.2% from a year ago, after rising by the same margin in Aug.  Both inflation measures continue to trend below the 2% target of the FED.  That, combined with the lackluster consumer spending, would argue against the central bank trimming its monthly bond purchases to keep interest rates low.  In Sep, income rose 0.5% after rising by the same margin in Aug.  With spending lagging income growth, the saving rate rose to 4.9 %, the highest since last Dec.

U.S. consumer spending tepid as households boost savings

McDonald's Corp Restaurant in New York

Photo:   Bloomberg

McDonald's, a Dow stock & Dividend Aristocrat, sales at stores open at least 13 months rose 0.5% in Oct as new items boosted sales in Europe & the US.  Analysts estimated a 0.2% increase.  Growth in Europe was 0.8%, exceeding the projection of a 0.2% gain.  CEO Don Thompson has been overhauling the menu worldwide.  In Europe (about 40% of revenue) MCD has advertised new & value items, such as different smoothie & McCafe coffee drink flavors in the UK.  At its domestic locations, MCD also is promoting new fare, including chicken wings and pumpkin-spice lattes.  Same-store sales rose 0.2% in the US, below the projection of 0.4%.  US confidence fell to a 10-month low in Oct as the reopening of the federal gov failed to reassure Americans.  About 1/3 of revenue comes from the U.S & MCD is revamping its Dollar Menu to include a $2 burger & chicken sandwiches.  The chain is facing pressure from its domestic store owners who have met to discuss higher costs, including rents, & the increasingly difficult economics of selling food for $1.  Same-store sales fell 2.8% in the Asia Pacific, Middle East & Africa region, the 4th straight monthly decline.  Analysts estimated a 1.7%.  “Consumer sentiment is very cautious” in China & people there are dining out more at local chains, Thompson said last month.  Same-stores sales in Japan slumped 9.7% in Oct.  Global comparable-store sales fell 0.1% in Sep rose 1.9% in Aug.  The stock fell 68¢.

McDonald’s October Sales Rise as New Items Boost Europe to U.S.

McDonald's (MCD)

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The jobs report is the primary story today.  The Dow's first reaction was muted, but buyers came in during the 2nd hour of trading, encouraged by the bullish tone of the jobs report.  They might have 2nd thoughts when they realize that stronger economic data gives ammunition to the FED to begin the tapering program.  Trading for the rest of the day will involve balancing the positive side of the report with thoughts about tapering sooner.

Dow Jones Industrials

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