Thursday, November 21, 2013

Markets rise on jobless claims data

Dow climbed 86, advancers ahead of decliners 5-2 & NAZ gained 32.  The MLP index jumped 4+ to the 451s & the REIT index was up a fraction to the 276s.  Junk bond funds were little changed & Treasuries fell.  Oil rose after a report showed fewer Americans than forecast filed claims for unemployment benefits, bolstering optimism that the US economy will grow.  Gold fell to the lowest since Jul as investors weighed speculation that the Federal Reserve may reduce monthly bond purchases in coming months.

AMJ (Alerian MLP Index tracking fund)

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CLF14.NYM...Crude Oil Jan 14..............94.56 Up ....0.71 (0.8%)

ZGZ13.CBT.....Gold 100 oz. Dec 13...1,255.30 Down ...2.70  (0.2%)


Photo:   Bloomberg

Applications for unemployment benefits in the US declined to the lowest level in almost 2 months.  Claims dropped 21K to 323K, the fewest since the week ended Sep 28, from a revised 344K in the previous week, according to the Labor Dept.  The forecast called for a drop to 335K.  Last week included the Veterans’ Day holiday, which makes adjusting the data for seasonal swings more difficult.  Rising sales going into the holiday-shopping period will probably prompt employers to keep current workers on staff to meet demand.  Fewer layoffs may also lead to bigger gains in hiring that will help boost consumer spending.  The 4 week average decreased to 338K last week from 345K in the prior week.  The number continuing to receive jobless benefits increased 66K to 2.88M.  Continuing claims don’t include Americans who have exhausted their traditional state aid & are receiving emergency & extended benefits under federal programs.  Those decreased 32K to 1.3M.

Claims for U.S. Jobless Benefits Fall More Than Forecast

Target Corp. Logos Sit on Shopping Carts

Photo:   Bloomberg

Target, a Dividend Aristocrat, Q3 profit fell 46% as US consumers restrained spending & its Canadian expansion hurt earnings more than expected.  EPS fell to 54¢ from 96¢ a year earlier.  The estimate was for  62¢.  Revenue rose 1.9% to $17.3B, trailing the $17.4B projection.  The Canadian operations cut EPS by 29¢, more than the 22¢ expected, & will reduce earnings by as much as 32¢ in Q4.  While some households are benefiting from the recovering economy, the rising stock market & rebounding home values, a large swath is being left behind.  These lower-income families, which make up a large portion of the customer base at discount retailers, have seen stagnant incomes & higher payroll taxes while suffering amid the 7.3% unemployment rate.  Average hourly wages in the US have grown 2.1% or less annually starting in 2009.  Sales at stores open at least 13 months as well as thru its website rose 0.9%, under the 1% gain forecasted.  Costs associated with the expansion in Canada, where 23 stores were added in Q3, have been a drag earnings.  The Canadian unit generated $333M in sales & had $221M in startup & operating expenses.  It posted a $238M loss before interest & taxes.  The company said it remains on track to have 124 stores there by the end of the year.  Q4 adjusted EPS should be $1.50-$1.60.  Analysts estimate $1.57.  The stock lost 2.76.

Target Profit Falls 46% as Economy Hurts Shoppers

Target (TGT)

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European Central Bank President Mario Draghi

Photo:   Bloomberg

Mario Draghi said keeping interest rates low for an extended period carries risks that policy makers weighed carefully before they reduced the benchmark rate to a record low.  “I am of course aware that our rate cut raised some concerns,” Draghi said.  “A protracted period of time of low rates creates the scene for risks in financial stability.”  The ECB reduced its main refinancing rate by a quarter of a percentage point to 0.25% on Nov 7, while keeping the overnight deposit rate for lenders who park excess cash at the central bank at zero.  Policy makers are considering a smaller-than-normal cut in the deposit rate to minus 0.1% if more stimulus is needed to ward off deflation.  “Don’t try to infer anything from what I say, anything about the possibility of negative rates,” Draghi said.  “This was discussed in the last monetary-policy meeting and there’s no more news since then. Let me make this clear.”  The ECB pres said after the Nov 7 meeting that a deposit rate below zero is a policy option for which the bank is “technically ready.”  The next interest-rate decision will be delivered, with new economic forecasts, on Dec 5.  Draghi said that broad-based risks from low interest rates haven’t materialized across the euro region so far.

Draghi Says ECB Aware of Concern Low Rates Risk to Stability

The jobless claims data sounds good & brought out buyers.  But the report was no great surprise & adds little to the economic scene.  The TGT story is more telling.  The drawn out economic recovery remains soggy.  Slow growth means few jobs are being added & a large majority of jobs added are for part time work.  Making matters worse is the disastrous roll-out of Obamacare.  This inhibits job growth & makes many consumers nervous about spending.  Meanwhile the Dow is within a whisper of its record high, although 16K has become a tough ceiling to break thru.

Dow Jones Industrials

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