Dow surged 198 (going back over 16K & closing at the high), advancers over decliners 3-1 & NAZ jumped 29. The MLP index rebounded, taking it up 2+ to 444, & the REIT index about 2+ to the 266s. Junk bond funds & Treasuries continued flattish. Oil had the biggest weekly gain since Jul as the US jobless rate
dropped to a 5 year low, bolstering the outlook for economic
growth in the world’s biggest fuel-consuming nation. Gold close about even today & down almost 2% for the
week, after the stronger-than-expected jobs.
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](http://www.kitco.com/images/live/gold.gif)
Photo: Bloomberg
The case strengthened for the Federal Reserve (FED) to start reducing bond purchases this month after a report showed job growth in Nov was stronger than forecast. GDP forecasts were increased for the first taper, giving the FOMC courage to start dialing down $85B in monthly bond buying at the Dec 17-18 meeting. The unemployment rate fell to a 5 year low of 7% as payrolls swelled by 203K. The Nov payrolls gain exceeded the 185K forecast. The FOMC has pledged to keep buying bonds until the “outlook for the labor market has improved substantially.” Quantitative easing has pushed the Fed’s balance sheet close to $4T with purchases of Treasury & mortgage-backed securities. Policy makers have said that they needed more evidence of lasting improvement in the economy & that fiscal policy was restraining growth. The FOMC cited the drag from fiscal policy in its Oct 30 statement, after a gov shutdown resulted in the furloughs of 800K federal workers. Data since then suggest the damage to the economy was limited. And a report yesterday showed Q3 growth was faster than initially estimated as GDP rose at a 3.6% annual rate.
Fed December Taper Odds Seen Higher as Job Gains Beat Estimates
Photo: Bloomberg
Meanwhile, factory orders in Germany fell more than forecast in Oct, signaling an uneven recovery in Europe’s largest economy. Orders slid 2.2% from Sep, when they rose a revised 3.1%, the Economy Ministry in Berlin said. The forecast called for a decline of 1%. Orders advanced 1.9% from a year ago when adjusted for the number of working days. Germany’s economic expansion has been slowed by the area’s struggle to sustain a recovery from its longest recession. Domestic demand accounted for all of German growth in Q3. The currency bloc, Germany’s biggest trading partner, will shrink 0.4% this year before expanding 1.1% in 2014, the ECB forecast yesterday. Today’s data reflect “big swings” in bulk orders, which depressed investment-goods orders, the ministry said. Demand plunged 5.2%, while orders for basic goods rose 2.2 % & increased 0.6% for consumer goods. “The trend in demand for industrial goods is still pointing upwards,” the ministry said. “That indicates a continued positive development in industry for the coming months.” The nation’s economy expanded 0.3% in Q3, after expanding 0.7% in Q2. For Q4, the Bundesbank forecasts a pickup, raising its estimate for growth this year to as much as 0.5%, up from its Jun prediction of 0.3% & it increased its outlook for 2014 to 1.7% from 1.5%.
German Factory Orders Decline in Sign of Uneven Recovery
Photo: Bloomberg
China’s broadest economic reforms since the 1990s will add less than half a percentage point to annual growth this decade, based on a survey, underscoring the likelihood of a cut in the nation’s expansion target. Economists see policies from a Communist Party summit last month boosting GDP either by a negligible amount or less than 0.5% a year compared with their previous outlook. The forecasts dovetail with increasing speculation that policy makers will set the lowest annual growth target since 2004 at a gathering this month, after leaders pledged to give markets a bigger role in setting prices for capital & resources such as energy. President Xi Jinping is trying to sustain long-term expansion while overcoming risks from rising debt & pressures on gov-backed companies. The State Information Center, a gov research institute, says China can set the 2014 GDP growth target at 7% & the state-run Chinese Academy of Social Sciences also believes the goal will be set at 7%.
China Reforms Seen Adding Less Than Half Point to Growth
Stocks threw caution to the wind. The jobs & unemployment news sounds good & thoughts about tapering beginning sooner did not disturb the buyers. There has been no news on the negotiations in DC over the budget battle. Stocks ended the 5 day slide & Dow finished down just 100 in Dec.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Treasury yields:
U.S. 3-month |
0.06% | |
U.S. 2-year |
0.30% | |
U.S. 10-year |
2.88% |
| CLF14.NYM | ....Crude Oil Jan 14 | ....97.41 |  ...0.03 (0.0%) |
Photo: Bloomberg
The case strengthened for the Federal Reserve (FED) to start reducing bond purchases this month after a report showed job growth in Nov was stronger than forecast. GDP forecasts were increased for the first taper, giving the FOMC courage to start dialing down $85B in monthly bond buying at the Dec 17-18 meeting. The unemployment rate fell to a 5 year low of 7% as payrolls swelled by 203K. The Nov payrolls gain exceeded the 185K forecast. The FOMC has pledged to keep buying bonds until the “outlook for the labor market has improved substantially.” Quantitative easing has pushed the Fed’s balance sheet close to $4T with purchases of Treasury & mortgage-backed securities. Policy makers have said that they needed more evidence of lasting improvement in the economy & that fiscal policy was restraining growth. The FOMC cited the drag from fiscal policy in its Oct 30 statement, after a gov shutdown resulted in the furloughs of 800K federal workers. Data since then suggest the damage to the economy was limited. And a report yesterday showed Q3 growth was faster than initially estimated as GDP rose at a 3.6% annual rate.
Fed December Taper Odds Seen Higher as Job Gains Beat Estimates
Photo: Bloomberg
Meanwhile, factory orders in Germany fell more than forecast in Oct, signaling an uneven recovery in Europe’s largest economy. Orders slid 2.2% from Sep, when they rose a revised 3.1%, the Economy Ministry in Berlin said. The forecast called for a decline of 1%. Orders advanced 1.9% from a year ago when adjusted for the number of working days. Germany’s economic expansion has been slowed by the area’s struggle to sustain a recovery from its longest recession. Domestic demand accounted for all of German growth in Q3. The currency bloc, Germany’s biggest trading partner, will shrink 0.4% this year before expanding 1.1% in 2014, the ECB forecast yesterday. Today’s data reflect “big swings” in bulk orders, which depressed investment-goods orders, the ministry said. Demand plunged 5.2%, while orders for basic goods rose 2.2 % & increased 0.6% for consumer goods. “The trend in demand for industrial goods is still pointing upwards,” the ministry said. “That indicates a continued positive development in industry for the coming months.” The nation’s economy expanded 0.3% in Q3, after expanding 0.7% in Q2. For Q4, the Bundesbank forecasts a pickup, raising its estimate for growth this year to as much as 0.5%, up from its Jun prediction of 0.3% & it increased its outlook for 2014 to 1.7% from 1.5%.
German Factory Orders Decline in Sign of Uneven Recovery
Photo: Bloomberg
China’s broadest economic reforms since the 1990s will add less than half a percentage point to annual growth this decade, based on a survey, underscoring the likelihood of a cut in the nation’s expansion target. Economists see policies from a Communist Party summit last month boosting GDP either by a negligible amount or less than 0.5% a year compared with their previous outlook. The forecasts dovetail with increasing speculation that policy makers will set the lowest annual growth target since 2004 at a gathering this month, after leaders pledged to give markets a bigger role in setting prices for capital & resources such as energy. President Xi Jinping is trying to sustain long-term expansion while overcoming risks from rising debt & pressures on gov-backed companies. The State Information Center, a gov research institute, says China can set the 2014 GDP growth target at 7% & the state-run Chinese Academy of Social Sciences also believes the goal will be set at 7%.
China Reforms Seen Adding Less Than Half Point to Growth
Stocks threw caution to the wind. The jobs & unemployment news sounds good & thoughts about tapering beginning sooner did not disturb the buyers. There has been no news on the negotiations in DC over the budget battle. Stocks ended the 5 day slide & Dow finished down just 100 in Dec.
Dow Jones Industrials
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