Wednesday, January 8, 2014

Lower markets after ADP reports job gains in December

Dow dropped 55, decliners over advancers 3-2 but NAZ went up 14.  The MLP index dropped 3+ to 454 & the REIT index lost 1 to the 267s.  Junk bond funds saw selling as did Treasuries, taking the yield on the 10 year Treasury near 3%.  Oil was even & gold lost ground (heading back towards the 1200 support level).

AMJ (Alerian MLP Index tracking fund)

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CLG14.NYM...Crude Oil Feb 14...93.60 Down ....0.07  (0.1%)

GCF14.CMX...Gold Jan 14.......1,220.50 Down ...8.90  (0.7%)

Companies in U.S. Added 238,000 Jobs in December, ADP Says
Photo:   Bloomberg

A survey showed US businesses added the most jobs in a year in Dec, powered by a big gain in construction.  The figures are the latest evidence that the economy gained momentum at the end of 2013.  Payroll processor ADP said that companies added 238K, up slightly from 229K in the previous month after Nov figures were revised higher.  The report showed solid gains in higher-paying jobs.  Construction firms hired 48K, the most since 2006, & manufacturers added 19K positions.  Companies in retail, transportation & utilities gained 47K jobs.  The ADP numbers cover only private businesses & often diverge from the gov's more comprehensive report.  But both reports have shown a solid pickup in hiring since the summer.  Last month, the Labor Dept said that private businesses added 203K jobs in Nov.  The forecast for the Dec report on Fri is it show employers added 196K, similar to the healthy average gain of 200K a month from Aug-Nov.  Those increases have helped push the unemployment rate to a 5 year low of 7%.  Improvement in intl trade, factory orders & consumer spending has boosted forecasts for economic growth in Q4.  Expectations are that growth will be at an annual rate of 3% or higher, up from earlier estimates closer to 2%. 

Orders at German factory rose more than forecasted in Nov, adding to signs that a recovery in Europe’s largest economy is gathering pace.  Orders gained 2.1% from Oct, when they fell by the same amount, according to the Economy Ministry.  The forecast called for a gain of 1.5%.  The German economy drove the area’s recovery in H2-2013 & continues to be “in good shape,” the Bundesbank said in Dec when it raised its forecast for growth this year.  Unemployment fell more than predicted at the end of last year & retail sales climbed for the first time in 3 months in Nov.  Euro-region retail sales increased 1.4% in Nov from the previous month, according to the EU statistics office.  That’s more than the 0.1% increase forecasted.  While there are signs of a recovery, the pace isn’t yet strong enough to lower unemployment which remained at 12.1% in Nov.

German Factory Orders Rose More Than Expected in November

A small group of Senate Reps are seeking a bipartisan compromise to pay for the benefit extension, an opening bid in Democrats’ 2014 election-year agenda focused on helping low & middle-income Americans.  A 3 month extension proposal survived yesterday when, in a surprise 60-37 vote, 6 Reps joined with Dems to provide the 60 votes needed to advance the bill.  But several of those Reps said they may vote against final passage without a way to cover the price tag.  Emergency jobless benefits expired for 1.3M last month.  The push to extend them marks the start of the party’s election-year focus on income inequality, in which Dems also will push to raise the minimum wage & increase spending on infrastructure projects to create jobs.  Rep House Speaker John Boehner hasn’t said his chamber will take up the measure, though he said any extension of the jobless benefits must contain financing.  Senate Republican Leader Mitch McConnell said that if both parties can agree on a way to fund the extension, “there may be a way forward.”  Emergency benefits have been renewed 11 times since pres Bush put them in place in 2008, when the jobless rate was 5.6%.

Jobless Benefits Bill Stays Alive Amid Talks on Offsets

This becoming a recurring theme in the stock market.  Good news on growth or the jobs front is treated with indifference or selling because that raises concerns that the Federal Reserve (FED) will cut back on bond purchases.  The jobs report coming out on Fri is looming large.  There are worries that "favorable" jobs data will give the FED courage to make a bigger reduction in its bond buying program, signalling that raising interest rates is closer.  The fabulous year in last year's stock market was primarily due to easy money from the FED, not so much from the drab economic data.

Dow Jones Industrials

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