Friday, May 2, 2014

Markets fluctuate after US unemployment falls to 6.3%

Dow lost 20, advancers ahead of decliners 3-2 & NAZ fell 7.  The MLP index was fractionally higher to the 484s & the REIT index climbed 1+ to the 296s (an 11 month high).  Junk bond funds rose again, as they've been doing all year & Treasuries pulled back.  Oil & gold did little.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLM14.NYM...Crude Oil Jun 14...99.34 Down ...0.08  (0.1%)

GCK14.CMX...Gold May 14....1,283.10 Down ....0.90  (0.1%)

This Undervalued Energy Stock is Set to Soar! Special Report

Photo:   Bloomberg

The job-creation engine kicked into higher gear as US employers boosted payrolls in Apr by the most in 2 years & the jobless rate plunged to the lowest since the collapse of Lehman Brothers in 2008.  The 288K gain in employment was the biggest since Jan 2012 & followed a 203K increase the prior month, according to the Labor Dept.  The forecast called for a 218K advance.  Unemployment dropped to 6.3%, the lowest level since Sep 2008.  Households spent more freely as Q1 drew to a close & manufacturing accelerated, helping explain why companies are taking on more workers.  The figures corroborate the Federal Reserve’s view that the expansion is perking up after stagnating in Q1, indicating it will keep trimming stimulus.  The increase in employment was broad-based, with construction companies adding the most workers in 3 months & retailers taking on the most this year.  Manufacturing, temporary help services & health care were among other industries boosting payrolls.  One cloud is worker pay is stagnating.  Average hourly earnings held at $24.31, & were up 1.9% over the past 12 months, the smallest gain this year.  The drop in the unemployment rate from 6.7% in Mar came as the agency’s survey of households showed the labor force shrank by more the 800K in Apr.  The participation rate decreased to 62.8%, matching the lowest level since 1978, from 63.2% a month earlier.  Private payrolls, which don’t include gove agencies, increased 273K after a 202K gain.  Last month, hiring by companies surpassed the pre-recession peak for the first time.

Hiring in U.S. Kicks Into Higher Gear as Unemployment Plunges

Photo:   Bloomberg

Ukraine sent armored vehicles & artillery to retake Slovyansk, a stronghold for pro-separatist forces, defying pres Putin's demand to pull back troops with Russia’s army massed across the border.  Interior Ministry forces were dispatched to displace the militants from seized buildings & free hostages, including 8 intl monitors.  Rebels responded with weapons including grenade launchers, shooting down a helicopter & killing one of its pilots.  The US & EU have blamed Russia for fomenting unrest in Ukraine’s easternmost, largely Russian-speaking, regions & have threatened to widen sanctions to target Russia’s economy unless Putin helps ease tensions.  Putin yesterday urged Ukraine to withdraw forces from the east, as the regions of Donetsk & Luhansk slip out of the control of the gov in Kiev.  Interior troops took control of 9 rebel checkpoints in Slovyansk.  Putin urged Ukraine yesterday to withdraw forces from its easternmost provinces as the IMF warned that the $27B in funding the gov has secured to rescue its shrinking economy may not be enough if control of the region, its industrial heartland, is lost.  In a telephone call with German Chancellor Merkel, Putin also demanded an end to violence gripping cities in southeastern Ukraine, according to a Kremlin statement.  The Ukrainian conflict will top the agenda when Merkel & pres Obama meet today.

Ukraine Troops Move on Rebel Stronghold Defying Putin

Citigroup & Bank of America reduced Russian assets last qtr amid the crisis in Ukraine.  Citi’s exposure to Russia dropped 9% to $9.4B from the end of 2013 & BAC said it reduced its exposure 22%.  While political tensions in Russia & Ukraine haven’t yet had a material impact on results, “future developments, including the imposition of any additional sanctions against Russian entities, business sectors, individuals or otherwise, could negatively impact the business,” Citi said.  “Russian intervention in the Ukraine during the first quarter of 2014 significantly increased geopolitical tensions in Central and Eastern Europe,” BAC said.  “The situation remains fluid with potential for further escalation of geopolitical tensions, increased severity of sanctions against Russian interests, and possible Russian counter-sanctions.”  Citi went up 27¢ & BAC rose 13¢.  If you would like to learn more about Citi, click on this link for Trend Analysis: 

If you would like to learn more about BAC, click on this link for Trend Analysis: 

Citigroup Joins Bank of America in Cutting Russia Assets on Ukraine Crisis

Citigroup (C)

Bank of America (BAC)

The unemployment & jobs created data was good.  But beneath the obvious numbers, there are problems.  A majority of the jobs created since the recession have been low paying, temp jobs.  Household income growth has not been impressive.  Worker participation rate has been low.  But traders are probably more concerned that favorable economic data could encourage the Fed to increase rates sooner, something they all fear.  In addition, there is the unknown of where Putin, the new world leader, will take the Ukraine mess.

Dow Jones Industrials

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