Friday, June 6, 2014

Dow climbs to new record on jobs report

Dow jumped 67 to a new record, advancers over decliners 4-1 & NAZ gained 22.  The MLP index went up 1+ to the 502s, another new record, & the REIT index was fractionally lower in the 306s.  Junk bond funds did little & Treasuries inched higher.  Oil climbed after US payrolls rose past their pre-recession peak, signaling higher fuel demand & gold slid back once again. 

AMJ (Alerian MLP Index tracking fund)

CLN14.NYM....Crude Oil Jul 14...102.83 Up ...0.35 (0.3%)

GCM14.CMX...Gold Jun 14.......1,246.90 Down ...6.10  (0.5%)

Employers added 217K jobs in May to push US payrolls past their pre-recession peak & the jobless rate held at an almost 6-year low.  The advance was broad-based & followed a 282K gain in Apr, according to  the Labor Dept.  The forecast called for a 215K increase.  Unemployment was unchanged at 6.3%.  Improving business confidence as sales grow & the economy rebounds from its worst performance in 3 years will probably mean headcounts should continue to climb.  Rising employment gives Federal Reserve policy makers reason to keep paring back record monetary stimulus.  Today’s employment report also showed average hourly earnings rose 0.2% to $24.38 in May from $24.33 the prior month.  They were up 2.1% over the past 12 months.  The underemployment, which includes part-time workers who’d prefer a full-time position & people who want to work but have given up looking, fell to 12.2%, the lowest since Oct 2008, from 12.3%.  While the economy is creating more jobs, wage growth has lagged behind.  Slower pay gains corroborate Fed Chair Janet Yellen’s view that a “substantial amount of slack” remains in the labor market.  What’s more, limited income growth stands in the way of faster consumer spending.

U.S. Payrolls Rose 217,000 in May, Unemployment at 6.3%, Nearly a 6-Year Low

China Premier Li Keqiang

Photo:   Bloomberg

China's banking regulator vowed to expand loans &cap borrowing costs, seeking to boost the supply of funds to the real economy as growth slows amid a clampdown on shadow financing.  Lending to small businesses, major infrastructure projects & first-home buyers will be a priority, the China Banking Regulatory Commission said.  To give banks more capacity to lend, the regulator may ease the ratio of loans to deposits by including some stable sources of deposits in the calculation, CBRC Vice Chairman Wang Zhaoxing said.  Premier Li Keqiang said in a May 30 State Council meeting that the nation will cut funding costs & maintain reasonable growth in credit as economists forecast the weakest expansion in 24 years.  Banks’ quarter-end cash demand to meet with regulatory requirements such as loan-to-deposit ratio & a crackdown on off-balance-sheet lending combined to push interbank lending rates to a record in Jun last year.  China’s banking law caps a bank’s loans at no more than 75% of its deposits to limit leverage.  Banks are currently lending about 65% of their deposits, & the function of the ratio to prevent credit from overheating will remain unchanged,  Wang said.  The country will further increase the credit supply to ease financing difficulties for small businesses, make loan approvals more efficient and lower borrowing costs, Wang said.  Policy makers will use tools including open-market operations & the required reserve ratio to adjust liquidity & keep the money-market stable, the CBRC said.

The Xbox from Microsoft, a Dow stock, needs help.  Missteps over the past 12 months, from pricing the new Xbox One $100 above the PlayStation 4 to a rollout that gamers said slighted them, let PlayStation grab the early lead.  Under new leadership, the company is pivoting back to attract loyal players with fresh titles & a lower-priced model that goes on sale Mon.  “There’s absolutely a renewed focus on the gamer and our fans for Xbox that have prioritized gaming,”  Yusuf Mehdi, VP for Xbox marketing & strategy, said.  “We are very much coming to this E3 with a great story to share and tell.”  With shoppers worldwide snapping up more than 7M PlayStation 4 consoles & MSFT shipping 5M Xbox Ones, including some still unsold, the company announced last month it would sell a Kinect-less version of Xbox One matching PlayStaton's $399 price.  With the price cut, Xbox One finally can go head to head with PlayStation 4, according to Pachter, who projects the Kinect-free version will account for 90% of Xbox sales.  With a renewed focus on gamers, Mehdi sees an opportunity to close the gap with PlayStation, especially with the new console generation not even a year old.  The Xbox One, while trailing, is still outselling its predecessor, the Xbox 360, at this stage, & that’s despite the fact it’s available in fewer countries.  The stock rose chump change.  If you would like to learn more about MSFT,
Click here for a FREE analysis of MSFT and be sure to notice the intermediate time frame

Microsoft Xbox Looks for Do-Over With Gamers as Sales Trail Sony

Microsoft (MSFT)

Dow is up 200 this week, setting new records.  The early returns from May were favorable & buyers like to see that.  Expectations for Q2 growth are being raised after a disappointing Q1.  Unfortunately the jobs report is not all favorable.  Restoring the number of jobs to levels that are 6 years old, means there was no growth.  In addition, new jobs tend to be lower paying ones which have replaced higher paying jobs.  As a result growth in income has been limited, a minus for consumer pending which makes up much of the economy.

Dow Jones Industrials

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