Friday, June 6, 2014

Higher markets after May jobs report

Dow went up 87 to yet another record, advancers over decliners almost 3-1 & NAZ advanced 25.  The MLP index rose 2+ to the 503s (up 40 YTD) while the REIT index fell 1+ to the 305s.  Junk bond funds did little & Treasuries slid lower.  Oil crawled higher & gold fell from a one-week high as equities advanced, diminishing demand for the precious metal as an alternative investment.

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Russian pres Putin met with Obama & held his first talks with Ukraine’s new leader, Petro Poroshenko, as France used D-Day commemorations to seek a breakthrough in the Ukraine crisis.  Putin welcomed Poroshenko’s commitment to ending the bloodshed in Ukraine, & said the gov in Kiev must call off its army campaign against pro-Russian separatists so that talks between the sides can begin.  Earlier, Obama & Putin held their first face-to-face meeting since Russia annexed Crimea in Mar, a month after a pro-Russian gov in Kiev was toppled by protesters, & the US & its European allies say Putin is behind the unrest in eastern Ukraine.  “The Ukrainian leadership must show its goodwill and wisdom,” Putin said at a news conference.  “They have to immediately stop the operation and announce a cease-fire. There is no other way to create the conditions for negotiations.”  Poroshenko said that the meeting addressed “first steps” in a plan to de-escalate tensions in eastern Ukraine, & that detailed talks with a Russian envoy are set to begin on Jun 8.  A US official said the US position is that Putin must follow thru from the meeting with Poroshenko & formally recognize the legitimacy of his election.  Putin must also stop sending arms & other aid to the separatists, & the direction will be clear in the coming weeks.  French pres Hollande brokered a separate meeting between Poroshenko & Putin that also lasted about 15 minutes.  The leaders agreed on the need to end violence & military action in southeastern Ukraine.  Hollande’s office said discussions about a possible cease-fire between Ukrainian forces & pro-Russian insurgents will begin “in the coming days.”

Putin Meets Obama, Poroshenko Amid Talk of Cease-Fire

Average Payrolls in U.S.

Photo:   Bloomberg

The last time the US saw job gains like those so far this year, the Dow Jones Industrials breached 10K for the first time & the Y2K specter loomed large.  In other words, it’s been a while.  Even after a slow start in Jan, payrolls have added about 214K jobs each month on average this year.  If the pace is sustained for the remainder of the year, it would mark the fastest-growing labor market in the US since 1999, when the economy added about 265K jobs on average each month as companies ramped up hiring to prepare their computer systems for the threat of the Year 2000 bug.  Employers added 217K jobs last month to push payrolls past their pre-recession peak, & the jobless rate held at 6.3%, an almost 6-year low.  May also marked 4 fourth straight month payrolls have increased at least 200K, the first time that’s happened since Sep 1999-Jan 2000.  The lack of surprise in the payrolls report seemed to damp some of the commotion that surrounds the monthly jobs numbers.  But not all jobs pay the same.  Some pay less & they have accounted for most of the new jobs since the recession.

Job Growth Paced for Best Year Since Y2K

Hertz tumbled after saying it needs to fix 3 years of accounting & that quarterly results won’t meet estimates on weak car-rental revenue.  The audit committee said financial statements for 2011 can’t be relied upon & should be restated, which will also require corrections to its 2012 & 2013 reports.  HTZ will conduct a “thorough” review of all 3 years, which could result in material adjustments for the last 2 years & said Q1 US daily car-rental revenue fell 1.6% from a year earlier, including its new Firefly discount brand, as it carried excess fleet.  But the company’s namesake brand airport rentals rose 1%. Analysts had projected Q1 EPS excluding certain items of 9¢ on revenue of $2.55B.  Hertz found errors while preparing Q1 quarter financials that included the capitalization & timing of depreciation for “certain non-fleet assets.”  The company also said it found other mistakes in how it accounted for money it couldn’t collect from renters who damaged their rentals.  In recent years the company increased the number of cars it bought from automakers for its fleet.  In the past, the company acquired most of the cars from the automakers & sold them back months later at predetermined prices.  While the accounting problems may delay the spinoff of its equipment-rental unit, originally planned for early next year, the move to separate the business remains on track, the company said.  In that transaction, the car-rental business will keep the name Hertz & get cash proceeds of about $2.5B to pay down debt & support a $1B share buyback.  The stock slumped 2.77 (9%).  If you would like to learn more about HTZ, 
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Hertz Falls as Accounting Review, Weak Rentals Crimp Results

Hertz Global Holdings (HTZ)

Stocks closed a successful week on a positive note.  Although, today's advance could have been bigger all considered.  Jobs growth met expectations & the Ukraine mess is calming down, at least for the time being.  A problem with favorable economic data is that it could give the Fed courage to make bolder moves on tapering its monthly bond buying program & hasten the start of increasing interest rates.  But Dow is up 347 YTD.

Dow Jones Industrials

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