Thursday, July 3, 2014

Higher markets on jobs added in June

Dow climbed 67, advancers just ahead of decliners & NAZ added 16.  The MLP index pulled back another 2 to the 521s & the REIT index fell 2+ to 301.  Junk bond funds were lower & Treasuries sold off.  Oil fell for a 6th day, marking its longest retreat in more than 2 years on easing supply concerns in Iraq & Libya.  Gold fell the most in 5 weeks after the US added more jobs last month than forecast, curbing demand for a haven asset.

AMJ (Alerian MLP Index tracking fund)

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CLQ14.NYM...Crude Oil Aug 14...103.82 Down ....0.66  (0.6%)

GCN14.CMX...Gold Jul 14.........1,313.00 Down ...17.70  (1.3%)

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Job creation rose beyond expectations in Jun & the  unemployment rate fell to an almost 6-year low of 6.1%, underscoring the strength of a US labor market that will help spur a rebound in growth.  The addition of 288K jobs followed a 224K gain the prior month that was bigger than previously estimated by the Labor Dept.  The forecast called for a 215K advance.  The number of long-term unemployed fell to 3.1M, showing they’re having greater success finding work.  More employment opportunities will probably keep the Federal Reserve on the path to reduce monetary stimulus.  Factories took on the most workers in 4 months, while payrolls at private service providers climbed by the most since Oct 2012.  An index gauging the breadth of private-industry hiring in Jun climbed to 64.8 from 62.9 a month earlier.  The number out of work for 27 weeks or longer, long-term unemployed, decreased as a percentage of all jobless to 32.8%, the lowest since Jun 2009.  The unemployment rate fell to the lowest since Sep 2008 (Lehman collapse).  It was projected to hold at 6.3%.  Revisions to prior reports added 29K jobs to overall payrolls in the previous 2 months.  Average hourly earnings rose by 0.2% for a 2nd month, to $24.45 in Jun from the prior month, & increased 2% over the past 12 months while the average work held at 34.5 hours.

Payrolls Jumped as U.S. Jobless Rate Fell to 6.1% in June

Mario Draghi reiterated that he’ll keep interest rates low as officials try to revive the region’s economy with a new round of emergency measures.  “The key ECB interest rates will remain at present levels for an extended period of time,” Draghi said after policy makers left borrowing costs unchanged.  Today’s meeting was the first after the ECB unveiled a range of measures last month to fight the threat of deflation in the euro area.  The package includes long-term loans to banks under the condition they lend the money on to households & companies as well as preparatory work for an ECB asset-purchase program.  The ECB left the main refinancing rate at a record low of 0.15%, as predicted & the deposit rate stayed at minus 0.1%.  Last month’s historic announcement left many questions unanswered and Draghi gave some details today.  He estimated that banks could take up as much as €1T ($1.36T) in the 2 initial tenders & a series of quarterly auctions.  “I’m confident that banks will quickly understand that even though it’s complicated, it’s also quite attractive,” he said.  The ECB is trying to stop inflation falling too low in an economy still struggling to recover from a debt crisis.  Inflation in the bloc held at 0.5% in Jun at about a qtr of the ECB target (just under 2%).  The rate has been below 1% every month since Oct.  “We are strongly determined to safeguard the firm anchoring of inflation expectation over the medium term,” Draghi said.  He also repeated that the ECB stands ready to embark on broad-based asset purchases if necessary.

Draghi Says Rates to Stay Low as ECB Prepares New Loans

Service provides from construction firms to retailers expanded in Jun at the 2nd-fastest pace in almost a year, showing more momentum in the US economy.  The Institute for Supply Management (ISM) non-manufacturing index was 56 last month after May’s 56.3, which was the highest since Aug.  The forecast was for no change from May.  Readings greater than 50 signal expansion.  The expansion at service providers, along with sustained growth at the nation’s factories, underscores a pickup in demand that’s helping put people to work.  The ISM’s measure of new orders to service producers climbed to 61.2, the highest since Jan 2011, from 60.5.  The employment gauge rose to 54.4, the strongest reading since Jan, from 52.4 in May.  The business activity index, which parallels the ISM’s factory production gauge, fell to 57.5 from 62.1, the highest since Feb 2011.  A measure of prices paid was little changed at 61.2 after 61.4.  “We’re not getting feedback from our respondents that they’re starting to see inflation,” ISM said.  The ISM services survey covers an array of industries including utilities, retailing, health care & finance.

Services in U.S. Expand at Second-Fastest Pace in Almost a Year

Considering the good economic news, the market response is drab on light volume.  While the jobs data looks good, growth in wages continues minimal as it has been since the recession.  The jobs added in recent years tend to be lower paying jobs which has contributed to the slowest economic growth following a recession in decades.  But Dow inched over 17K giving the bulls something to cheer about.

Dow Jones Industrials

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