Tuesday, July 8, 2014

Markets tumble after recent gains

Dow sank 117. decliners over advancers 3-2 & NAZ was off a very big 60.  The MLP index dropped 2 to the 511s (the record high of 526 was set one week ago) & the REIT index inched up fractionally to the 303s.  Junk bond funds slid back & Treasuries rose.  Oil & gold were each a tad lower.

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Job openings rose in May to the highest level in almost 7 years, a sign the US labor market will help boost economic growth in H2.  The number of positions waiting to be filled climbed 171K to 4.64M, the most since Jun 2007, according to the Labor Dept, & the number of unemployed job seekers per opening fell to the lowest level in 6 years.  Today’s data are among the labor measures monitored by the Federal Reserve (FED) & add to evidence the job market is strengthening.  Payrolls grew more than forecast in Jun, & the jobless rate fell to an almost 6-year low, figures showed last week.  The Job Openings & Labor Turnover Survey (JOLTS) adds context to monthly payrolls figures by measuring dynamics such as resignations, help-wanted ads & the pace of hiring.  Although it lags the Labor Dept’s other jobs data by a month, the FED follows the report as a measure of labor-market tightness & worker confidence.  There are about 2.1 unemployed vying for every opening, the fewest since May 2008.  There were 1.8 job seekers per opening when the last recession began in Dec 2007.  In today’s report, the number hired cooled to 4.72M in May from 4.77M, pushing down the hiring rate to 3.4% from 3.5%.  The latest reading compares with an average hiring rate of 2.8% during the previous expansion.  The gauge calculates the number of hires during the month divided by the number of employees who worked or received pay during that period.  Job openings increased at factories, construction companies & providers of business services & health care.  The rate of openings climbed to 3.2% in May, the highest since Aug 2007, from 3.1%.  Separations eased to 4.5M in May from 4.55M.  2.53M quit their jobs in May, up from the prior month’s 2.47M.  The quits rate, which shows the willingness of workers to leave their jobs, held at 1.8% & is down from a 2.1% reading when the recession started at the end of 2007.  Total dismissals, which exclude retirements & those who left their job voluntarily, decreased to 1.58M from 1.7M a month before.  In the 12 months ended in May, the economy created a net 2.3M jobs, representing 55.3M hires & 53M separations.

Job Openings in U.S. Increased to an Almost Seven-Year High

Consumer borrowing in the US surged again in May as Americans took out more loans to purchase cars.  The $19.6B increase in credit followed a revised $26.1B gain in Apr, Federal Reserve figures showed today.  Non-revolving lending, which includes auto & school loans, advanced by the most in a year.  Stronger employment & stock-market gains this year are giving consumers the confidence to take on more debt.  The figures coincide with robust auto sales & greater demand for furniture & appliances tied to the real-estate recovery, indicating the economy is rebounding from a Q1 slump.  The Apr gain was the biggest in comparable data going back to Dec 2010.  The report doesn’t track mortgages, home-equity lines of credit, or other real estate-backed debt.  Revolving debt, including credit-card balances, rose $1.79B in May following an $8.85B Apr advance that was the biggest since Nov 2007.  Non-revolving credit, which includes car & education loans, gained $17.8B in May, the biggest increase since Feb 2013, after climbing $17.3B in the previous month.  Car sales picked up in May, climbing to a 16.7M annual rate from 16M a month earlier.  The pace accelerated last month, reaching 16.9 million, the fastest since Jul 2006.  Consumer loans made by the federal gov, mostly for school tuitions, increased $4.4B before seasonal adjustment after rising $4.8B in Apr.  Stronger home are helping drive demand for home furnishings & purchases of new properties rose in May by the most in 22 years as mortgage rates declined.  The same month, receipts at furniture stores climbed 6.5% from May of last year, while sales at electronics & appliance retailers rose 1.3%.

Consumer Credit in U.S. Jumped in May as Auto Lending Picked Up

Greece fought off calls to consider a 3rd bailout as Mario Draghi warned that the pace of economic fixes is slowing, officials said after euro finance ministers met yesterday.  Greece has ruled out further aid, which would come with another raft of conditions, after its current rescue ends, a Greek official said.  According to the troika of IMF, ECB & euro-area authorities, Greece may need one anyway.  Further emergency aid will probably be needed as the gov still faces a funding shortfall, can’t count on financial-market support & is slipping further behind on its commitments to overhaul the economy.  The troika’s concerns were underlined by Draghi’s warning to Greek Finance Minister Hardouvelis that Greece should not assume its reforms have been completed.  At stake is Greece’s ability to win debt relief from its area creditors.  This writedown is the main reward that authorities have to offer if Greece meets its commitments, or withdraw if the nation falls short.  The troika wants Greece to focus on its economic overhauls rather than rely on fragile & tenuous links to markets.  Greece faces a €12B ($16B) financing gap in 2015.  To avoid another bailout, Greece aims to jump start its newly regained financial-market access & the gov plans to sell up to €3B in 3-year bonds.  This debt mess is far from over.

Greece Resists Troika on Third Bailout as Draghi Protests Delays

Stocks were not meant to go straight up & today was a reminder of that simple thought.  Dow is back to where it was on Jun 6 & NAZ  is back to where it was 4 months ago.  Economic data is fairly encouraging, but far from impressive.  Economic & wage growth have been tepid during this recovery.  Now there seems to be a ton of messes out of DC because the gov is not in control of its fate.  Israel's strike at Gaza is adding fuel to an already troubled MidEast ready to explode.  When congress & the pres are not working together, that spells trouble for the stock market.

Dow Jones Industrials

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