Friday, October 3, 2014

Markets bounce back after jobs data

Dow jumped 122, advancers over decliners 2-1 & NAZ gained 44.  The Alerian MLP index slid 1+ to 524 & the REIT index rebounded 1+ to the 293s.  Junk bond funds climbed higher after recent selling & Treasuries retreated.  Oil & gold continued to sell off.

AMJ (MLP Index tracking fund)

CLF15.NYM....Crude Oil Jan 15...88.66 Down ......0.42  (0.5%)

GCQ15.CMX...Gold Aug 15....1,203.00 Down ...14.70  (1.2%)

A powerful surge in hiring pushed unemployment to a 6-year low of 5.9% in Sep as the US labor market showed renewed vigor.  The 248K gain in payrolls last month followed a 180K increase in Aug that was bigger than previously estimated, according to the Labor Dept.  The forecast was for 215K.  The jobless rate fell to the lowest level since Jul 2008, from 6.1%.  Sustained, elevated gains in hiring are needed to bring about faster wage growth & put the expansion in a self-reinforcing cycle of more consumer spending & employment opportunities.  Federal Reserve policy makers are trying to determine the extent of labor-market slack as the central bank approaches the end of asset purchases aimed at boosting growth.  One sign of weakness in today’s report was average hourly earnings, which were unchanged in Sep & up only 2% over the past 12 months.   A stronger-than-expected increase in net hiring last month reflected a pickup at grocery stores, factories & restaurants.  Employment at private service providers increased 207K, while payrolls rose 4K at factories.  Construction companies added 16K workers for a 2nd month & retail employment grew 35K.  Automakers boosted hiring by 3K in Sep after a 4K drop in Aug that may have reflected the timing of plant shutdowns to retool for the new model year.  Employment at food & beverage stores rebounded 19K after a decline in Aug, when workers walked off the job at a New England grocer.   The underemployment rate, a gauge that counts the unemployed, workers settling for part-time jobs & people who have given up the search, fell to 11.8% in Sep from 12% a month earlier.  The gauge has averaged 15% since the recession end in Jun 2009.

Hiring Surge Pushes U.S. Jobless Rate to Six-Year Low of 5.9%

Service industries grew in Sep, capping the strongest qtr of expansion in more than 10 years for the biggest part of the US economy.  While the Institute for Supply Management’s non-manufacturing index fell to 58.6 from the prior month’s 59.6, the Q3 average was the highest since the Q1-2004.  Readings above 50 signal expansion.  The forecast called for 58.5.  More hiring & stock-market gains are boosting Americans’ wealth & encouraging them to keep spending.  Advances in service industries, which account for about 90% of the economy, combined with manufacturing growth bode well for the economy that’s now in its 6th year of expansion.  The ISM index averaged 59 from Jul thru last month & compares with 54.7 in 2013.  The gauge of services employment increased to 58.5, the highest since Aug 2005, from 57.1 the prior month. 

Services Industries Growth in U.S. Caps Best Quarter Since 2004

The US trade deficit unexpectedly shrank in Aug to the lowest level in 7 months as exports edged up to a record.  The gap decreased 0.5% to $40.1B, the smallest since Jan, from a revised $40.3B in Jul, according to the Commerce Dept.  The forecast called for a deficit of $40.8B.  The gain in exports was driven by capital goods such as telecommunications equipment, & the petroleum shortfall was the smallest since 2004.  Demand from the nation’s trading partners is holding up even as the global economic expansion cools, giving American manufacturers a lift.  Imports have been restrained as the US comes closer to energy independence than it has in almost 3 decades, limiting the need for foreign oil.  The Commerce Dept initially reported a $40.5B shortfall for Jul.  Exports climbed 0.2% to $198.5B as demand for American-made capital goods advanced $1B.  Imports increased 0.1% to $238.6B in Aug.  The petroleum deficit shrank to $13.1B, the smallest since Jul 2004.  Imports of the fuel fell to $27.2B, the least since Nov 2010.  After eliminating the effects of price fluctuations, which generates the numbers used to calculate GDP, the trade deficit was little changed at $47.9B from $47.8B in Jul & down from an average $51.6B in Q2, putting trade on track to boost growth.

Trade Gap Unexpectedly Narrows in August on Record U.S. Exports

The Sep jobs report made the bulls happy, but there were problems.  Many new jobs were low paying as has been the case during the recovery period.  Sloppy & careless behavior in DC is not going away.  That's disturbing since these are the guys watching over everybody else.  And the intl scene remains troubling.  But the bulls are happy, taking Dow nearer to another record high.

Dow Jones Industrials

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