Friday, December 5, 2014

Markets climb higher on payrolls report

Dow rose 58 for a new record, decliners slightly ahead of advancers & NAZ added 11.  The MLP index sank 8+ to the 479s as the index continues with high volatility & the REIT index fell 2+ to 323.  Junk bond funds were mixed to lower & Treasuries sold off, bringing the yield on the 10 year Treasury over 2.3%.  Oil dropped to the 65s & gold also sold off.

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CLF15.NYM...Crude Oil Jan 15....66.13 Down ...0.68  (1.0%)

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A Nov surprise that included a jump in wages as well as the biggest hiring surge in almost 3 years suggests the US economy is putting aside doubts about the strength of the expansion.  The 321K advance in payrolls followed a 243K increase in Oct that was stronger than previously reported.  The jobless rate held at a 6-year low of 5.8% & earnings rose by the most since Jun of last year.  From factories to offices & retailers, employers took on more staff last month, giving American consumers the bump in pay needed to drive holiday spending.  The breadth of industries hiring last month was the broadest since 1998, a sign the benefits of the expansion were rippling thru the economy.  Factory payrolls rose by the most in a year, professional & business services companies took on more employees than at any time since Nov 2010, financial firms boosted payrolls by the most since early 2012 & hiring at retailers picked up.  These figures show the US remains a standout as the rest of the world struggles.  The Bundesbank today cut its economic forecast for Germany, Europe's largest economy, thru 2016.  The central bank cut its projection for growth next year to 1% compared with a Jun outlook of 2%.

Hiring Surge Gives U.S. Expansion a Lift Into 2015: Economy

Consumer borrowing rose less than forecast in Oct as Americans tempered their credit-card use ahead of the holiday-shopping season.  The $13.2B gain in credit followed a revised $15.4B advance in Sep, according to the Federal Reserve.  The forecast called for a $16.5B increase.  Households wary of taking on too much debt are being deliberate in using their credit cards to make purchases.  At the same time, a faster pace of hiring and a pickup in wages are prompting Americans to take advantage of low borrowing costs to buy cars.  Revolving credit, which includes credit-card balances, rose $922M, less than the $1.4B gain in Sep.  Non-revolving loans, including borrowing for vehicle purchases & college tuition, rose $12.3B.  Federal gov lending to consumers, made up mostly of student loans, climbed $5.1B from the previous month before adjusting for seasonal variations.  Auto sales advanced in Nov at a 17.1M annualized rate from 16.4M a month earlier.  In Aug, purchases ran at a 17.5M pace, the strongest since Jan 2006.

Consumer Credit in U.S. Increased Less Than Forecast in October

General Motors will build more than 95% of its Cadillac lineup locally in China by 2018, as part of its strategy to make the country a key market for the premium brand alongside the US.  “China is on an unstoppable path of ascendancy,” Johan de Nysschen, Cadillac’s president, told said.  “China is absolutely now, at the very, very center of our focus. We need to establish the Chinese market as the second volume hub for the Cadillac brand.”  Manufacturing in China allows foreign automakers to avoid paying custom duties that can add more than 25% to costs, making imports less competitive versus locally made models.  Cadillac will need to succeed in the world’s largest auto market to achieve its target to double global sales by 2020 & earn a profit margin of 10% or more by the next decade.  GM predicts one in 10 cars sold in China will be a luxury vehicle by the end of the decade, & plans to introduce 9 new Cadillac models in the next 5 years to meet the demand.  GM is building a factory in Shanghai dedicated to manufacturing Cadillacs that’s scheduled to open next year.  The automaker doesn’t rank among the top 5 luxury-car makers in China.  Cadillac sales in China surged 51% to 64K units in the first 11 months of 2014.  GM expects to sell 70K Cadillac vehicles in the country this year & 100K in 2015.  GM is reorganizing Cadillac into a standalone unit with its own headquarters in NY starting next year, underscoring the company’s efforts to rebuild the brand.  The stock rose 84¢.  If you would like to learn more about GM,click on this link:

GM to Build 95% of Cadillac Models Locally in China by 2018

General Motors (GM)

The rally on what should be considered good economic news was meager.  Perhaps thoughts about the data giving the Federal Reserve courage to start raising interest rates sooner was sobering for traders.  In addition, sluggish economies overseas is not an encouraging for multi-nationals.  Weak market breadth with more decliners than advancers suggests this enormous market rally is very tired.

Dow Jones Industrials

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