Wednesday, December 3, 2014

Markets fluctuate as oil rebounds

Dow inched up 3, advancers over decliners 2-1 & NAZ lost 6.  The MLP index rose 4+ to the 482s & the REIT index slipped a fraction in the 324s.  Junk bond funds were mixed & Treasuries retreated.  Oil rose after an industry report showed that US crude inventories declined last week & gold went back over 1200.

AMJ (Alerian MLP Index tracking fund)

CLF15.NYM...Crude Oil Jan 15...67.61 Up ....0.73 (1.1%)

GCZ14.CMX...Gold Dec 14....1,203.00 Up ...3.80 (0.3%)

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US Companies added 208K workers in Nov, indicating steady progress in the labor market.  The increase in employment followed a revised 233K gain the prior month, according to ADP Research Institute.  The forecast called for an advance of 222K.  Payrolls have climbed by at least 200K in 7 of the last 8 months.  Resilient domestic demand, supported in part by falling energy costs, is encouraging employers to add to headcounts even as global economies struggle.  Faster wage gains would help provide an added boost to household spending, which makes up almost 70% of the economy.  Goods-producing industries, which include manufacturers & construction companies, increased headcount by 32K in Nov.  Employment in construction rose by 17K, while factories added 11K jobs.  Payrolls at service providers advanced by 176K (many are low paying jobs).  Companies employing 500 or more workers added 42K jobs.  Medium-sized businesses, with 50-499 employees, took on 65K workers & the smallest companies increased payrolls 101K.  Moody’s produces the figures with ADP & said. “At this pace the unemployment rate will drop by half a percentage point per annum.  The tightening in the job market will soon prompt acceleration in wage growth.”

ADP Says Companies in U.S. Added 208,000 Workers in November

Fed Vice Chairman Stanley Fischer
Photo:   Bloomberg

Federal Reserve (FED) officials are signaling more confidence in the economy that moves them nearer to raising interest rates, & are stressing the liftoff is linked to data rather than dates to avoid unsettling markets.  FED Vice Chairman Stanley Fischer said yesterday the central bank was getting closer to replacing a vow to hold rates low for a “considerable time” with guidance that tighter monetary policy will hinge on the economy’s performance.  The FMOC is embarking on a critical phase in its 7-year battle with a financial crisis, a recession & a sub-par recovery.  If the economy keeps improving, officials will need to signal to investors that they’ll raise the federal funds rate without sending bond yields higher & slowing growth.  The FOMC next meets on Dec 16-17 is expected to debate retaining their “considerable time” commitment.   “We’re not going to suddenly stop that and not say anything, just take it out and leave no guidance,” Fischer said yesterday.  “We don’t want to surprise markets,” Fischer added.  “On the other hand, we can’t give precise estimates about dates that we don’t know, and that’s why the emphasis always goes back to the data, and not to the date.”  Both Fischer & New York FED pres William C. Dudley emphasized the benefits of lower oil prices for the US economy, playing down the threat that the drop will push inflation even further below their 2% goal.

Fed Officials Stress Data Over Dates as Case for Rate Increase Builds

Holiday shopping on the web rose 17% in the US to a record $2.04B on Cyber Monday, researcher ComScore said, as consumers took advantage of online deals.  Dec 1, this year’s Cyber Monday,  remains the busiest internet shopping day so far this year, topping Black Friday’s $1.51B in desktop web sales.  Still, growth on Cyber Monday is slowing as consumers spread out their purchases to other days.  On the same day last year, online retail sales on desktop computers rose 18%.  Shoppers have been responding to earlier promotions at e-commerce websites which kicked off its holiday deals a week before Black Friday.  As gift-buying creeps earlier in the month & includes Thanksgiving Day, the Cyber Monday peak is becoming less pronounced.  Even as spending shifts between days, the broader trend is robust growth, ComScore said.  Online spending from Nov 1 thru Cyber Monday totaled $26.7%, up 16% from the same period last year.  That compares with last year’s growth rate of 8%.  “The online holiday shopping season is clearly going very well at the moment & is currently running ahead of forecast,” ComScore Chairman Emeritus Gian Fulgoni said.  “Varying reports have also indicated weakness in the consumer economy due to flagging brick-and-mortar sales over the holiday weekend, but what we may really be seeing is an accelerating shift to online buying as mobile phones spur increased show-rooming activity. The data we’re seeing suggest it may be more a change in shopping behavior than a lack of consumer demand.”

Cyber Monday Online Sales Rose 17% to $2 Billion, ComScore Says

The markets are adjusting to lower oil prices as WTI is settling in near $67.  FED officials have to keep reminding everybody that lower prices for oil is good for the economy.  However dislocations that it brings can be unsettling.  For a start MLPs have gone thru another trial by fire, but investors have been bargain hunting in the last 2 days.  The jobs report from ADP was good, but pretty much expected.  The Fri jobs report for Nov should show the economy added more than 200K jobs.  Dow continues to hover around record levels.

Dow Jones Industrials

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