Wednesday, January 7, 2015

Markets rebound on economic data

Dow jumped 127, advancers over decliners 5-2 & NAZ added 34.  The MLP index rose 2 to the 442s & the REIT index went up 2 to 338 (another multi year high).  Junk bond funds were mixed & Treasuries gave up some of their recent gains.  Oil recovered to the 48s & gold drifted lower.

AMJ (Alerian MLP Index tracking fund)

CLG15.NYM...Crude Oil Feb 15...48.26 Up ...0.33 (0.7%)

GCF15.CMX...Gold Jan 15.......1,212.10 Down ...7.20  (0.6%)

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Companies added more workers than forecast in Dec, indicating the US job market was sustaining strength as 2014 drew to a close.  The 241K increase in employment was the biggest since Jun & followed a 227K Nov gain that was more than initially reported, according to ADP Research Institute.  The projection called for an advance of 225K.  Headcounts are growing as the economy strengthens, powered in part by a pickup in household purchases.  Goods-producing industries, which include manufacturers & builders, increased headcounts by 46K last month. Hiring in construction rose 23K, while factories added 26K jobs.  Payrolls at service providers increased 194K.  Companies employing 500 or more workers rose 66K jobs.  Medium-sized businesses, with 50-499 employees, took on 70K workers & small companies increased payrolls by 106K.

ADP Says Companies in U.S. Added 241,000 Workers in December

The trade deficit narrowed more than forecast in Nov as US petroleum imports sank to the lowest level in more than 5 years.  The gap shrank 7.7% to $39B, the smallest since Dec 2013, from $42.2B in Oct, according to the Commerce Dept.  The forecast projected $42B.  The smallest quantity of crude oil imports in more than 2 decades & the lowest prices in 4 years combined to limit the value of foreign-fuel purchases.  A combination of rising supply as domestic production picks up & slower growth overseas that’s reducing demand is leading to a rout in oil prices that has continued into 2015.  Outside of fuel, Americans bought record amounts of consumer goods that shows the economy is strengthening.  The Commerce Dept initially reported a $43.4B shortfall for Oct.  The deficit lats year narrowed 11.4% to $476B, the smallest since 2009.  Leading up to the last recession, the shortfall reached a record $761B in 2006.  Imports dropped 2.2%, the most since Jun 2013, to $235B from $240B in the prior month.  The US imported $23B worth of petroleum in Nov, the least since Aug 2009.  The 189M barrels of foreign crude oil purchased during the month were the fewest since 1994, & the $82.95 average price per barrel was the lowest since Dec 2010.  Excluding petroleum, the trade gap would have been little changed in Nov at $27.6B compared with $27B the prior month.  Slower foreign demand is also holding back orders for US products.  Exports declined 1% to $196.4B from $198B in Oct.  After eliminating the influence of prices, which generates the numbers used to calculate GDP, the trade deficit narrowed to $47.8B compared with $50.1B in Oct.  The average so far in Q4 is little changed from Q3, indicating trade won’t have much impact on GDP.

Trade Gap Shrinks More Than Forecast as U.S. Oil Imports Dry

German Unemployment Falls to Record Low
Photo:   Bloomberg

German unemployment fell for a 3rd month in Dec to a record low, signaling that growth in Europe's largest economy will accelerate in 2015.  The number out of work fell a seasonally adjusted 27K to 2.84M in Dec, according to the Federal Labor Agency.  Economists predicted a decline of 5K.  The adjusted jobless rate dropped to 6.5%, the lowest level in records going back more than 2 decades.  After Germany's economy narrowly avoided a recession in the middle of 2014, recovering sentiment among entrepreneurs & investors supports forecasts that growth will accelerate this year.  A slump in oil prices & a weaker € could prove a boon for consumers & exporters, & the ECB is weighing large-scale gov-bond purchases as additional stimulus.  Unemployment fell 17K in western Germany & 10K in the eastern part of the country.

German Unemployment Falls to Record Low on Economic Recovery

Stocks are bouncing back in what could be their first up day this year.  The markets are oversold & buying was to be expected.  But problems associated with low oil prices have not gone away.  And overseas economies remain sputtering, looking for growth.

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