Friday, March 6, 2015

Markets decline after favorable jobs report

Dow dropped 111, decliners over advancers more than 3-1 & NAZ lost 5.  The MLP index slipped 1+ to 443 & the REIT index lost a very big 7+ to the 326s (down 10% from its recent peak).  Junk bond funds were lower & there was selling in Treasuries.  Oil slid lower & gold sank further in the 1100s.

AMJ (Alerian MLP Index tracking fund)

CLJ15.NYM.....Crude Oil Apr 15...50.19 Down ....0.57  (1.1%)

GCH15.CMX...Gold Mar 15.....1,177.00 Down ...18.90  (1.6%)

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Employers added more jobs than forecast in Feb & the unemployment rate dropped to 5.5%, the lowest in almost 7 years, showing the labor market is sustaining progress after the best performance since 1999.  The 295K advance in payrolls last month followed a 239K Jan increase that was smaller than previously reported, according to the Labor Dept.  The forecast called for a 235K increase.  The unemployment rate fell from 5.7%, but hourly earnings rose less than forecast.  The report underscores a lingering appetite among companies to boost headcounts as increased purchasing power from cheaper fuel supports consumer spending.  While the jobless rate reached Federal Reserve policy makers’ range for what they consider full employment, a missing link continues to be faster wage growth that will be needed to ensure household purchases accelerate.  Average hourly earnings rose 0.1% from the prior month after rising 0.5% in Jan, which was the most since Nov 2008.  The forecast called for a 0.2% gain.  Earnings were up 2% over the past year, also less than projected & matching the increase on average since the expansion began in mid-2009.  Feb marked the 12th straight month payrolls have increased by at least 200K, the best run since a 19-month stretch that ended in 1995.  Payrolls rose 3.1% in 2014, the most in 15 years.  The revision to the Jan figures subtracted 18K jobs from the payroll count & Dec was unrevised at 329K.  The gain in Feb employment was led by stronger hiring in business services & leisure & hospitality, which include restaurants. The drop in the jobless rate reflected both an increase in hiring & a decline in the number of people in the labor force.  The participation rate, which indicates the share of working-age people working or looking for a job, decreased to 62.8% from 62.9% in Jan.

Payrolls Climb More Than Forecast, U.S. Jobless Rate at 5.5%

A stronger-than-forecast payrolls report strengthens the argument for the Federal Reserve to begin raising interest rates in Jun, after the jobless rate reached the range viewed as full employment.  Janet Yellen last week began to prepare investors for an increase this year, without saying that a move was imminent.  She signaled in testimony to Congress that the Fed may drop its pledge to be “patient,” which would mean that rates could be raised at any meeting.

Pressure Rises for a June Rate Hike

The institutions overseeing the Greek bailout program will need to scrutinize the probable impact of the gov's latest reform proposals before the country can receive another loan payout, a senior EU official said.  The European Commission, the ECB & IMF, formerly known as the troika, must assess the overall balance of the measures proposed by the gov & this will not happen before euro-area finance ministers meet on Mon.  Greece’s anti-austerity gov has so far been unable to agree with its creditors on the terms for the disbursement of an outstanding aid portion totaling about €7B ($7.6B).  Euro-area finance ministers last month agreed to extend the current arrangement, giving Greece 4 more months to come up with a suitable reform program.  “The disbursement of the final tranche requires a successful completion of the program; we don’t know when that will be,” the German Finance Ministry said.  “There are clearly defined, sequenced steps and for us this sequence is binding.”  The Greek gov confirmed that the latest reform proposals were sent to Dutch Finance Minister Jeroen Dijsselbloem, who presides over meetings of euro-area finance ministers.  While the Greek Finance Minister is expected to formally present them next week, there can be no decision on whether they are sufficient before a technical review, an EU official said.  The list of reforms includes proposals on fighting tax evasion & regulation of internet gambling.  Technical discussions have not yet started & there is no indication when they are likely to.  Greece needs to refinance or repay about €6.5B in the next 3 weeks.

Greek Loan Payout Hinges on Review of Reforms, EU Says

The "good" news on jobs brought on selling.  The thinking is that will give the Fed courage to begin raising interest rates, long overdue.  Janet & other officials have been dropping signals.  As long as the US economy is doing relatively well, the first increase has to be expected.  There have also been numerous hints about mid 2015 & that seems likely.  The Dow has almost tripled from its low 6 years ago & much of that increase was fueled by low interest rates.  Apple (AAPL) will be added to the Dow in a couple of weeks.  It will replace AT&T (T), a Dividend Aristocrat.

Dow Jones Industrials

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