Friday, May 8, 2015

Markets surge on US jobs report

Dow shot up 264, advancers over decliners 4-1 & NAZ added 55 (edging over 5K).  The MLP index rose 1 to the 437s & the REIT index recovered 7+ to the 327s.  Junk bond funds gained & Treasuries also went up.  Oil slid below 59 & gold inched higher, still stuck under 1200.

AMJ (Alerian MLP Index tracking fund)

CLM15.NYM...Crude Oil Jun 15...59.19 Up ...0.25 (0.4%)

GCK15.CMX...Gold May 15....1,186.90 Up ...4.50 (0.4%)

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Payrolls rebounded in Apr following an even bigger setback a month earlier than previously estimated, a sign companies are confident the US economy will reboot after stagnating early this year.  The unemployment rate dropped to 5.4%.  The 223K net increase in employment followed an 85K gain in Mar that was the smallest since Jun 2012, according to the Labor Dept.  The jobless rate fell to the lowest since May 2008 (shortly before the Lehman collapse) as more Americans entered the labor force & found work.  But average hourly earnings climbed less than forecast.  Construction & health care were among the industries that accelerated the pace of hiring last month as the economy emerged from temporary setbacks that included bad weather & a labor dispute at West Coast ports.  Such job growth & steadily rising wages may keep the Federal Reserve (FED) on track to raise its benchmark interest rate later this year.  The forecast called for a 228K advance & Mar was revised downward from a previously reported 126K advance.  Revisions to prior reports subtracted a total of 39K jobs from overall payrolls in the previous 2 months.  The participation rate, which indicates the share of working-age people who are employed or looking for work, increased to 62.8% from 62.7% in Mar, which matched the lowest since 1978.  Wage growth remains limited, with average hourly earnings rising 0.1% in Apr after a revised 0.2% gain that was weaker than initially reported.  Compared with a year earlier, hourly pay was up 2.2% last month.  The average work week for all employees held at 34.5 hours.  Construction companies took on 45K, the biggest gain since Jan 2014, & employment in health services increased 55,6K, the strongest increase in 5 months.

U.S. Unemployment Falls to Lowest Level Since May 2008

Greek Finance Minister Varoufakis said his gov is prepared to go “down to the wire” in talks with its creditors as policy makers signal they’re losing patience with the country after months of brinkmanship.  Varoufakis, who denies he’s been sidelined by Greek Prime Minister Tsipras in the negotiations, said he expects an agreement in the next 2 weeks, though one is unlikely to be announced when euro-area finance chiefs meet on Mon.  Greece has less than a week to prove to the ECB that it’s serious about reaching an agreement with intl lenders.  Failure to make progress in bailout talks or repay about €745M ($839M) owed to the IMF on May 12 may prompt the imposition of tighter liquidity rules on its banks.  “Europe works in glacial ways and eventually does the right thing after trying all alternatives,” Varoufakis said.  “So we probably won’t have an agreement on Monday, but certainly we’re going to have an agreement in the next couple of weeks or so.”  More than 100 days of talks between Europe’s most-indebted state & its creditors have failed to produce an agreement on the terms attached to the country’s €240B.  The standoff between Greece’s governing coalition & euro-area member states has led to an unprecedented flight of deposits from Greek banks & renewed concern over the country’s future in the single currency.  Varoufakis said that while there’s convergence between the 2 sides, the Greek gov won’t bow to creditors’ demands for more austerity.  “This cycle of debt deflation and insincerity has to end,” he said in the BBC interview. “We are prepared to go all the way down to the wire.”  His gov has repeatedly expressed confidence a deal was imminent, only to be rebuffed by European officials seeking more specific policy proposals from Greece.

Varoufakis Says Greece Ready to Take EU Impasse Down to the Wire

German industrial production unexpectedly declined in Mar in a sign that Europe’s largest economy remains vulnerable to global economic weakness.  Output, adjusted for seasonal swings and inflation, fell 0.5% after stagnating in Feb, data from the Economy Ministry showed.  The typically volatile number compares with an estimate of a 0.4% gain.  Production rose 0.1% from a year earlier.  Patches of economic weakness around the world & the stand-off between Greece & its creditors risk dragging on an accelerating recovery in the euro area, Germany’s biggest trading partner, even as the ECB is making large-scale asset purchases.  Yet, German business confidence is at a 10-month high & the Bundesbank predicts “quite robust” economic growth for this year.  Manufacturing output fell 0.8% from the previous month, with investment-goods production down 1.4%.  Industry output rose 0.5% in Q1, bolstered by a 2.3% increase in construction.  “The industrial sector had an overall moderate start to the year,” the ministry said.  “Manufacturing especially stumbled in the past months. Important sectors for the economy such as engineering and the car industry are currently lacking momentum.”  A measure of factory activity in Germany & the euro area signaled slowing output in Apr, according to Markit Economics.  At the same time, manufacturers raised prices for the first time in 8 months, providing evidence that the foundations of the feeble recovery are strengthening.  Factory orders, a gauge of future output, rose in Mar after 2 months of decline.  While the trend continues to be positive, orders dropped 1.5% in Q1 amid sluggish demand from abroad. 

German Industrial Production Falls as Economy Risks Grow

While stocks are having one of their best days in some time, the employment report was not all that spectacular.  The prior 2 months were worse than previously reported & the number of new jobs in Apr was only line with numbers from late 2014.  Higher earnings continue to be a troubled area.  Today's advance ignores an increased probability that the FED will have enough courage to begin raising interest rates sooner, not later.  Calmer heads could bring selling on Mon.

Dow Jones Industrials

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