Tuesday, June 30, 2015

Markets advance cautiously on reduced Greek debt concerns

Dow rose 23, advancers over decliners better than 3-2 & NAZ went up 28 (taking it near 5K).  The MLP index continued falling, down 2+ to 397, & the REIT index inched up pocket change in the 303s.  Junk bond funds were higher & Treasuries were weak after yesterday's rally.  Oil rose & gold saw selling again.

AMJ (Alerian MLP Index tracking fund)

CLQ15.NYM....Crude Oil Aug 15....59.46 Up ...1.13 (1.9%)

Live 24 hours gold chart [Kitco Inc.]

Just how quickly is everyone's paycheck growing?  It's one of the most important questions in the American job market right now, with only inconclusive answers derived from conflicting data.  This week, a regional Federal Reserve bank added a new indicator to the mix in hopes of offering policy makers a closer look at what's really happening in the job market.  The new index, which shows a median wage increase of 3.3% in the 12 months thru May, a substantially faster pace than even just a year ago, gives ammunition to central bank hawks who would like to raise interest rates in Sep.  There are currently 2 principal measures of wages: the Labor Dept average hourly earnings measure & the Employment Cost Index, a broader measure that includes benefits.  They give somewhat conflicting pictures on the state of wages, with hourly earnings up 2.3% thru May & quarterly ECI up a more robust 2.8% thru Q1, excluding gov workers.  The Atlanta Fed's newly introduced measure is based on Census Bureau questions to thousands of households, compared to other measures that survey businesses.  "We are seeing signs of wage pressure," says John Robertson, a senior policy adviser at the regional bank.  While some economists consider the Employment Cost Index the single best measure of earnings, an advantage of the Atlanta Fed's tracker is it will come out monthly & provide a much faster take on the job market.  The new measure has moved in tandem with changes in unemployment rate from 12 months earlier, Robertson says.  This suggests that further wage gains are coming because the jobless rate has dropped to 5.5%, from 6.3% in May 2014.  Wage gains have doubled from 1.6% in Jan 2010, but remain lower than the 4.1% level during the month the recession started in Dec 2007.  Robertson's takeaway: "The labor market is tightening, though not necessary tight. We are seeing some acceleration in wages—though not back yet to the levels when the market was tight, like 2006-2007."  While some economists believe that Fed Chair Janet Yellen may want to wait until later in the year, the Atlanta Fed data add to the argument that an increase could be warranted sooner.

This New Indicator Shows the U.S. Job Market Finally Heating Up

The US economy probably bounced back to an annual growth rate of around 2.5% in Q2, & the labor market is approaching full employment, Federal Reserve vice chairman Stanley Fischer said.  He said "tentative" signs of wage growth & continued job creation also gave him confidence that US labor markets will continue improving, & gradually push inflation towards the Fed's 2% target.  Fischer did not directly address the timing of an initial Fed rate hike that is expected as early as Sep, but noted that the central bank needed to stay ahead of the curve, since monetary policy only affects the economy with a time lag.  "We should not wait until we have reached our objectives to begin adjusting policy," Fischer said.  Since late last year the Fed has wrestled with whether a weaker global economy might throw the US off track & force a further delay in any rate hike.  The escalating crisis in Greece could add to that uncertainty if it drags the euro zone back into recession.  Fischer did not mention the Greek crisis specifically but added that the global situation remained a “significant headwind” for the US.  It has hurt the country's exports in particular, & the impact is likely to continue.  Still, Fischer's view of the economy remained one of steady improvement at a time when the Fed has said it would consider an interest rate hike at each upcoming meeting, & be responsive to incoming data.  "Our policy will be data dependent, and the (Federal Open Market Committee) at upcoming meetings will weigh possible adjustments" to the interest rate, Fischer said.

Economy nearing full employment, bounced back in Q2: Fed's Fischer

Cisco, a Dow stock, said it would buy OpenDNS for $635M, the latest move to boost its security business as cyber attacks increase in number & sophistication.  It has been buying a number of security companies, which has made its relatively tiny security business one of its fastest growing in the past 2 years.  OpenDNS uses predictive intelligence to block malware, botnets & phishing threats that antivirus & firewalls miss.  The global cyber security market is estimated to grow to $170B by 2020 from $106B in 2015.  This acquisition is its first after saying in May that veteran Chuck Robbins would replace John Chambers as CEO in Jul.  CSCO, which acquired dozens of companies under Chambers, is transitioning toward high-end switches & routers, & investing in new products such as data analytics software & cloud-based tools.  The company, whose security business is known for its firewalls, expanded into intrusion detection & prevention systems with the $2.7B acquisition of Sourcefire in 2013.  The stock slid back pennies.  If you would like to learn more about CSCO, click on this link:

Cisco to Buy OpenDNS for $635M

Cisco (CSCO)

Angela Merkel said no to another Greek bailout.  What's new?  Obama said no to a bailout for PR.  Times are tough for debtor nations.  It is difficult to evaluate today's market rise with fund managers adjusting their Q2 end books.  But Dow is down modestly in Q2 & YTD.  And rising interest rates are around the corner.

Dow Jones Industrials

3 Stocks You Should Own Right Now - Click Here!

No comments: