Friday, August 7, 2015

Markets drop after jobs report

Dow fell 70, decliners over advancers almost 3-2 & NAZ lost 20.  The MLP index recovered 2+ to the 346s & the REIT index gave up 1+ to the 315s.  Junk bond funds drifted lower & Treasuries rose, bringing the yield on the 10 year Treasury to 2.2%.  Oil is well below the important support level of 45 & gold inched higher.

AMJ (Alerian MLP Index tracking fund)

CLV15.NYM....Crude Oil Oct 15...44.77 Down ...0.32  (0.7%)

GCQ15.CMX...Gold Aug 15.....1,094.60 Up ...4.40 (0.4%)

Today's gov report showed that the number of full-time US jobs as a share of total employment rose to 81.7%, the highest level since Nov 2008.  For those worried, that this economic recovery has been one that's created only low-quality jobs, this should be really good news.  Even so, the share of full-time workers remains below its peak during the last cycle of 83.2% in Oct 2007.  The pool of Americans working part-time for economic reasons, such as not being able to find a job with more hours, fell last month by 180K to 6.3M, the lowest level since Sep 2008 (Lehman collapse).  Additionally, the number working part-time for non-economic reasons, going to school, taking care of family, etc., plunged by 589K, the biggest decline since Jun 2012.  At the same time, the number of employees on the payrolls of temporary work services also fell, declining 9K.  The rest of the details of the jobs report were also solid.  Overall, payrolls climbed 215K Jul & the unemployment rate held at a 7-year low of 5.3%.

Full-Time Jobs in the U.S. Just Made a Comeback

China's central bank said it would use a combination of monetary tools to ensure sufficient levels of liquidity in the economy amid slowing growth.   The People's Bank of China (PBOC) said in its Q2 monetary policy report that it would enhance the flexibility of its monetary policy, while continuing its prudent stance.  The central bank also suggested that monetary policy wouldn't be adjusted due to changes in the price of a single product.   The PBOC also said in the report that the economy, which is facing more downward pressure, is too reliant on gov-led investment & support measures.  China's economic growth slowed to 7.0% year-over-year in Q2, its weakest performance in 6 years.  The central bank also warned that debt levels in the economy are rising & repeated previous statements on the need to prevent systemic risks in the financial sector.   The PBOC also said it expected more uncertainties ahead in global exchange rates & cross-border capital flows.  The central bank said it would improve the yuan's exchange-rate mechanism & allow more flexibility in the Chinese currency, maintaining a long-standing policy stance.

China Central Bank Pledges Sufficient Liquidity

German industrial production unexpectedly dropped in Jun as a result of weaker performances by the construction & machinery sectors & calendar effects caused by public holidays.  Exports also dropped more than expected.  The Economy Ministry said that production in Europe's biggest economy was down 1.4% compared with the previous month.  Economists had expected a 0.3% gain.  In a separate report, the Federal Statistical Office said that exports dropped 1%, worse than the forecast 0.3% decline & imports were 0.5% lower.  Germany's trade surplus slipped to €22B ($24B) from €22.8B in May.

German industrial production drops unexpectedly in June

Traders were not happy with the jobs data.  While it was fairly good, it also might be good enough to give the Fed enough courage to raise interest rates next month.  Dow is down almost 500 YTD & near the lows since late Oct.  Its chart is dreary.

Dow Jones Industrials

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