Friday, January 8, 2016

Markets try to edge higher as oil dips to the $32s

Dow rose 15, decliners ahead of advancers almost 5-4 & NAZ added 15.  The MLP index recovered 3+ to the 268s & the REIT index was down fractionally to the 319s.  Junk bond funds were mixed to lower & Treasuries were flattish.  Oil slid again, going below 33, & gold was also sold. 

AMJ (Alerian MLP Index tracking fund)


CLG16.NYM....Crude Oil Feb 16....33.10 Down ...0.17  (0.5%)







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Employers in Dec added 292K workers, exceeding the highest estimate, & payrolls for the previous 2 months were revised higher, according to the Labor Dept.  The jobless rate held at 5% as people entering the labor force found work.  At the same time, worker pay disappointed, rising less than forecast from a year earlier.  The Dec advance followed a 252K increase in Nove that was stronger than the previously estimated at 211K.  The forecast called for 200K.  The readings capped the 2nd-best year for hiring since 1999.  Dec job gains, which were probably helped by mild winter weather across much of the country, were led by temporary-help services, health care, transportation & construction.  Revisions to prior reports added a total of 50K jobs to payrolls in Nov & Oct.  For all of 2015, employment climbed by 2.65M after a 3.1M gain in 2014, for the best back-to-back years since 1998-99.  The unemployment rate for all of 2015 averaged 5.3%, the best since 2007, when it was 4.6%.  While employers continue to aggressively add to headcounts, worker pay has yet to show a sustainable pickup.  Average hourly earnings in Dec were unchanged from the prior month & increased 2.5%.
The year-to-year advance was primarily due to an easy comparison with Dec 2014, when earnings fell 0.2% from the previous month.  This base effect will probably result in some payback with the Jan employment report when earnings come up against a strong Jan 2015 comparison.  The participation rate, which shows the share of working-age people in the labor force, increased to a 4-month high of 62.6% from 62.5%.  The underemployment rate, which includes part-time workers who’d prefer a full-time position & people who want to work but have given up looking, held at 9.9%.  Employment over the final 3 months of 2015 increased 284K on average, the most since Jan 2015.

Payrolls Surge, U.S. Jobless Rate at 5% as Workforce Grows

German industrial production unexpectedly fell in Nov, led by investment goods, in a sign that a slowdown in emerging markets such as China & Brazil may weigh on economic growth.  Output, adjusted for seasonal swings & inflation, slid 0.3% from Oct, when it gained a revised 0.5%, according to the Economy Ministry.  The reading compares with an estimate for a 0.5% gain. 
Germany’s BGA trade group warned this week that a ‘hard landing’ in China will push Europe's largest economy into a recession & argued that the weak € is exaggerating the country's economic strength.  The Bundesbank has expressed confidence in the recovery, pointing to an expected pickup in global trade & robust private consumption benefiting from record-low unemployment & rising wages.  German exporters are responding by turning their focus to recovering economies such as the US.  Shipments to the US jumped more than 20% in the 10 months thru Oct from the previous year, while sales to China slipped 4.2%.  Total foreign sales rose 0.4% in Nov & imports were up 1.6% from the previous month.  In France, manufacturing increased 0.4% in Nov after a drop of the same extent the previous month.  German manufacturing output slid 0.8%, driven by a 3.3% slump in the production of investment goods.  Energy production jumped 2.5% & construction climbed 1.6%.

German Industrial Output Unexpectedly Falls Amid China Risks


China’s central bank pledged to continue prudent monetary policies this year while maintaining “reasonable, ample” liquidity in the banking system.  The People’s Bank of China said it would seek to keep the yuan's exchange rates “basically stable” at reasonable & equilibrium level, &d work to further promote the internationalization of the currency, the monetary authority said today.  The PBOC also said it would continue to offer credit support to some key areas & lower social-financing costs with multiple tools, including the Pledged Supplemental Lending & Medium-term Lending facilities.

PBOC Vows to Maintain Prudent Monetary Policy in Year Ahead


Stocks received the best possible news on the jobs report & its response is lackluster.  Jobs added tend to be ones with low wages.  More importantly, the bear market for oil persists.  China's economy & stock market is in economic turmoil.  And chaos in the MidEast is not helping matters.  If the market sells off in the PM, the loss for the first week for the Dow could exceed 1K, a mind boggling selloff.

Dow Jones Industrials







 

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