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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.
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.
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%.
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.
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.
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