Thursday, March 17, 2016

Markets climb on economic data and higher oil prices

Dow surged 155, advancers over decliners better than 4-1 & NAZ had a more modest advance of 11.  The MLP index was up 6+ to the 276s & the REIT index added 4+ to the 336s.  Junk bond funds were higher & Treasuries rallied along with stocks.  Oil climbed to the 41s & gold had a solid advance, well above 1250.

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CLJ16.NYM....Crude Oil Apr 16....40.16 Up ...1.70 (4.4%)

Live 24 hours gold chart [Kitco Inc.]

Oil surged above $40 a barrel for the first time since Dec as central banks signaled they will continue to provide economic stimulus to support demand.  The fell a 2nd day after the Federal Reserve scaled back expectations for the pace of interest-rate gains.  A weaker $ bolsters investor demand for commodities priced in the currency.  Crude output slid to the lowest level since Nov 2014 & supplies expanded by 1.3M barrels, the smallest gain in 5 weeks.  US production dropped 10K barrels a day to 9.07M.  Stockpiles at Cushing, Oklahoma, increased 545K barrels to a record while nationwide supplies remain at the highest level in more than 8 decades.

Crude Oil Rises Above $40 in New York for First Time in 3 Months

Job openings outpaced hiring in Jan, consistent with further improvement in the US labor market.  The number of positions waiting to be filled increased 260K to 5.54M, from 5.28M in the prior month that was less than previously estimated, according to the Labor Dept.  The Jan level was the 3rd-highest since records began in 2000.  Hiring & quits, however, both eased.

Elevated job listings & waning dismissals indicate sustained demand for workers that has the potential of adding to wage pressures.  The report corroborates the Fed's view that the labor market continues to strengthen.  The Job Openings & Labor Turnover Survey (JOLTS) adds context to monthly payrolls data by measuring dynamics such as resignations, help-wanted ads & the pace of hiring.  The number hired fell to 5.03M from 5.4M in the prior month.  The hiring rate dropped to 3.5% from 3.8%.  The gauge calculates the number of hires during the month divided by the number who worked or received pay during that period.  One weak part of the report was that fewer Americans voluntarily left their current position.  Some 2.8M quit their jobs in Jan, down from 3.09M the prior month.  The quits rate, which shows the willingness of workers to leave their jobs, eased to 2% from 2.2%.  The rate was 2% when the recession started at the end of 2007.  Total dismissals, which exclude retirements & those who left their job voluntarily, decreased to 1.66M from 1.67M a month before.  There were about 1.4 unemployed people vying for every opening, compared with about 1.8 when the 18-month recession began.  In the 12 months thru Jan, the economy created a net 2.7M jobs, representing 61.7M hires & 59M separations.

Job Openings in U.S. Increased in January to 5.54 Million

The index of leading economic indicators in the US increased in Feb, reflecting continued signs of a healthy labor market.  The Conference Board’s measure of the economic outlook for the next 3-6 months rose 0.1% in Feb after sliding 0.2% the month before.  The forecast in a Bloomberg survey of economists called for a 0.2% increase.  A drop in building permits weighed on the index.  The coincident economic index, a measure of current economic activity, rose 0.1%, after a 0.3% increase the prior month.  The index tracks payrolls, incomes, sales & production, measures used by the National Bureau of Economic Research to determine the beginning & end of recessions.  The gauge of lagging indicators advanced 0.4% last month after a 0.1% gain the month before.

Leading Indicators in U.S. Rose in February as Hiring Improves

On Feb 10, the Dow was under 16K.  Since then it has rocketed ahead more than 1½K, for one impressive surge.  It's also in the black YTD.  Rising oil prices have been a major help.  Now, anticipation is that easy Janet will continue easy money policy for the rest of the year (at a minimum).  Energy companies, even at these levels, still face enormous obstacles with low oil prices.  Next month brings Q1 earnings & estimates are being lowered daily.  While the bulls have firm command of the stock market, lagging economic fundamentals may be their undoing.  That is shown by rising prices for Treasuries & gold.

Dow Jones Industrials


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