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Thursday, March 31, 2016
Markets crawl higher on the last day of the quarter
Dow gained 13, advancers over decliners 4-3 & NAZ rose 10. The MLP index went up 4+ to the 266s & the REIT index was flattish in the 339s. Junk bond funds edged higher & Treasuries had a modest advance. Oil rose in the 38s & gold also traded higher (see below).
Initial jobless claims increased by 11K to 276K last week, the highest since the end of Jan, according to the
Labor Dep. The forecast called for filings to hold at 265K.
The
data may indicate that improvement in the labor market, which has been
the strongest part of the economy lately, is being tempered by
still-weak manufacturing, flagging business investment & soft consumer
spending. Initial claims would still need to show a sustained trend
higher to confirm that layoffs are on the rise. Jobless
claims have been below 300K, a level associated with a
healthy labor market, for 56 consecutive weeks. That's the longest since
1973. The 4-week moving average of claims, a less volatile measure than the weekly figures, increased to 263K from 259K. The
number continuing to receive jobless benefits fell 7K in
the latest reporting week to 2.17M, the lowest level since
mid-Oct. The unemployment rate among people eligible for benefits
held at 1.6%.
S&P has cut the outlook for China's credit rating
to negative from stable, saying the nation's economic rebalancing is
likely to proceed more slowly than the ratings firm had expected. The credit rating is AA- with a negative outlook. S&P also affirmed the long-term & A-1+
short-term sovereign credit ratings. “We revised the outlook to reflect our expectation that the economic
and financial risks to the Chinese government’s creditworthiness are
gradually increasing,” S&P said. “This follows from
our belief that, over the next five years, China will show modest
progress in economic rebalancing and credit growth deceleration.” China's economic expansion will remain at or above 6% a year
in the next 3 years, S&P forecast. The investment rate may be
“well above” what S&P says are sustainable levels of 30-35%
of GDP. “In our opinion, these expected trends could weaken the Chinese
economy’s resilience to shocks, limit the government’s policy options,
and increase the likelihood of a sharper decline in trend growth rate,”
it added. A downgrade could follow if S&P sees a higher likelihood that
China seeks to stabilize growth at or above 6.5% by increasing
credit at a “significantly faster rate” than nominal GDP growth. Ratings
could stabilize if credit growth is moderated to levels in line with
economic expansion, S&P said.
Gold is headed for the biggest quarterly advance since 1990 as
demand for haven assets surged to make the metal this year's best
performing major commodity. Bullion rose
0.5% to $1230 in Singapore. The metal is up 16% since the start
of Jan, the first quarterly gain since Jun 2014. Gold
rallied this year as it cemented its status as a store of value amid
financial market turbulence & concern about the global economy, which
led to speculation that the Federal Reserve would pause on tightening
monetary policy. A gauge of the US currency headed for the
biggest quarterly loss since 2010 after Fed Chair Janet Yellen said
the central bank will act “cautiously” as it looks to withdraw
stimulus. Investor holdings in exchange-traded products have expanded by
about 300 metric tons this qtr, the most in 7 years.
Q1 is closing out with little excitement. Thanks to a major climb in Mar, Dow is up 300 YTD. Earnings season is very near near & expectations have been revised lower. GDP is also expected to have another weak qtr.
.....0.25 
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