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Wednesday, March 30, 2016
Markets extend rally on Yellin's dovish comments
Dow shot up 129, advancers over decliners 5-2 & NAZ gained 47. The MLP index jumped 7+ to the 268s & the REIT index soared 10 to 340. Junk bond funds climbed higher & Treasuries retreated with a rising stock market. Oil is heading back up towards 40 (see below) while gold slid lower.
Companies took on 200K workers in Mar, adding to evidence of a
firming labor market. The
increase in employment followed a revised 205k gain the prior month,
according to ADP
Research Institute. The forecast called for
a 195k advance. Persistent hiring will be critical in
sparking bigger gains in the household spending that makes up the bulk
of a economy beset by struggling overseas demand. “The
job market continues on its amazing streak,” Moody's Analytics said (Moody's
produces the figures with ADP). “The only industry reducing payrolls is
energy, as has been the case for over a year. All indications are that
the job machine will remain in high gear.” Goods-producing
industries, which include manufacturers & construction companies,
increased headcount 9K.
Employment in construction rose 17K, while factories added 3K
jobs. Trade, transportation & utilities hired 42K workers, the most
since Jun & payrolls at service providers advanced 191K.
Companies
employing more than 500 or more workers added 39K jobs. Medium-sized
businesses, with 50-499 employees, took on 75K & the smallest
companies increased payrolls by 86K. The ADP report is based on data from businesses with almost 24M workers on their combined payrolls.
German inflation unexpectedly climbed above zero in Mar, a sign
that domestic demand & ECB stimulus may be starting
to spur price gains. Consumer prices rose 0.1% from the
prior year, data from the Federal Statistics Office. That’s
higher than the estimate of zero & compares with a rate of minus 0.2% in Feb.
Prices rose 0.8% from the previous month. Budding inflation
in Europe's largest economy will come as welcome news to
monetary-policy makers, who are trying to fuel price pressures in the
19-nation euro area. ECB pres Mario Draghi announced additional
stimulus in Mar, the latest stage in the central bank's war to offset
weak demand & global headwinds. Before
the report, economists projected that euro-area inflation stood
at minus 0.1% in Mar, compared with a minus 0.2% reading
the prior month. In Mar, the ECB predicted inflation in the region would accelerate to 1.3% in 2017 & 1.6% in 2018. The goal is to reach medium-term inflation of just
under 2%.
Oil edged up to near $40 per barrel as a weaker $ spurred interest in riskier assets & the International Energy
Agency said expectations for a deluge of oil from Iran were misplaced. The $ index fell, after slipping to an 8-day low in the
previous session on dovish comments by Janet Yellen about
possible interest rate rises. A weaker $ makes greenback-denominated commodities cheaper for holders of other currencies. Oil prices fell about 3% in the previous session after
Kuwait & Saudi Arabia said they would resume production at the jointly
operated 300K-barrels-per-day Khafji field even as oil producers
plan to meet on Apr 17 to consider an output freeze. The International Energy Agency, which oversees energy policies
of industrialized nations, forecasts the global stock build to continue
this year. But it said on today Iran was not adding as many barrels into
the market as expected despite the easing of intl sanctions in Jan.
Stocks are closing out Q1 in a rally mode. Much of the enthusiasm is from Janet Yellin's comments about going easy on raising interest rates. That probably means interest rate hikes are finished for the rest of the year. Dow is up over 300 in Q1 & within striking distance of setting a new record. Hard to believe given the drab economic data behind it.
...0.85 
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