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.

AMJ (Alerian MLP Index tracking fund)

CL.NYM...Crude Oil May 16...39.13 Up ...0.85 (2.2%)

GC.CMX...Gold Apr 16......1,232.90 Down ...2.90  (0.2%)

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.

ADP Says Payrolls at Companies in U.S. Rose 200,000 in March

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%.

German Inflation Rate Turns Positive in Sign of Euro-Area Pickup

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.

U.S. Crude Rises With Riskier Assets on Weak Dollar

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. 

Dow Jones Industrials


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