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Thursday, June 30, 2016
Higher markets on reduced Brexit vote worries
Dow added 79, advancers over decliners 3-2 & NAZ went up 16. The MLP index lost 2 to the 315s & the REIT index was up 4+ to 359 (record territory). Junk bond funds were mixed & Treasuries were lower again. Oil fell to the 48s & gold also slipped back.
The number of Americans who applied last week for unemployment
benefits rose to a level that's still consistent with steady improvement
in the labor market. Jobless claims increased 10K to
268K, according to the Labor Dept. The forecast
called for 267K. Continuing claims decreased for the 3rd week in
the last 4. Companies are reluctant to layoff workers as skilled & experienced employees become difficult to attract in a tighter labor
market. Dismissals that are still hovering near 4-decade lows signal
a recent slowdown in payrolls may be short-lived as household spending
continues to fuel the economy. For 69
consecutive weeks, claims have been below the 300K level, consistent with an improving job market.
That's the longest stretch since 1973. The 4-week moving average held at 266K. The
number continuing to receive jobless benefits fell 20K
to 2.12M & the 4-week average
declined to 2.13M, the lowest since 2000.
The
unemployment rate among people eligible for benefits declined to 1.5% from 1.6%.
Oil is heading for the biggest quarterly advance in 7 years as falling
US supply added to speculation the global surplus is easing as futures fell 2.6%. Still, oil
is headed for its best quarterly gain since Jun 2009. US crude
supplies declined a 6th week & output slipped to the lowest since
Sep 2014. Markets have whipsawed
after the UK vote to leave the EU.
Supply disruptions (such as in Nigeria) & falling US output have
helped cut a global surplus, sparking a rally of more than 85%
since prices hit a 12-year low in Feb. The International
Energy Agency & OPEC forecast this month that the market is heading toward balance as demand growth outpaces supply. US crude
inventories dropped to 526.6M barrels, the lowest since Mar, the Energy Information Administration said. Supplies
climbed to an 87-year high of 543.4M barrels in the last week of
Apr. Production slipped 55K barrels a day to 8.62M last
week, the EIA said.
Puerto Rico's fiscal crisis is reaching a turning point as pres Obama plans to sign bipartisan legislation that would allow the
island to escape from debts once viewed as ironclad. The
Senate yesterday, passed a bill that protects the
island from creditors as it veers toward its largest default yet. The
legislation creates a financial control board to help restructure Puerto
Rico's $70B in debt & oversee the island's finances, marking
the largest federal intervention ever into the US municipal bond
market. Obama is likely to sign the measure today, one day
before Puerto Rico Governor Alejandro Garcia Padilla has said the island
will default on more than $1B on general-obligation debt. “It
is a critical first step toward economic recovery and restored hope for
millions of Americans who call Puerto Rico home,” Obama said. “I look forward to signing the bill into law.” The
territory had continued to pay the securities even as it rapidly went
broke. The bill passed by the Senate doesn't provide any additional
funding, but it allows Puerto Rico to turn to federal court to cut its
obligations & protects the gov from creditor lawsuits by
putting them on hold. In return, Puerto Rico is being forced to
accept strict oversight by a control board that will have significant
power over its day-to-day affairs. The legislation also does
little to alleviate the underlying economic conditions on the island
that led to its vast accumulation of debt.
Hard to believe that the stock market is trying to extend its bounce back to 3 days. No problems have been solved relating to Britain leaving the EU. But there are plenty of unhappy euro bureaucrats in Belgium who will make the exit difficult. Stock market optimism is not well founded with gold just below its recent highs. Even oil lost ground today.
...1.25 
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