Thursday, July 7, 2016

Lower markets fall after oil plunges 5%

Dow was down 22, advancers slightly ahead of decliners & NAZ gained 17.  The MLP index slid back fractionally to the 311s & the REIT index fell 3+ to 361s following a long climb this year.  Junk bond funds inched higher & Treasuries were sold.  Oil tumbled & gold retreated (see more on both below).

AMJ (Alerian MLP Index tracking fund)

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Crude Oil Aug 16....45.12 Down ....2.31   (4.9%)

Live 24 hours gold chart [Kitco Inc.]

Oil prices fell 5% to 2-month lows after the US gov reported a weekly crude draw within forecasts, disappointing market bulls who had expected larger declines. US crude futures were down $2.23 (4.7%) to $47.20 (earlier hit a 2-month low at $44.87).  The Energy Information Administration (EIA) said crude stockpiles fell 2.2M barrels last week, drawing for a 7th week in a row.  But the EIA figure came in just below the decline of 2.3M barrels forecast & was far less than the 6.7M-barrel draw reported by trade group the American Petroleum Institute late Wed.

Oil Tumbles After U.S. Crude Draw Disappoints Market Bulls

Private payrolls in Jun rose at the best clip in 3 months, suggesting US firms continue to create jobs at a healthy pace & alleviating some concerns over May's marked slowdown.  Private payrolls across the US increased 172K, according to Automatic Data Processing & forecasting firm Moody's Analytics.  Economists expected an increase of 151K.  May's gain, initially reported at 173K, was revised down slightly to 168K.  Job growth revived last month from its spring slump," said Mark Zandi, chief economist of Moody's Analytics.  He said the employment market remains healthy outside of the struggling energy & manufacturing sectors, "and Brexit won't help," but small-&-midsize companies are hiring at a solid pace, he added.  ADP's May report didn't similarly reflect softer hiring, largely because of its methodology.  The report is based on data collected from ADP clients in addition to lagged gov figures, it doesn't aim to replicate the nonfarm payrolls survey, & it didn't include the Verizon (VZ) strike or adjust for it.  The Jun ADP report comes a day before the Bureau of Labor Statistic's employment report which is expected to show nonfarm payrolls rose 165K last month, up from 38K in May.  The unemployment rate is expected to tick up to 4.8% from 4.7%, where it unexpectedly fell because of sharp labor market shrinkage.

ADP Private Payrolls Rise a More-than-Expected 172,000 in June

Gold futures settled lower, pulling back after a 3-session climb, as upbeat US data on Jun private-sector employment & jobless claims triggered uncertainty around US interest-rate expectations.  Gold for Aug delivery lost $5 (0.4%), to finish at $1362.

Gold Futures Settle Lower After Three-session Rise

Stocks were treading water, waiting for the big jobs report tomorrow.  However even a good number will probably not be spectacular, an indication that Q2 GDP data will be drab.  The chart below shows how tough it has been for the Dow to go above 18K in the last year.  With the effects of Brexit sinking into the global economy, positive economic surprises are not in the cards for the rest of the year,

Dow Jones Industrials


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