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Thursday, August 11, 2016
Markets extend gains as oil rallies
Dow jumped up 112, advancers over decliners 2-1 & NAZ gained 20. The MLP index was fractionally higher in the 311s & the REIT index ell 3+ to the 366s. Junk bond funds were little changed & Treasuries were sold as stocks rallied. Oil rebounded, up 1, & gold was also higher.
The number of Americans filing applications for unemployment benefits
was little changed last week, holding near 4-decade lows that
highlight strength in the job market. Jobless claims fell 1K
to 266,000, from a revised 267K in the
prior period, according to the Labor Dept.
Filings have been below 300K for 75 straight weeks, the longest
stretch since 1970.
Employers
are retaining & hiring more workers & slowly raising wages,
indicating consumer spending will keep boosting the world's largest
economy in H2. Such durability in US employment would be
among forces that encourage Federal Reserve to raise
interest rates by the end of 2016. The estimate was for 265K. The
number continuing to receive jobless benefits rose 14K
to 2.16M & the unemployment rate among
people eligible for benefits held at 1.6%. Initial jobless claims reflect
weekly firings, & a sustained low level of applications has typically
coincided with faster job gains. Many layoffs may also reflect company-
or industry-specific causes, such as cost-cutting or business
restructuring, rather than underlying labor market trends.
Brexit is hitting the housing market in the UK.
Sales dropped the most since the financial crisis in 2008, according to
data from the Royal Institution of Chartered Surveyors. Prices rose at
the slowest pace in 3 years in Jul & new listings declined.
Rents
are also set to cool. Rents are expected to rise just 1-5% this year, instead of their previous forecast of 5-8%, & companies may delay the development of real estate projects if demand for space gets worse.
Global oil markets will continue to re-balance this year as a pick-up
in demand from refiners absorbs record output from several Persian Gulf
producers, the International Energy Agency predicted. Refiners
around the world will process record volumes of crude this qtr as
their intake rebounds after falling in Q2 by the most
since 2009. That
will shrink brimming crude stockpiles even as Saudi Arabia, Kuwait &
the UAE pump at all-time highs amid competition between
OPEC nations to secure market share, according to the agency.
Rebounding
demand will “help pave the way to a sustained tightening of the crude
oil balance,” said the agency. Oil's recovery from
12-year lows reached in Jan faltered in early Jun as inventories of
both crude & refined fuels remained bloated, demand growth weakened & US oil explorers began to resume drilling. OPEC, which has been
pursuing a strategy to maximize its market share rather than defend
prices, said it will hold informal talks about how to stabilize prices
on the sidelines of a conference in Algiers next month. Refiners’
crude processing this qtr, known as throughput, will increase by
600K barrels a day from a year earlier to a record 80.6M a
day. Throughput sank by 480K a day between
Apr & Jun amid a glut of fuels like gasoline that refiners had
churned out earlier in the year while taking advantage of cheap crude
prices. The IEA increased the supply outlook & saw weaker demand growth next year compared with last month's report.
The sellers remain on vacation, allowing the buyers to take stocks higher. As in prior Aug periods, there is not much news to drive markets. Oil is attracting interest in stocks even though its dreary fundamentals of too much production & bloated inventories are not going away anytime soon. But new records for the stock averages should be set today. Gold, negative bets on the stock market, remains at 2 year highs.
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