Friday, August 5, 2016

Markets soar after 255,000 jobs were added in July

Dow jumped up 147, advancers over decliners 5-2 & NAZ gained 53.  The MLP index fell 5+ to the 311s & the REIT index was flattish in the 368s.  Junk bond funds went higher & Treasuries were weak while stocks rallied.  Oil dropped (see below) & gold declined 24.

Dow Jones Industrials

Crude Oil Sep 16

Gold Futures,Aug-2016

3 Stocks You Should Own Right Now - Click Here!

Employment jumped in Jul for a 2nd month & wages climbed, pointing to renewed vigor in the US labor market that will sustain consumer spending into H2.  Payrolls climbed by 255K, exceeding all forecasts, following a 292K gain in Jun that was a bit larger than previously estimated, according to the Labor Dept.  The jobless rate held at 4.9% as many of the people streaming into the labor force found jobs.  The rate of hiring is more than enough to whittle away at the jobless rate over time & gradually eliminate labor-market slack, a goal of Fed officials who’ve kept interest rates low to spur growth.  The forecast called for a 180K advance.  Revisions added 18K jobs to overall payrolls in the previous 2 months.  The unemployment rate was little changed as employment climbed by 420K, more than making up for the 407K increase in the labor force.  The labor force participation rate, which indicates the share of working-age people who are employed or looking for work, increased to 62.8% from 62.7%.  Wage growth offered more promising signs of acceleration, with average hourly earnings rising a more-than-forecast 0.3% from a month earlier, the most since Apr, to $25.69.  The year-over-year increase was 2.6% in Jul, the same as in Jun.  The average work week for all workers also increased by 6 minutes to 34.5 hours, up from 34.4.

The gain in payrolls was broad-based, including manufacturers, health-care, retailers, temporary-help agencies & leisure & hospitality.  Gov agencies also took on 38K workers, the most since Sep 2014, reflecting gains at local schools.   The report did come with one caveat.  The underemployment rate climbed to 9.7% from 9.6% as many of the people entering the workforce had to settle for part-time jobs.  The number working part-time for economic reasons rose to 5.94M from 5.84M.  Also, the number of discouraged Americans, those who stopped looking for work because of bleak prospects, rose to a 5-month high of 591K.

U.S. Posts Another Strong Month of Job Gains

The US. trade deficit rose to a 10-month high in Jun as rising domestic demand & higher oil prices boosted the import bill while the lagging effects of a strong $ continued to hamper export growth.  The Commerce Dept said the trade gap increased 8.7% to $44.5B, the biggest deficit since Aug 2015.  The May trade deficit was revised slightly down to $41.0B.  Jun marked the 3rd straight month of increases in the deficit.  Economists had forecast the trade gap widening to $43.1B after a previously reported $41.1B shortfall.  When adjusted for inflation, the deficit rose to $64.7B from $60.9B in May.  The gov's snapshot of Q2 GDP published last week said trade had contributed two-tenths of a percentage point to the 1.2% annualized growth pace during the period.  The $ sharp rally between Jun 2014 & Dec 2015 has undercut export growth.  Exports of goods & services edged up 0.3% in Jun.  Exports to the EU jumped 7.8%, with goods shipped to the UK soaring 18.2%.  China bought more US made goods in Jun, with exports to that country rising 3.6%.  Imports of goods & services increased 1.9% to $227.7B, with oil prices accounting for part of the rise.  The increase in imports also reflected a pickup in domestic demand.  Imports from China increased 2.8%.  With imports outpacing exports, the US-China trade deficit rose 2.5% to $29.8B, the biggest gap since last Nov.

Trade Deficit Rises to 10-Month High in June

Oil prices dipped, ending a 2-day rally, as a glut of crude & refined products weighed on markets & investors eyed a possible stutter in China's imports.  Downward pressure returned as overproduction in crude & refined products has left onshore storage tanks brimming & triggered the chartering of tankers to store unsold fuel.  Oil prices were still more than $2 per barrel above the week's lows, which was attributed to short-covering.  Investors added the equivalent of 56N barrels of short positions in the 3 main Brent & WTI futures, & options contracts in the week to Jul 26.

Crude Prices Fall as Short-Covering Rally Fizzles

The bulls are happy after the jobs report.  The data was generally favorable.  However, it gives the Fed a little more ammunition for those who want to increase interest rates ( a negative for the stock market).  Dow is within 100 of its recent record high.

Dow Jones Industrials


No comments: