Thursday, October 6, 2016

Markets decline ahead of jobs report

Dow dropped 80, decliners over advancers 5-2 & NAZ gave back 20.  The MLP index lost 3+ to the 306s & the REIT index was fractionally lower in the 336s.  Junk bond funds were off a tad & Treasuries were also a little lower.  Oil rose over 50 (see below) & gold fell to the mid 1200s (100 below recent highs).

AMJ (Alerian MLP Index tracking fund)

Crude Oil


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Filings for US unemployment benefits fell last week to the 2nd-lowest level since 1973, as employers show scant willingness to dismiss workers amid a tightening labor market.  Jobless claims dropped 5K to 249K, according to the Labor Dept.  The forecast called for 256K.  Continuing claims declined to the lowest level since 2000.  Filings were just a hair above the 4-decade low of 248K from Apr, a sign of minimal layoffs ahead of the monthly employment report tomorrow.  Companies are going head-to-head in finding skilled applicants amid record job openings, indications of a healthy labor market that may encourage Federal Reserve officials to raise the benchmark interest rate before the end of the year.

Filings have been below 300K for 83 straight weeks, the longest streak since 1970 & a level typical for a healthy labor market.  The 4-week average of claims dropped to 253K, the lowest since 1973, from 256K in the prior week.  The number continuing to receive jobless benefits declined 6K to 2.06M & the unemployment rate among people eligible for benefits held at 1.5%.

Jobless Claims Near Four-Decade Low Ahead of U.S. Payrolls Data

Oil climbed above $50 a barrel for the first time since Jun as declines in US crude inventories & OPEC's pledge to reduce supply lifted hopes the global glut may clear.  Futures rose as much as 1.4%. US crude stockpiles shrank below 500M barrels last week for the first time since Jan.  OPEC pledged in Algiers on last week to reduce the group's output to 32.5-33M barrels a day in a bid to shrink the world's bloated oil supplies & boost prices.  However the market is set to remain oversupplied in 2017.

West Texas Intermediate for Nov delivery rose 61¢ (1.2%) to $50.44 a barrel & prices reached $50.51, the highest since Jun 22.  US crude stockpiles dropped 2.98M barrels for a 5th weekly decline, the Energy Information Administration reported.  Crude production declined for a 2nd week to 8.5M barrels a day. 

U.S. Oil Rises Above $50 a Barrel for First Time Since June

German factory orders jumped more than expected in Aug on broad-based domestic demand, according to figures released by the Economy Ministry.  Orders, adjusted for seasonal swings & inflation, rose 1% from Jul, when they climbed a revised 0.3%. The increase is biggest since Mar & the forecast was for 0.3% gain.  Orders were up 2.1% from a year earlier.

The report comes after German business sentiment surged to the highest level in more than 2 years in Sep, a sign that corp concerns over the consequences of Britain's decision to leave the EU are easing.  Still, the number of Germans unemployed unexpectedly rose last month for the first time in more than a year & the Bundesbank toned down its outlook, pointing to slower growth in Q3.

Stocks keep churning, looking for direction.  The big banks have been under fire, a dark cloud that traders have to deal with.  Oil continues its rally, but the outlook is not as bright as the bulls suggest.  Crude inventories remain at very high levels & US production is starting to climb once again.  In addition, the production cut by OPEC is from a record level & may not mean be significant in reducing bloated oil supplies.

Dow Jones Industrials


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