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Friday, October 7, 2016
Markets drift lower after a mediocre jobs report
Dow gave up 30, decliners over advancers almost 3-2 & NAZ slid back 9. The MLP index went up 1+ to the 309s & the REIT index was fractionally higher to the 337s. Junk bond funds were mixed & Treasuries did little. Oil was up slightly (see below) & gold inched higher after recent selling.
Employers continued to add to payrolls in Sep as record
openings drew more Americans into the workforce & most found jobs,
indicating the labor market is settling into a pace that will
support the economy. The 156K increase followed a 167K rise
in Aug that was more than previously estimated by the Labor Dept. While the Sep figure was
weaker than the 172K forecast, payrolls included
the biggest drop in gov employment in a year. The jobless rate
rose to 5% as the labor participation rate ticked up to a 6-month high. Companies face a limited pool of available & qualified workers at
the same time that improving prospects for employment are drawing more
people into the labor force. Steady progress will underpin further wage
gains & consumer spending, the main driver of US expansion this
year & encourage the Fed to follow thru on
their forecast for an interest-rate increase by the end of 2016.
Sep
payrolls have tended to disappoint when the initial data are released,
based on data since the last recession ended. The
unemployment rate rose as employment increased 354K. The
jobless rate was projected to hold at 4.9%, close to the lowest since 2007. The participation
rate, which shows the share of working-age people in the labor force,
increased to 62.9%, from 62.8% & has been hovering close
to the lowest level in more than 3 decades. Private
employment, which excludes gov agencies, rose 167K after a
144K increase the prior month.
German factory production increased strongly in Aug, helping alleviate fears of a slowing economy in Q3. The Economy Ministry said that industrial production rose
2.5% in Aug over Jul, according to season-&
calendar-adjusted figures. The increase follows a 1.5% drop in Jul over Jun, giving
rise to renewed optimism about the strength of Europe's largest
economy.
Oil futures held above $50 per barrel as the entire crude
forward curve pushed above that level in a sign that financial markets
have increasing confidence in the sector. West Texas Intermediate (WTI) futures were up 3¢ at
$50.47 per barrel after they settled at $50.44 per
barrel yesterday, the first settlement above $50 since late Jun. OPEC
plans to agree on a coordinated production cut when it next meets in
late Nov, in a bid to rein in a global fuel supply overhang that
has dogged prices for the last 2 years. Despite the increasing confidence by financial oil traders in higher prices, the physical market remains relatively weak. In a sign of ongoing oversupply, top exporter Saudi Arabia cut
its benchmark crude prices to Asia this week.
The jobs report was uneventful, about as expected. Dow continues to muddle long, extending its sideways trading pattern. Earnings report will begin next week & they are expected to be less than exciting.
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