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.

AMJ (Alerian MLP Index tracking fund)

Light Sweet Crude Oil Futures,N

Gold Futures,Dec-2016

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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.

Payrolls in U.S. Rise 156,000 as More Americans Seek Work

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.

German industrial production rises strongly in August

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.

Oil Holds Above $50 as Confidence in Crude Rises

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.

Dow Jones Industrials


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