Thursday, March 9, 2017

Markets are treading water ahead of February jobs report tomorrow

Dow went up 13, decliners ahead of advancers about 2-1 & NAZ gained 2.  The MLP index fell 2 to 321 & the REIT index was fractionally higher to 340.  Junk bond funds dropped again & Treasuries declined again, taking the yiled on the 10 year Treasury near 2.6%.  Oil dropped below 50 & gold lost 5 to 1204 (more on both below).

AMJ (Alerian MLP Index tracking fund)

stock chart

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Gold is sliding toward $1200 an ounce in its longest losing run since Oct as positive US economic figures reinforce expectations that yields on other investments will rise this year.  Bullion for immediate delivery fell 0.1% to $1207 an ounce after touching the lowest level since Feb 1.  It slid for a 4th day as yields on 10-year Treasuries extended gains.
Gold Suffers Worst Run Since October
Applications for US jobless benefits rebounded last week from a 44-year low, returning to a range that still shows strength in the labor market.  Jobless claims rose 20K to 243K according to the Labor Dept.  The figures, in line with this year's average, are a mirror image of the previous week, when filings fell 19K to 223K.  The latest results are consistent with a trend of historically low claims that signal a tightening labor market, a picture likely to be reinforced by the monthly payrolls report tomorrow.  Companies, stretching to find more skilled & experienced personnel, are holding on to existing employees & maintaining a steady pace of hiring.   The forecast called for 238K claims.  The 4-week moving average increased to 236K last week from 234K.  The number continuing to receive jobless benefits fell 6K to 2.06M & the unemployment rate among people eligible for benefits held at 1.5%.  The latest tally marked 105 straight weeks of claims below 300K, the level considered consistent with a healthy labor market. 

U.S. Jobless Claims Rebounded Last Week From Four-Decade Low
OPEC ministers met with partners & rivals in Houston this week as they try to figure out whether to prolong production cuts.  That decision only got harder.  At the CERAWeek conference in Texas, representatives of OPEC huddled both with Russia, its main ally in an effort to clear a global glut, & execs from the US shale industry, the group’s key competitor.  Yet OPEC's de-facto leader Saudi Arabia, which said in Jan that 6 months of output curbs would be enough, sounded less certain about what to do next.  The data confronting OPEC is heightening its dilemma.  Implementation of the agreed production cuts has largely exceeded expectations, but US crude inventories are still rising from record levels, suggesting more work needs to be done.  At the same time, US drillers are already roaring back & forecasters warn further price gains would only encourage them to swell the surplus.  Those factors pushed benchmark US oil futures below $50 a barrel for the first time since Dec 15.  West Texas Intermediate crude was 1.7% lower at $49.42.  Oil analysts are split on whether OPEC's deal needs to be prolonged. 

OPEC's Houston Huddle Deepens Oil Cuts Dilemma
The stock market is meandering again.  There is more excitement in commodities as oil being  sold.  Mounting oil inventories in the US are becoming a dark cloud over the oil market.  Markets are adjusting to the disconnect between gold & stocks.  Gold is being sold while stocks still have positive momentum on expectations for a growing US economy (illustrated in the chart below).  Tomorrow's jobs report is looming large although it is likely to give a generally positive picture of the economy.

Dow Jones Industrials

stock chart

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