Friday, March 10, 2017

Markets rise after favorable jobs report

Dow went up 25, advancers over decliners almost 2-1 & NAZ gained 18.  The MLP index rose 1+ to the 321s & the REIT index was fractionally lower in the 325s.  Junk bond funds inched higher & Treasuries had a modest advance.  Oil slid lower (more below) & gold was off a tad at 1202.

AMJ (Alerian MLP Index tracking fund)

Crude Oil Apr 17

Gold Futures,Apr-2017

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US employers added jobs at an above-average pace for a 2nd month on outsized gains in construction & manufacturing while wage growth picked up, as the labor market continued its steady improvement in the new year.  The 235K increase followed a 238K rise in Jan that was more than previously estimated, the best back-to-back rise since Jul, according to the Labor Dept.  The unemployment rate fell to 4.7% & wages grew 2.8% from Feb 2016.  While unseasonably warm weather may have boosted the payrolls count, the data represent Trump's first full month in office & coincide with a surge in economic optimism following his election.  The figures also validate recent comments by Fed officials that flagged a likely interest-rate increase this month.  Construction jobs, which can fluctuate depending on the weather, rose 58K, the strongest in almost a decade & followed a 40K increase in Jan.  Manufacturing payrolls gained 28K, the most since Aug 2013.  Meanwhile, retail positions fell 26K, the most in 4 years.  Just 157K people were unable to work in Feb because of inclement weather, compared with an average of 311K for the month.  In Jan, 395K employees couldn’t work because of the weather.  Even so, the figures indicate that the drivers of consumer spending probably remain intact after purchases slowed in Jan, suggesting that any easing of Q1 economic growth will be temporary.  Fed Chair Janet Yellen said last week that the labor market is “in the vicinity of our maximum employment objective.”

U.S. Jobs, Pay Show Solid Gains in Trump's First Full Month

China stocks ended flat as initial excitement toward the country's annual parliamentary meeting petered out & investors turned cautious ahead of a likely US rate hike next week.  The blue-chip CSI300 index was unchanged at 3427 while the Shanghai Composite was down just 0.1% at 3212.  Main share indexes closed near where they were at the start of the week, with the CSI300 index flat while the Shanghai Composite Index was down 0.2%.  The meeting of the National People's Congress (NPC) has so far failed to deliver policies that exceed market expectation, prodding some investors to reduce their holdings.  China's central bank governor said that making monetary policy neutral would help China's supply-side reforms, reinforcing expectations that liquidity would be relatively tight.

China Shares End Flat Ahead of Next week's Fed Meeting

Japan's Nikkei share average closed at its highest since Dec 2015 as exporters benefitted from the $ hitting a 6-week high against the ¥, while investors waited for a US jobs report that could pave the way for a rate hike as early as next week.  Financial stocks also rallied after US bond yields rose.  The Nikkei added 1.5% to 19,604, the highest closing level since Dec, 2015.  For the week, the benchmark index climbed 0.7%.  The broader Topix was up 1.2% at 1574, while the JPX-Nikkei Index 400 advanced 1.3% to 14,087.  The Nikkei Jasdaq index eked out small gains, rising for a 21st straight session, its longest winning streak since early 2004.

Nikkei Hits 15-Mth Closing High Ahead of U.S. Jobs Report

Oil prices steadied after dropping to their lowest in more than 3 months, pressured by heavy oversupply despite OPEC-led production cuts.  US crude was 5¢ lower at $49.23 a barrel.  The contract fell below $50 on yesterday for the first time since Dec.  US crude is on track for a drop of more than 7% this week, its biggest weekly fall for 5 months.  Market confidence faltered after news of another big rise in US crude inventories that have built steadily to record highs as US oil production has grown this year.  OPEC & other exporters including Russia agreed last year to cut output by around 1.8M barrels per day in H1, but so far the move has had little impact on inventory levels.  Crude oil inventories in the US swelled by 8.2M barrels last week to a record 528M barrels.  US oil & gas drilling has also picked up, with producers planning to expand crude production in North Dakota, Oklahoma & other shale regions, while output has jumped in the Permian, America's largest oilfield.  That has undermined bullish sentiment & cast doubt on how long OPEC will be willing to cut output if prices keep falling.  Senior Saudi officials told US oil firms in a closed-door meeting they should not assume OPEC would extend output curbs to offset rising production from US shale fields.  Analysts said they expected a period of market consolidation after the heavy falls this week, but there could be another sell-off if investors were forced to sell loss-making contracts.

Oil Edges off 3-Month Low but Glut Worries Persist

Feb was Trump's first full month & the jobs report was excellent.  On the flip side, that makes the rate hike next week all but certain & increases the likelihood of more to come.  The latter thought is limiting market gains.  Dow continues at near record levels & is up a massive 2½K after Trump's election.  Investors have been selling gold & Treasuries recently as negative bets on the economy are looking less attractive.

Dow Jones Industrials


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