Thursday, May 18, 2017

Markets edge higher cautiously after yesterday's tumble

Dow recovered 42, advancer over decliners 5-4 & NAZ gained 37.  The MLP index fell 1 to the 302s & the REIT index was of fractionally, slipping under 341.  Junk bond funds were mixed & Treasuries slid back slightly after a big gain yesterday.  Oil rose fractionally to the 49s & gold dropped 7 to 1251.

AMJ (Alerian MLP Index tracking fund)

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Brazilian equities plunged 10% before being halted as political crisis gripped the nation.  Losses in US stocks were muted & the $ rose for the first time in 7 days as investors assessed the turmoil in DC.  The S&P 500 retreated 0.2%, with fresh revelations about undisclosed contacts between the Trump campaign & the Kremlin adding to concern about the administration’s policy agenda.  Treasury yields edged lower, touching the lowest in a month, while crude slumped the most in 2 weeks.  The $ benefited from weakness in emerging-market currencies as political turmoil in Brazil added to the chaos in DC.  As the confusion surrounding Trump threatens to derail the policy agenda that helped push global equities to records as recently as Tues, a gauge of US stock volatility surged the most since the UK voted to leave the EU last Jun.  Many of the trades sparked by the election have now reversed, with the $ all but erasing its post-election rally.

Global Stocks Fall After U.S. Rout

Fewer people sought US unemployment benefits last week, a sign Americans are benefiting from solid job security.  Applications for weekly unemployment aid fell 4K to 232K, the Labor Dept said, the lowest level in nearly 3 months.  The 4-week average, a less volatile figure, declined 3K to 241K.  Applications are a proxy for layoffs & have been below 300K, a historically low figure, for 115 weeks.  That's the longest such streak since 1970.  The number receiving aid fell to 1.9M, the lowest level since 1988.  The figure has fallen 12% in the past year.  The rock-bottom figures add to evidence that companies are holding onto workers & hiring at a steady pace.  Americans are spending more, factories have cranked up output & home sales are strong, boosting the economy after it barely expanded in the first 3 months of the year.  Hiring has remained steady, despite slow growth in Q1.  Employers added 211K jobs in Apr as the unemployment rate fell to a 10-year low of 4.4%.  This year, the job gains have averaged 185K a month, the same pace as in 2016. 

Applications for US Jobless Aid Fell to 3-Month Low of 232K
Protesters took to the streets of central Athens for the 2nd day running, hours before lawmakers vote in parliament on measures that will impose additional income losses for many Greeks for another 3 years.  In spite of torrential rain, hundreds of pensioners marched to parliament to express their anger at the latest planned cuts to their incomes.  "No more tax theft," they chanted.  Pensions have been cut sharply over the past 7 years as successive Greek govs have slashed spending in return for bailout money to avoid bankruptcy.Their protest comes a day after a general strike disrupted services across the country.  Ongoing stoppages have kept ferries tied up at port for 3 days & played havoc with public transport.  Left-wing Prime Minister Tsipras is seeking parliamentary approval for the pension cuts & further tax hikes through 2020, as part of an agreement with intl bailout creditors to release the next bailout installment.  With all opposition parties opposed to the measures, Tsipras is relying on his 3-seat majority in the 300-member parliament.  So far, there are no declared dissenters.

Greece: More protests, strikes ahead of major austerity vote

Stocks are trying to climb higher, but that won't be easy.  The mess in DC went from bad to worse.  Even with the special counsel, deep political divisions are not going away.  Political uncertainty is clouding Trump's efforts to bring reform to health care & taxes.  And that's just the beginning of proposed changes.  There is also uncertainty overseas, not helping matters, such as: Brazil, Venezuela, Greece, Syria, North Korea to name a few. The Dow continues to be heavily overbought, not seeing a significant correction in some time.  Stocks began the day lower, but buying brought the Dow into the black.  The recovery may not last.

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