Thursday, June 8, 2017

Markets struggle as Comey begins testimony

Dow went up all of 2, decliners modestly ahead of advancers & NAZ lost 4.  The MLP index fell 1+ to the 393s & the REIT index gave back 3+ to the 345s.  Junk bond funds did little & Treasuries were sold.  Oil was higher (more below) & gold sank 17 to 1276.

AMJ (Alerian MLP Index tracking fund)

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The ECB ruled out further interest-rate cuts in a sign that it's moving closer to an exit from its stimulus program.  The Governing Council dropped its guidance that rates might fall further, saying only that it now expects borrowing costs to stay at present levels for an extended period.  Policy makers reiterated their pledge to increase the size or duration of their bond-buying program if the economy deteriorates.  While the improving economy has sparked a debate about policy, it wasn’t a certainty how far the ECB would change its guidance at this meeting.  Pres Mario Draghi sought to talk down expectations for any major shift, arguing the ECB must be extremely cautious in communicating any exit from stimulus amid a lack of convincing inflationary pressure.  Data today showed euro-area GDP 0.6% in Q1 stronger than initially estimated.  Even so, the statement marks only a small step.  The deposit rate was kept unchanged at minus 0.4 % & the main refinancing rate at zero, & officials still intend to buy €60B ($67B) of debt a month until at least the end of the year.
ECB Drops Guidance on Rate Cuts in Step Toward Stimulus Exit

Fewer Americans applied for unemployment benefits last week as most workers continue to enjoy job security.  The Labor Dept said that claims for jobless aid fell 10K to a seasonally adjusted 245K last week.  The less-volatile, four-week average rose by 2K to 242K.   Applications for unemployment benefits are a proxy for layoffs.  They've come in below 300K, a historically low figure, for 118 straight weeks, longest such streak since 1970.  Nearly 1.92M were collecting unemployment checks, down nearly 10% from a year ago.  The 4-week average number of Americans receiving jobless aid was 1.91M, lowest since 1974.  The job market is healthy, though hiring has slowed recently, partly because employers can't find workers when the unemployment rate is at a 16-year low 4.3%.  The economy has generated 162K jobs a month so far this year, up from an average 157K a month from Jan-May last year, but down from an average 187K a month for all of 2016.

Claims for US jobless benefits fall by 10,000 to 245,000


Oil edged up, having hit one-month lows the previous day after an unexpected surge in US inventories & the return of more Nigerian crude to an already oversupplied market.  The oil price has slipped below $50 a barrel despite a pledge by the largest exporters to extend an existing output cut of 1.8M barrels per day (bpd) into next year in an effort to reduce bulging global inventories.  Adding to concern about supply outstripping demand, production was lifted on exports of Nigeria's Forcados crude, bringing all the country's oil grades fully online for the first time in 16 months.  US crude futures rose 38¢ to $46.10 a barrel.  The market has also come under pressure from news of rising output from Libya, which together with Nigeria is exempt from the production cut made by OPEC & its 11 partners.  In the US stocks of crude oil & gasoline surprisingly rose last week as refinery runs declined & exports fell, official data showed.

Oil rises off one-month lows struck after surprise inventory build
Stocks are meandering ahead of the important news stories later today.  As expected ECB is not a major driver for the markets.  Currently, all attention is on Comey & what he has to say.. Even though he already released his written testimony, traders insist hearing on hearing every word he says today.  Hard to image there will be any news bulletins unless he confesses to all sins ever committed,  When  his testimony is over maybe stocks will get back to watching "real" stories.,

Dow Jones Industrials

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