Friday, July 7, 2017

Higher markets on jobs report and tech rebound

 Dow shot up 93 closing near the highs, advancers over decliners 2-1 & NAZ added 63.  The MLP index inched up 1+ to the 297s & the REIT index gained 2+ to the 345s.  Junk bond funds slid lower & Treasuries were a little lower.  Oil & gold had major declines (more below).
Dow Jones Industrials

Live 24 hours gold chart [Kitco Inc.]

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The Federal Reserve acknowledged that post-crisis financial regulations may be crimping bond-dealers’ incentives to make markets, while also saying that the impact on liquidity appears to be limited.  “A series of changes, including regulatory reforms, since the global financial crisis have likely altered financial institutions’ incentives to provide liquidity,” the Fed said in its semi-annual Monetary Policy Report to Congress.  “However, the available evidence does not point to any substantial impairment in liquidity in major financial markets.”  The report, released 5 days before Chair Janet Yellen begins testimony, reprised recent economic data & the Fed's policy actions.  It also included a number of special topic sidebars, including one on monetary policy rules, & another on financial stability.  Congress is intent on rolling back some of the regulations of the sweeping 2010 Dodd-Frank Act, that included the Volcker Rule which limited proprietary trading by banks.  In the report, the Fed says that changing regulations such as the Volcker Rule “may have contributed to the continued trend of lower dealer inventories.”  The Fed used the report to address Rep lawmakers' concerns on the House Financial Services Committee that the Fed ignores policy rules in favor of discretionary policy.  In a long description of as many as 5 different policy rules, the Fed explained their strengths & weaknesses.  “The small numbers of variables involved in policy rules makes them easy to use,” the report said.  “However, the U.S. economy is highly complex, and these rules, by their very nature, do not capture that complexity.”

Fed Says Post-Crisis Rules May Sap Bond-Market Liquidity

Gold prices fell to finish at their lowest level since Mar as upbeat monthly data on US jobs supported expectations for at least one more interest-rate hike from the Federal Reserve this year.  Aug gold dropped $13.60 (1.1%) to settle at $1209 an ounce.  Prices fell about 2.6% for the week.

Gold Prices Down a Fifth Week In a Row; Silver Drops To Lowest In Over a Year

Baker Hughes reported that the number of active US rigs drilling for oil rose by 7 to 763 rigs this week.  That followed a 2-rig fall reported a week earlier, which was the first such decrease in 24 weeks.  Total active US rig count, which includes oil & natural-gas rigs, also climbed by 12 to 952.  Oil prices extended their losses following the data, with Aug West Texas Intermediate crude down $1.45 (3.2%) at $44.07 a barrel.

Oil Prices Extend Losses As Baker Hughes Reports Rise In U.S. Oil-rig Count

Europe's bailout fund has approved the payment of €8.5B ($9.6B) in rescue loans to Greece, a long-delayed installment under the country's 3rd intl bailout.  The approval by the European Stability Mechanism was the final formality before the funds can be released to the debt-laden country.  The first disbursement of €7.7B is to be made Mon, with 6.9B earmarked for servicing debts & the remainder for clearing arrears.  Greece reached a deal with intl lenders last month on implementing more austerity measures, including tax hikes & pension cuts, in return for the installment.  The disbursement of the remainder will come after Sep 1 if Greece "makes significant progress" in clearing arrears using its own resources as well as bailout funds.

European bailout fund approves big payment to Greece

Stocks closed the week on a positive tone with a strong jobs report & higher prices for tech shares  OK, the gains were not impressive, but up is up, especially in a difficult week. On the negative side Sears (SHLD) will close another 43 stores as it continues to face challenges.  The G-20 summit will produce a lot of hot air, as in the past, but Trump will bring excitement. The bulls are hoping to take the averages to new heights.  Maybe & maybe not this summer.

Dow Jones Industrials


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