Friday, July 7, 2017

Markets rise on jobs growth of 222,000 in June

Dow rose 55, advancers over decliners about 5-4 & NAZ gained 38.  The MLP index lost 2+ to 294 & the REIT index recovered 1+to the 344s.  Junk bond funds fluctuted & Treasuries were about even.  Oil sold off (more below) & gold was also weak.

AMJ (Alerian  MLP Index tracking fund)

CL=FCrude Oil44.27

GC=FGold   1,215.10

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US hiring picked up in Jun while wage gains disappointed yet again, a mix that may continue to be a puzzle for the economy & policy makers, Labor Dept figures showed.  Payrolls rose 222K (est. 178K) & Apr-May revisions added 47k jobs.  Unemployment rate rose to 4.4% (est. 4.3%) from 16-year low of 4.3%.  Average hourly earnings rose by 0.2% M/M (est. 0.3% rise); up 2.5% Y/Y (est. 2.6%).  While payroll gains were broad-based & boosted by the biggest jump in gov jobs in almost a year, wages were below forecasts, even with the jobless rate close to the lowest since 2001.  Sustained hiring in Jun is evidence of the kind of labor-market resiliency that could eventually lead to a stronger acceleration in wages.  At the same time, the month's data could also reflect a new graduating class & the summer’s seasonal workers joining the labor force, some likely welcomed by employers who are struggling to find workers.  The data suggest the job market is attracting people off the sidelines, as the size of the labor force & number of unemployed people increased, indicating more people are actively looking for work.  The number who went from out of the labor force to employed rose to 4.7M, the highest in data going back to 1990.  A relatively strong finish for the labor market in the second quarter that should support continued gains in consumer spending in the coming months. Federal Reserve policy makers raised interest rates last month and reiterated plans to start reducing their balance sheet & increase borrowing costs once more this year.

U.S. Hiring Accelerates While Wage Growth Stays Flat

US stocks are bouncing back after the gov said hiring grew at a stronger pace in Jun.  Tech companies are making some of the biggest gains while energy companies decline with oil prices.  A day earlier, stocks took their biggest loss since mid-May following a disappointing measure of hiring by private companies.  The S&P 500 picked up 8 (0.4%) to 2418.  Investors have been worried that rising interest rates in the US, & possibly in Europe, will affect economic growth & the end of stimulus measures by the Federal Reserve & ECB could affect stocks, as they have helped support stock markets since the financial crisis in 2008-09.  Tech companies helped lead stocks higher trading.  Fri marks one month since tech stocks went into a swoon.  NAZ closed at an all-time high Jun 8 & the S&P 500 technology index reached its highest mark in 17 years.  But since then the tech index is down 4.3% since then & the NAZ has fallen 3.1%.  However tech is still up 16.8% YTD, the biggest gain of the 11 industries in the S&P 500.

US stocks bounce higher after solid June jobs report

Oil prices fell more than 2% after data showed US production rose last week just as OPEC exports hit a 2017 high, casting doubt over efforts by producers to curb oversupply.  West Texas Intermediate (WTI) crude futures traded at $44.53 a barrel, down 99¢ (2.2%).  Their session low of $44.05 was also the lowest in over a week.  Weekly US gov data showed that US oil production rose 1% to 9.34M barrels per day (bpd), correcting a drop in the previous week that was down to one-off maintenance work & hurricane shutdowns.  The rise in US output coincides with exports from OPEC climbing for a 2nd consecutive month in Jun to the highest level this year.  Russia, which is cooperating with OPEC in a deal to stem production, said on today it was ready to consider revising the parameters of the deal if needs be.  A group of oil producing countries monitoring the output deal will meet on Jul 24 at which point they could recommend adjusting the pact.  OPEC sources welcomed Russia's comments, saying they provided a good basis for discussions on deepening production cuts.  The market largely ignored news from the US Energy Information Administration (EIA) that US crude inventories fell 6.3M barrels in the latest week to 502.9M barrels, the lowest since Jan.

Oil prices fall 2% on signs market still oversupplied

The jobs data was what the bulls like to see although market breadth is meager.  The disconnect between the Dow & NAZ is disturbing for the bulls.  Markets will be concerned with the goings on in Europe in PM trading.

Dow Jones Industrals



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