Friday, August 4, 2017

Markets crawl higher as jobs report beats

Dow gained 18, advancers over decliners 5-4 & NAZ added 9.  The MLP index fell 1+ to the 292s & the REIT index went up 1+ to the 352s.  Junk bond funds fluctuated & Treasuries were sold.  Oil was higher (more below) & gold dropped 11 to 1263.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil48.98

GC=FGold   1,255.00

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The US economy beat expectations by adding 209K jobs in Jul, as robust hiring continued to encourage new job seekers.  The labor market has gained steam over the last 2 months.  Jun brought 231K new jobs, up from an initial count of 222K & Jul job growth easily kept pace above the H1 monthly average of 180K jobs.  Hiring in the last month was strong enough to absorb new entrants into the workforce.  The labor force participation rate ticked higher to 62.9% from 62.8%, but the unemployment rate fell to 4.3% from 4.4%, tying a 16-year low.  The unemployment rate in Jul met expectations at 4.3%.  Jobs growth surprised economists, who estimated that employers would add 183K net new jobs.  However, wages remained mostly stagnant.  The average hourly wage of $26.36 was up 0.3%, & wage growth over the last year was steady at 2.5%.

US adds 209,000 jobs in July as hiring remains strong

The US trade deficit narrowed in Jun as exports hit the highest level in 2½ years.  The Commerce Dept said that the trade gap slid 5.9% in Jun to $43.6B.  Exports of goods & services rose 1.2% to $194.4B, the highest amount since Dec 2014 on higher foreign demand for American soybeans, computer accessories & other products.  Services exports reached a record $65.4B.  US exports may be getting a lift from a pickup in global economic growth & a drop in the value of the $.  A weaker $ makes American products a better bargain in foreign markets.  Overall imports slipped 0.2% to $238B on a drop in demand for cellphones & other household goods.  So far this year, the trade deficit is up 10.7% to $276.6B.  The deficit means the US is buying more goods & services from other countries than it is selling them.  A shrinking trade gap boosts US economic growth.  Pres Trump has vowed to bring down America's trade deficits, saying they are caused by bad trade deals & abusive practices by China & other trading partners.  The deficit in goods with China rose 3.1% to $32.6B & is up 6.1% to $170.7B so far this year.  The goods deficit with Mexico slid 18.3% to $6B.  The Trump administration is preparing to renegotiate the North American Free Trade Agreement with Mexico & Canada.  Trump has complained that NAFTA encourages US manufacturers to move to Mexico to take advantage of cheaper labor.

US trade deficit narrowed to $43.6 billion in June

Oil prices recouped earlier losses but remained on track for a weekly decline, weighed down by rising OPEC exports & strong output from the US.  West Texas Intermediate (WTI) crude futures were up a nickel at $49.08 per barrel but set to end the week more than 1% lower.  While OPEC is leading cuts of 1.8M barrels per day (bpd) along with some non-members such as Russia, its Jul exports hit a record high.  A recent survey also showed OPEC oil output at 2017 highs in Jul, led by Libyan gains.  Libya & Nigeria were exempt from OPEC's output deal.  Output in Russia is also high. Russia's largest oil producer,  Rosneft, said its crude production grew by 11.1% year-on-year in Q2.  US oil production hit 9.43M bpd, the highest since Aug 2015 & up 12% from its most recent low in Jun last year.  Still, US crude exports in Jun fell to 786Kd, compared with just over 1M bpd in May.  Prices were still more than 16% above the lows hit in Jun, as strong summer demand for transport fuel has buoyed benchmark contracts.

Oil prices flatten, but under shadow of high production

The favorable jobs report drew little excitement in the stock market & market breadth remains drab.  DC news is fairly quiet today.  Dow is up 150 so far in Aug, not bad.

Dow Jones Industrials


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