Friday, March 9, 2018

Markets soar after better-than-expected jobs report

Dow surged 440 (closing at the highs), advancers over decliners a relatively muted 5-2 & NAZ shot up 132 (reaching a new record).  The MLP index gained 3+ to the 259s & the REIT index added 1+ to the 325s.  Junk bond funds rose & Treasuries were sold while stocks were purchased.  Oil jumped 2 to the 62s & gold added 1 to the 323s while stocks were in a rally mode.

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Stocks rose while Treasuries fell as the latest labor report showed the American economy continued to strengthen without the prior month's rapid wage gains that stoked inflation fears.  The $ weakened against most peers.  The S&P 500 pushed its weekly gain past 3% after employers hired the most workers in almost 2 years & wages remained stagnant, allaying fears the Federal Reserve may accelerate its rate-hike schedule.  10-year Treasury yields had the first one-week advance in 3, while the greenback slid against all major currencies except for the Japanese ¥.  West Texas crude gained toward $62 a barrel.

Dow Surges More Than 300 Points Following Jobs Report

The share of US workers who were unemployed in Feb after having a job in the previous month slid to 0.96%, the lowest in data going back to 1990, according to Labor Dept figures.  That number, covering people who were laid off or fired, or who walked away from jobs & started looking for work again, indicates companies are loath to lose staff & workers have little desire or ability to leave.  The number indicates a tight labor market, in contrast with other data in the report signaling slack: Lower-than-expected wage growth in the period means those workers weren't necessarily compensated for their loyalty.

Share of U.S. Workers Who Lost Jobs Just Fell to a Record Low

Neel Kashkari is questioning whether the economy is really at full employment, a line his Federal Reserve colleagues frequently trot out.  “We were at maximum employment. We are now at maximumer employment,” the Minneapolis Fed pres tweeted, after the Labor Dept monthly employment report showed that the US economy added 313K jobs in Feb.  Some on Twitter were confused. Kashkari clarified.  “I thought the ‘tongue-in-cheekiness’ of my tweet would be obvious,” Kashkari wrote.  “Allow me to translate: We keep saying we are at max employment and then all these people choose to work. It suggests we weren’t really at max employment.”  Kashkari is touching on what could be a hot debate in coming months.  US unemployment at 4.1% is the lowest since 2000.  Fed officials regularly say that they've essentially fulfilled the maximum employment part of their dual mandate, even as they lag when it comes to lifting inflation to their 2% goal.  But there are a few reasons to think there might be room to recover more workers, as Kashkari points out.  Most obviously, job gains have failed to slow much, & you would expect them to in an economy at full employment.  Today's report underlined that point.  Beyond that, the participation rate rose in Feb & has been relatively stable for several years.   Demographically, it should be falling, a sign that workers are coming in from off the sidelines.  Finally, wages have been slow to move higher, & theory would expect them to pop up if employers were competing harder for scarce workers.

Fed’s Kashkari Says Jobs Data Are Sign U.S. Not at Full

The number of rigs exploring for oil & natural gas in the US increased by 3 this week to 984, exceeding the 768 rigs that were active this time a year ago.  Baker Hughes reported that 796 rigs drilled for oil this week & 188 for gas.  Among major oil- & gas-producing states, Texas increased by 7 rigs, North Dakota gained 3 & Colorado & Pennsylvania each increased by one.  Oklahoma decreased by 4 rigs, Alaska lost 2 rigs & Louisiana, New Mexico & Utah each decreased by one.  The US rig count peaked at 4530 in 1981 & bottomed out in May of 2016 at 404.

Texas adds 7 rigs as US rig count increases to 984

The message from gov data, which gave multiple indications America's jobs situation isn't as tight as previously thought, sending stocks & bond yields higher.  Employers added the most workers since mid-2016, the participation rate rose by the most in almost 8 years despite downward pressure from retiring baby boomers & wage gains cooled from a pace that spurred financial turbulence last month.  The addition of 313K employees to nonfarm payrolls was spread across many industries & covered sectors that have complained of labor shortages for some time, including trucking & factories.  The report may be a political benefit for Pres Trump, while also leaving Federal Reserve policy makers to decide whether a faster pace of interest-rate increases is warranted this year than the 3 they projected in Dec.  The participation rate, the share of working-age Americans with jobs or actively seeking one. increased to 63%, reflecting a 806K increase in the labor force.  That indicates there's still scope for pulling even more people from the sidelines.  The jobless rate held at 4.1%, the 5th straight month at that level.  Average hourly earnings increased 2.6% from a year earlier following a downwardly revised 2.8% gain.  Among men age 25 to 54, a key demographic watched by economists & new Fed Chair Jerome Powell, the participation rate increased to 89.3%, the highest since 2010.  The rate for teenagers increased to an 8-year high of 36%.  Fed policy makers are widely anticipated to raise interest rates when they meet Mar 20-21 in Powell'’s first gathering as chairman.  A bigger question is whether central bank officials strengthen their resolve for 3 qtr-point hikes this year, or leave the door open for 4.

The bulls were out in force after an excellent jobs report for Feb.  However, market breadth was relatively modest & gold was not sold.  The rally remains impressive.  Uncertainties concerning the new tariffs remain & they could cause bumps in future economic data.  The REIT index is back.  They have had a rough time in the last few months on fears about higher interest rates.  Bargain hunters returned in the last couple of weeks.

Dow Jones Industrials

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