Thursday, August 30, 2018

Lower markets after a 4 day rally

Dow lost 73, decliners over advancers 3-2 & NAZ slid back 8.  The MLP index dropped 1+ to 280 & the REIT index was steady in the 363s.  Junk bond funds rose & Treasuries were bid higher.  Oil crawled up pennies in the 69s & gold dropped 5 to 1205.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil69.70
+0.19 +0.3%

GC=FGold  1,203.20
 -8.30   -0.7%

3 Stocks You Should Own Right Now - Click Here!

US consumer spending increased solidly in Jul, pointing to strong economic growth early in Q3, while a measure of underlying inflation hit the Federal Reserve's 2% target for the 3rd time this year.  The Commerce Dept reported consumer spending, which accounts for more than 2/3 of US economic activity, rose 0.4% last month after advancing by the same margin in Jun.  Households spent more at restaurants & on accommodation last month.  There was also an increase in spending on prescription medication.  The forecast called for consumer spending rising 0.4% in Jul.  When adjusted for inflation, consumer spending gained 0.2% in Jul after rising 0.3% in Jun.  Strong consumer spending helped fire up economic growth in Q2, with GDP rising at a 4.2% annualized rate, almost double the 2.2% pace notched in Q1.  Solid consumer spending should blunt some of the impact on the economy from an anticipated widening in the trade deficit & weakness in the housing market in Q3.  Recent data showed a sharp rise in the goods trade deficit in Jul as well as further declines in home sales & a moderate rise in homebuilding last month.  Consumer spending, which grew at a 3.8% annualized rate in Q2 following a pedestrian 0.5% pace in Q1, is being supported by a robust labor market.  Spending on goods rose 0.2% last month after slipping 0.1% in Jun.  Outlays on services increased 0.4% after surging 0.6% in the prior month.  With demand rising last month, prices continued their gradual upward trend.  The personal consumption expenditures (PCE) price index excluding the volatile food & energy components rose 0.2% after edging up 0.1% in Jun.  That lifted the year-on-year increase in the core PCE price index to 2.0% from 1.9% in Jun.  The core PCE index is the Fed's preferred inflation measure.  It hit the central bank's 2% inflation target in Mar for the first time since Apr 2012.  Minutes of the Fed's Jul 31-Aug 1 meeting showed some policymakers worried "a prolonged period in which the economy operated beyond potential could give rise to inflationary pressures."  The Fed is expected to raise interest rates for the 3rd time this year in Sep.  In Jul, personal income rose 0.3%  after increasing 0.4% in the prior month.  Wages gained 0.4% & the saving rate slipped to 6.7% last month from 6.8% in Jun.

US consumer spending increases strongly; inflation rising

The shortage of qualified workers at construction firms is becoming more widespread, according to a new report, & the industry is raising pay as it desperately seeks to combat the epidemic.  80% of firms are having trouble finding hourly craft employees, according to a survey from Autodesk & the Associated General Contractors of America (AGC).  Additionally, 56% cannot find enough qualified applicants to fill salaried jobs, including project supervisors & managers.  The shortage has ballooned across all regions of the country, which has caused firms to increase pay & add other incentives in order to attract qualified personnel.  Over the past year, 62% of firms raised pay for hourly craft workers, while 56% did so for salaried employees.  More than ¼ added incentives or bonuses for hourly employees, while 34% did so for full-time employees.  Nearly one out of 4 firms improved benefit contributions or employee benefits for all employees.  Meanwhile, certain open jobs can net prospective applicants salaries in the 6 figures, as previously.  Some of those positions include welders, foremen & even some craft professionals, like instrument techs & crane operators.  Industry leaders are not confident the employment picture will turn around in the near future, with more than 80% of firms telling AGC it will continue to be hard to find hourly craft workers throughout the remainder of the year.  Industry leaders also expressed a lack of confidence in the skills among the pipeline of prospective workers, encouraging a greater focus on workforce development & education programs.  The industry is struggling to attract younger employees, as it seeks to combat perception challenges & changing workforce conditions.  The shortage is having an economic impact as the demand for construction grows.  Projects under way are taking longer to complete & costing more than anticipated, causing firms to factor these increased expenses into their bids.  As previously reported, the lack of workers in the construction industry is one factor leading to a serious lack of inventory in the housing market, which has caused costs to spike & has priced some first-time buyers out of the market completely.  As the labor market continues to tighten, the construction industry isn't the only sector plagued by a shortage of qualified applicants.  There is also a notable shortage of truck drivers, which is causing companies to raise wages for those employees as well.

Construction worker shortage: Top open jobs and what they pay

The number of Americans filing for unemployment benefits rose last week, but the underlying trend continued to point to a robust labor market that should keep the economy on a strong growth path this year.  Initial claims for state unemployment benefits increased 3K to a seasonally adjusted 213K for the latest week, the Labor Dept said.  Claims have now declined for 3 straight weeks.  The forecast called for claims rising to 214K.  The 4-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 1K last week to 212K, the lowest level since 1969.  There are no signs so far in the claims data that the Trump administration's protectionist trade policy, which has led to an escalating trade war with China & import tariffs with other trading partners, including the EU, Canada & Mexico, is hurting the labor market.  The jobs market, which is viewed as being near or at full employment, is steadily raising wage growth, helping to support consumer spending & boost the overall economy.  The economy grew at a 4.2% annualized rate in Q2, the fastest pace in nearly 4 years & almost double the 2.2% rate notched in Q1.  The claims report also showed the number of people receiving benefits after an initial week of aid dropped 20K to 1.71M for the latest week.  The 4-week moving average of continuing claims fell 4K to 1.73M.  The continuing claims data covered the week of the household survey from which the Aug unemployment rate will be derived.  The 4-week average of continuing claims declined 15K between the Jul & Aug survey weeks, suggesting an improvement in the unemployment rate.  The jobless rate was at 3.9% in Jul.

US weekly jobless claims rise, labor market still tightening

Stocks are winding down, getting ready for a long weekend.  Still the Dow is up almost 300 already this week. returning to 26K+ territory.  Other popular averages have already reached new records.  Amazon (AMZN) is up 15, taking it over 2K.  The challenge for the bulls will be to extend this rally next week when serious trading resumes.  Continued strong economic data should be helpful.

Dow Jones Industrials

No comments: