Thursday, October 4, 2018

Markets decline on surging interest rates

Dow dropped 212 (session lows), decliners over advancers almost 3-1 & NAZ sank 102.  The MLP index was off a tad in the 281s & the REIT index declined 3+ to the 344s.  Junk bond funds slid lower & Treasuries were sold, taking the yield on the 10 year Treasury up 2 basis point to 3.18% (a 7 year high).  Oil pulled back to the 75s & gold rose 6 to 1209 while stocks were sold.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil75.55
 -0.86  -1.1%

GC=FGold  1,206.90
+4.00 +0.3%

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Stocks fell the morning after the Dow climbed to a fresh record & a 5th-straight session of gains.  Some analysts remain worried about political tensions in Europe & stagnant growth outside the US, leading investors to favor assets considered safer, such as the $.  A reading on weekly jobless claims came in better than expected with 207K Americans filing for benefits versus analysts' expectations for 230,000.

Stocks lower, putting Dow march to 27,000 on hold

The number of Americans filing for unemployment benefits fell to a near 49-year low last week, pointing to sustained labor market strength, which should continue to underpin economic growth.  The labor market, which is viewed as being near or at full employment, is steadily boosting wage growth, which could help to support consumer spending as the stimulus from the Trump administration''s $1.5T tax cut package fades.  Initial claims for state unemployment benefits dropped 8K to a seasonally adjusted 207K for the latest, the Labor Dept reported (the lowest level since 1969).  The claims data has no bearing on the Sep employment report, which is scheduled for release tomorrow.  According to a Rsurvey of economists, nonfarm payrolls likely increased by 185K in Sep after surging 201K in Aug.  The unemployment rate is forecast falling 1/10 of a percentage point to 3.8%, an 18-year low first hit in May.  Payrolls growth could, however, surprise on the upside as data yesterday showed an increase in hiring by private companies in Sep & a jump in private sector jobs.  The Federal Reserve raised interest rates last week for the 3rd time this year & removed the reference to monetary policy remaining "accommodative."  The claims report also showed the number of people receiving benefits after an initial week of aid fell 13K to 1.65M for the latest week.  The 4-week moving average of continuing claims decreased 15K to 1.66M, the lowest level since 1973.  The forecast called for claims slipping to 213,000 in the latest week. The Labor Dept said claims for South & North Carolina were affected by Hurricane Florence, which lashed the region in mid-Sep.  The 4-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, inched higher to 207K last week.

US weekly jobless claims drop to a near 49-year low

US factory orders rose 2.3% in Aug to mark an 11-month high, rebounding from a small decline the month before.  The forecast predicted a 2.2%%.  Orders for Jul were also revised to show a smaller 0.5% decline instead of 0.8% as initially reported, the gov said.  Shipments advanced 0.5%.  In Aug, orders for durable goods climbed 4.4%.  So far this year, overall factory orders are up 8.6% from the same period in 2017.

U.S. factory orders climb 2.3% in August, biggest gain in 11 months

The finer things in life are the latest victims of escalating trade tensions between the US & China.  The latest round of tariffs on $200B worth of Chinese-made goods affects mink furs, reptile skin handbags, leather accessories, silk, handmade lace, gold leaf & fabrics used specifically for ballet, opera & theater sets.  They're among the roughly 5K products subject to a 10% tariff that went into effect in late Sep; it will increase to 25% in Jan.  Pres Trump says the tariffs, which make it more expensive for Chinese-made goods to enter the US, are necessary to protect American manufacturing & jobs.  But business groups say they'll do the opposite, arguing that tariffs “hurt the heartland” & burden working families with higher prices on consumer goods.

Tariffs for the 1%: Fur coats, fancy handbags and other luxury goods hit by trade war with China

This is shaping up as a dreary day for stocks.  That should be expected after its rise this week.  The jobs number will drive the market tomorrow.  Markets indices are near record highs as earnings season begins next week.  Let's see if the early losses are extended in the PM.

Dow Jones Industrials

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