Dow dropped 79 (700 above AM lows), decliners over advancers a more modest 3-2 & NAZ was up 29. The MLP index pulled back 1+ to the 243s & the REIT index dropped 5 to the 353s. Junk bond funds were weak & Treasuries had early gains trimmed in the PM but yields finished the session lower. Oil fell 1+ to the 51s after a lack of agreement on production cuts by OPEC (more below) & gold was steady in the 1243s (up from the 1100s in Oct).
AMJ (Alerian MLP Index tracking fund)
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US productivity grew at an annual rate of 2.3% in Q3, slower than the previous qtr but still an improvement over the weak annual gains of the past decade. Labor costs rose at a modest pace in Q3. The Q3 gain in productivity was revised up slightly from an initial estimate a month ago of a 2.2% gain, the Labor Dept said. It marks a more modest advance than the Q2's 3% annual rate of increase. Labor costs were up at a 0.9% annual rate in Q3 following a decline at a 2.8% rate in Q2. Productivity, the amount of output per hour of work, has been weak throughout the current expansion. It rose last year by just 1.1% & over the past decade, productivity has hovered at an average annual rate of 1.3%, just about ½ the 2.1% gains in the 7 years starting in 1947. The period 2000-2007 saw even stronger annual gains of 2.7%, a burst that was credited to efficiency improvements achieved with the introduction of high-tech computers & other devices to the workplace. Finding a solution to the slowdown in productivity growth is one of the key economic challenges facing the country. Rising productivity is critical to boosting standards of living because productivity gains allow companies to pay workers more without having to increase the cost of their products, which can be inflationary. The Trump administration will find it difficult to achieve its goal of sustained GDP growth of 3% or better each year without significant improvements in productivity. An economy's potential for growth is determined by an expansion in the labor force, which is determined largely by birth rates & immigration, as well as the growth in productivity. The gov reported last week that the economy's total output, as measured by GDP, rose at an annual rate of 3.5% in Q3, a strong reading but down from Q2's sizzling 4.2% GDP advance. In a separate report, the Labor Dept said that the number of Americans filing for unemployment benefits fell to 231K last week, a drop of 4K from the previous week. Benefit applications, a proxy for layoffs, have been at ultra-low levels for months, underlining the strength of the US labor market.
Companies slowed the pace of job creation in Nov as the labor market indicated more signs of tightening, according to a report from ADP & Moody's Analytics. Private payrolls increased by 179K, below the 195K growth expected. The number also was a drop from the 225K in Oct & below the 203K prior monthly average. Job gains were concentrated in medium-size businesses, with 50-499 employees & came almost exclusively from services-providing companies. “Job growth is strong, but has likely peaked. This month’s report is free of significant weather effects and suggests slowing underlying job creation,” Mark Zandi, chief economist at Moody's, said. “With very tight labor markets, and record unfilled positions, businesses will have an increasingly tough time adding to payrolls.” The ADP/Moody’s release comes a day before the gov's closely watched nonfarm payrolls report. The forecast is for employment in the private & public sector to rise 195K & the unemployment rate to hold steady at 3.7%. The ADP/Moody’s report occasionally will cause an adjustment in those expectations, though the 2 counts sometimes differ by wide margins due to differing methodologies. From a sector standpoint, service industries added 163K workers, with goods-producing companies making up the balance. Professional & business services led with 59K, while education & health services added 49K & leisure & hospitality was next with 26K. Financial-related activities saw growth of 8K, while information services lost 1K positions. On the goods side, construction added 10K & manufacturing saw growth of 4K. From a size standpoint, medium-size companies added 119K positions, while smaller companies rose 46K. Large firms added just 13K, including a 7K drop for those with more than 1K employees.
Payroll growth slows in November as labor market tightens
Atlanta Fed Pres Raphael Bostic said the the central bank may not have to go much further with interest rates to achieve a proper balance between slowing & overheating. Addressing the key concept of where a “neutral” rate is for the economy, Bostic said the exact rate is hard to determine, but signs are indicating that it’s close. “I currently think we’re within shouting distance of neutral, and I do think neutral is where we want to be,” he said in remarks. “I’m not seeing clear signs of overheating, nor am I seeing any indications of a material weakening in the macroeconomic data at the moment.” Markets widely expect the Fed to hike its benchmark interest rate later this month, but are not concurring with forecasts for 3 more increases in 2019. Bostic did not map a specific rate schedule but said the Fed “ought to be taking a more neutral position — one that neither provides policy accommodation nor hinders growth.” On one hand, inflation “if anything [has] softened slightly over the past three months” while the 3.7% unemployment rate is pointing to the type of economy that has posed problems in past years. “Dating back to 1960, every high-pressure period ended in a recession. And all but one recession was preceded by a high-pressure period,” he added. On the economy broadly, Bostic assessed that “there is a lot to like” about current conditions, though he acknowledged threats from trade tensions, a global slowdown & volatility in financial markets.
Fed's Bostic says interest rates are 'within shouting distance of neutral'
Oil prices tumbled about 3% as OPEC reportedly agreed to cut production, but ended its closely-watched meeting without a decision on how much crude the cartel will take off the market. OPEC agreed in principle to cut production during a meeting at its headquarters in Vienna, Austria, two sources said. However, the cartel delayed a decision on specific quotas until it consults Russia tomorrow. OPEC began capping supply in partnership with Russia & several other nations last year in order to end a punishing downturn in oil prices. But Moscow has not yet specified how much it will cut production during the fresh round of supply caps that is now under consideration. Intl benchmark Brent crude fell $1.77 (2.9%) at $59.79 a barrel, after falling to a session low at $58.36. West Texas Intermediate crude ended the session down $1.40 (2.7%) at $51.49, bouncing from a session low of $50.08. Oil prices briefly pared losses after gov data showed US crude stockpiles fell by 7.3M barrels in the latest week. The 2 benchmarks have each fallen more than 30% over the last 2 months. The oil price has been hammered by concerns that supply will outstrip demand next year, weakness in global markets & technical trading that has extended the selling. Top OPEC producer Saudi Arabia has been leading calls for the group to trim output, amid surging supply & fears that an economic slowdown will erode fuel demand. Oil producers appeared to be coalescing around a plan to remove 1.3M barrels per day from the market earlier in the week. However, Saudi Energy Minister Khalid al-Falih said that a cut of 1M bpd would be sufficient. Falih said a production cut of 1.3M barrels per day is “excessive” in light of Alberta's decision this week to cut 325K bpd in order to drain the Canadian province's brimming stockpiles of crude. Falih also noted that production from some OPEC producers is falling. “The number that we need is going to be less than 1.3 [million]. Is it a million? Is it slightly less, slightly more? We have all day today and some of tomorrow to determine those numbers.”
US crude sinks 2.7%, settling at $51.49, after OPEC delays decision on production cut levels
Just another wild day on Wall Street. Pointed out earlier, the stock market was vastly oversold & bargain hunters returned. But all is not well. Some traders are hoping the market selloff will encourage the Fed to be more cautious about raising interest rates. Even if that comes about, all is still not well. Major fundamentals problems need to be solved with US-China trade & more trade agreements will be needed time to resolve issues. The chart below shows Q4 has been an unusually volatile time for stocks. Those conditions are likely to continue. Presently the Dow is flirting with break-even YTD.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
OPEC members agreed to cut oil output, although it’s unclear by how much. Crude
oil prices sank after a closely watched OPEC meeting in
Vienna ended with no guarantee from major producers like Saudi Arabia & Russia to cut output, according to Saudi's energy minister. “We
hope to conclude something by the end of the day tomorrow,” the Saudi
minister, Khalid al-Falih, told reporters. “We
have to get the non-OPEC countries on board.” Concern
over an emerging supply glut has decimated oil prices, West Texas
Intermediate, the US benchmark, fell more than 2% to $51.56 per
barrel but Pres Trump has pushed for cheaper oil,
urging other countries to refrain from output cuts. “Hopefully OPEC will be keeping oil flows as is, not restricted,” he
wrote on Twitter. “The World does not want to see, or need,
higher oil prices!” al-Falih said all options were on the table if OPEC failed to reach a
deal: The organization & its allies could cut output from 0.5-1.5M barrels per day (bpd). He also said that a 1M bpd
production cut was acceptable. Data released
from the International Energy Agency revealed that the US, Saudi
Arabia & Russia are producing crude at record levels, causing supply
to surpass demand & lowering prices.
OPEC agrees to deal to cut oil output
US productivity grew at an annual rate of 2.3% in Q3, slower than the previous qtr but still an improvement over the weak annual gains of the past decade. Labor costs rose at a modest pace in Q3. The Q3 gain in productivity was revised up slightly from an initial estimate a month ago of a 2.2% gain, the Labor Dept said. It marks a more modest advance than the Q2's 3% annual rate of increase. Labor costs were up at a 0.9% annual rate in Q3 following a decline at a 2.8% rate in Q2. Productivity, the amount of output per hour of work, has been weak throughout the current expansion. It rose last year by just 1.1% & over the past decade, productivity has hovered at an average annual rate of 1.3%, just about ½ the 2.1% gains in the 7 years starting in 1947. The period 2000-2007 saw even stronger annual gains of 2.7%, a burst that was credited to efficiency improvements achieved with the introduction of high-tech computers & other devices to the workplace. Finding a solution to the slowdown in productivity growth is one of the key economic challenges facing the country. Rising productivity is critical to boosting standards of living because productivity gains allow companies to pay workers more without having to increase the cost of their products, which can be inflationary. The Trump administration will find it difficult to achieve its goal of sustained GDP growth of 3% or better each year without significant improvements in productivity. An economy's potential for growth is determined by an expansion in the labor force, which is determined largely by birth rates & immigration, as well as the growth in productivity. The gov reported last week that the economy's total output, as measured by GDP, rose at an annual rate of 3.5% in Q3, a strong reading but down from Q2's sizzling 4.2% GDP advance. In a separate report, the Labor Dept said that the number of Americans filing for unemployment benefits fell to 231K last week, a drop of 4K from the previous week. Benefit applications, a proxy for layoffs, have been at ultra-low levels for months, underlining the strength of the US labor market.
US productivity rises 2.3% in third quarter
Companies slowed the pace of job creation in Nov as the labor market indicated more signs of tightening, according to a report from ADP & Moody's Analytics. Private payrolls increased by 179K, below the 195K growth expected. The number also was a drop from the 225K in Oct & below the 203K prior monthly average. Job gains were concentrated in medium-size businesses, with 50-499 employees & came almost exclusively from services-providing companies. “Job growth is strong, but has likely peaked. This month’s report is free of significant weather effects and suggests slowing underlying job creation,” Mark Zandi, chief economist at Moody's, said. “With very tight labor markets, and record unfilled positions, businesses will have an increasingly tough time adding to payrolls.” The ADP/Moody’s release comes a day before the gov's closely watched nonfarm payrolls report. The forecast is for employment in the private & public sector to rise 195K & the unemployment rate to hold steady at 3.7%. The ADP/Moody’s report occasionally will cause an adjustment in those expectations, though the 2 counts sometimes differ by wide margins due to differing methodologies. From a sector standpoint, service industries added 163K workers, with goods-producing companies making up the balance. Professional & business services led with 59K, while education & health services added 49K & leisure & hospitality was next with 26K. Financial-related activities saw growth of 8K, while information services lost 1K positions. On the goods side, construction added 10K & manufacturing saw growth of 4K. From a size standpoint, medium-size companies added 119K positions, while smaller companies rose 46K. Large firms added just 13K, including a 7K drop for those with more than 1K employees.
Payroll growth slows in November as labor market tightens
Atlanta Fed Pres Raphael Bostic said the the central bank may not have to go much further with interest rates to achieve a proper balance between slowing & overheating. Addressing the key concept of where a “neutral” rate is for the economy, Bostic said the exact rate is hard to determine, but signs are indicating that it’s close. “I currently think we’re within shouting distance of neutral, and I do think neutral is where we want to be,” he said in remarks. “I’m not seeing clear signs of overheating, nor am I seeing any indications of a material weakening in the macroeconomic data at the moment.” Markets widely expect the Fed to hike its benchmark interest rate later this month, but are not concurring with forecasts for 3 more increases in 2019. Bostic did not map a specific rate schedule but said the Fed “ought to be taking a more neutral position — one that neither provides policy accommodation nor hinders growth.” On one hand, inflation “if anything [has] softened slightly over the past three months” while the 3.7% unemployment rate is pointing to the type of economy that has posed problems in past years. “Dating back to 1960, every high-pressure period ended in a recession. And all but one recession was preceded by a high-pressure period,” he added. On the economy broadly, Bostic assessed that “there is a lot to like” about current conditions, though he acknowledged threats from trade tensions, a global slowdown & volatility in financial markets.
Fed's Bostic says interest rates are 'within shouting distance of neutral'
Oil prices tumbled about 3% as OPEC reportedly agreed to cut production, but ended its closely-watched meeting without a decision on how much crude the cartel will take off the market. OPEC agreed in principle to cut production during a meeting at its headquarters in Vienna, Austria, two sources said. However, the cartel delayed a decision on specific quotas until it consults Russia tomorrow. OPEC began capping supply in partnership with Russia & several other nations last year in order to end a punishing downturn in oil prices. But Moscow has not yet specified how much it will cut production during the fresh round of supply caps that is now under consideration. Intl benchmark Brent crude fell $1.77 (2.9%) at $59.79 a barrel, after falling to a session low at $58.36. West Texas Intermediate crude ended the session down $1.40 (2.7%) at $51.49, bouncing from a session low of $50.08. Oil prices briefly pared losses after gov data showed US crude stockpiles fell by 7.3M barrels in the latest week. The 2 benchmarks have each fallen more than 30% over the last 2 months. The oil price has been hammered by concerns that supply will outstrip demand next year, weakness in global markets & technical trading that has extended the selling. Top OPEC producer Saudi Arabia has been leading calls for the group to trim output, amid surging supply & fears that an economic slowdown will erode fuel demand. Oil producers appeared to be coalescing around a plan to remove 1.3M barrels per day from the market earlier in the week. However, Saudi Energy Minister Khalid al-Falih said that a cut of 1M bpd would be sufficient. Falih said a production cut of 1.3M barrels per day is “excessive” in light of Alberta's decision this week to cut 325K bpd in order to drain the Canadian province's brimming stockpiles of crude. Falih also noted that production from some OPEC producers is falling. “The number that we need is going to be less than 1.3 [million]. Is it a million? Is it slightly less, slightly more? We have all day today and some of tomorrow to determine those numbers.”
US crude sinks 2.7%, settling at $51.49, after OPEC delays decision on production cut levels
Just another wild day on Wall Street. Pointed out earlier, the stock market was vastly oversold & bargain hunters returned. But all is not well. Some traders are hoping the market selloff will encourage the Fed to be more cautious about raising interest rates. Even if that comes about, all is still not well. Major fundamentals problems need to be solved with US-China trade & more trade agreements will be needed time to resolve issues. The chart below shows Q4 has been an unusually volatile time for stocks. Those conditions are likely to continue. Presently the Dow is flirting with break-even YTD.
Dow Jones Industrials
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