Friday, December 7, 2018

Markets pull back after a weaker than expected jobs report

Dow dropped 209, advancers modestly ahead of decliners & NAZ fell 74.  The MLP index rose 2+ to the 245s & the REIT index soared 9 to the 363s.  Junk bond funds fluctuated & Treasuries drifted lower after yesterday's advance.  Oil shot up 2+ to the 53s on OPEC production cuts (more below) & gold was up 7 to 1251 (not seen since Jul).

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil53.71
+2.22 +4.3%

GC=FGold   1,248.90
+5.30 +0.4%

3 Stocks You Should Own Right Now - Click Here!

Stocks traded in a tight range after a surprisingly weak Nov jobs report that could give the Federal Reserve reason to ease its interest rate hikes.  The Labor Dept said American employers created 155K jobs last month, less than the 200K expected.  The smaller-than-expected number could influence the Fed to pause its interest rate hikes.  Such recent increases, including one expected this month, have spooked stock investors lately & drawn fire from Presi Trump.  The Nov jobs report also found that the unemployment rate is still 3.7% & that wages edged slightly higher last month.  Oil prices jumped 4.5% to $53.81 after OPEC agreed to cut production by 1.2%.  Asian stocks closed higher today, with the Nikkei 225 closing up 0.8%, the Shanghai Composite inched higher & India's Sensex climbed 1%.  In Europe equities were mostly higher, with Britain's FTSE 100 up 1.5%, France's CAC 40 added 1.5% & Germany's DAX added 0.7%.  Yesterday, US stocks clawed back from deep losses with the NAZ closing the session up 29 while the S&P 500 & the Dow finished well off their lows of the day.  The Dow ended the session down 79  clawing back from a loss of over 700 in what was a volatile session. The S&P 500 posted fractional losses as investors enagaged in late day buying of consumer discretionary & tech stocks.  At one point during the session, all 3 of the major averages were down over 3% putting each back in the red for the 2018 year.  The late day turn around has the averages now little changed on an annual basis.  The sectors that failed to trim losses included financials & energy stocks.

US stocks cautious after jobs report

U.S. employers added 155K jobs in Nov, missing expectations for an increase of 200K jobs, after an already rocky week for stocks exacerbated yesterday by investor fears that a US-China trade deal could be reneged amid newly inflamed tensions.  The unemployment rate remained steady at 3.7%, the lowest rate in 50 years, while the labor force participation rate also stayed the same at 62.9% during the month.  Average hourly earnings meanwhile rose by 6¢ to $27.35.  Over the year, average hourly earnings have increased by a total of 81¢ (3.1%).  Although it was a weaker-than-expected number, experts portrayed the data as another good report, particularly regarding wage growth.  It's the 98th-straight month of gains & indicates that despite a slight miss, the labor market remains robust & the economy strong.  And with an already tight labor market, analysts said they expect job creation to continue to cool heading into 2019, even as wages continue to rise.   Jobs numbers come on the heels of a report Wed from payroll processing firm ADP, which revealed the private sector added 179K in Nov, up from 227K in Oct, the highest level since Feb.  Analysts anticipated that unemployment would hold steady at 3.7%, a 49-year low, while forecasting the creation of 200K jobs.  While the US economy is still creating jobs, the softer report could give the Federal Reserve a reason to slow its planned pace of rate hikes in 2019.  Yesterday a report suggested the Fed is considering adopting a wait-&-see policy on future rate rises.  Central bank policymakers will hold their final meeting of the year on Dec 18-19 & are expected to raise interest rates at the conclusion.

Job growth slows, unemployment holds at 3.7 percent

OPEC members & Russia agreed to cut oil output in a deal that seeks to end an emerging supply glut driving prices down.  OPEC & Russia will curb oil output by a total of 1.2M barrels a day.  But the deal is still under negotiation.  OPEC members would cut production by 800K barrels while Russia and its allies would be responsible for the rest.  West Texas Intermediate, the US benchmark, jumped nearly $2, up 4% at $53.41.  Crude oil prices sank yesterday 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.”  Yesterday, concern over an emerging supply glut has decimated oil prices, West Texas Intermediate 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 on Wed.  “The World does not want to see, or need, higher oil prices!”  According to a report, al-Falih said all options were on the table if OPEC failed to reach a deal:  The organization & allies could cut output 0.5-1.5M barrels per day (bpd).  He also said that a 1M bpd production cut was acceptable.  Data released from the Intl Energy Agency revealed that the US, Saudi Arabia and Russia are producing crude at record levels, causing supply to surpass demand & lowering prices.

OPEC, Russia to cut oil output, despite Trump pressure

White House economic advisor Larry Kudlow said that Pres Trump would consider extending the 90-day tariff truce with China if “good” progress is made in trade talks.  Last weekend, Trump & Chinese Pres agreed to that trade cease-fire on no new tariffs on each other's goods as negotiations continue.  Today Trump tweeted that China trade talks are going “very well.”  Kudlow, director of Trump’s National Economic Council, said the arrest of Meng Wanzhou, CFO of Chinese telecommunications giant Huawei Technologies, won't impact US-China trade talks.  Meng, daughter of Huawei founder Ren Zhengfei, was detained in Canada on Sat, the same day Trump & Chinese Pres Xi had dinner to talk about trade on the sidelines of the G-20 summit in Argentina.

Kudlow: Trump would consider extending 90-day trade truce with China if progress made in talks

Sellers have returned after a weaker than expected jobs reports, although on balance it was not that bad.  Trade talks with China & worries about a rate hike this month along with guidance for next year are keeping buyers away.  The Dow is down 800 this week (& month).  So much for the Santa Claus rally.

Dow Jones Industrials

No comments: