Friday, May 3, 2019

Markets climb higher on a strong April jobs report

Dow shot up 89, advancers over decliners 3-1 & NAZ advanced 82.  The MLP index added 1+ to the 247s & the REIT index was fractionally higher in the 379s.  Junk bond funds hardly budged in price & Treasuries were also purchased, bringing lower yields.  Oil went up to the 62s & gold rebounded 10 to 1282.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil61.90

GC=FGold   1,279.80

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Stocks opened higher as the jobs report showed hiring surged in Apr, creating 263K, far higher than the 185K expected.  The Labor Dept also said unemployment dropped to 3.6%, beating expectations of 3.8% & the lowest rate since 1969.  The yield on the 10-year Treasury eased fractionally to 2.53%.  Crude oil prices fell. West Texas Intermediate, the benchmark US crude oil, slipped to $61.80 per barrel.  China's Shanghai Composite closed up 0.5%, the Hang Seng added 0.5% & Japan's Nikkei 225 slipped 0.2%.  Britain's FTSE 100 was up 0.8%, France's CAC 40 added 0.3% & Germany's DAX 0.5%.

Stocks higher on big April jobs report, falling unemployment

The US economy added 263K jobs in Apr, soaring past expectations for an increase of 185K jobs, while unemployment fell to the lowest rate since 1969.  The unemployment rate dropped to 3.6%, beating expectations of 3.8%.  The labor force participation rate, meanwhile, was little changed at 62.8%, from 63% the month prior.  Average hourly earnings, which investors were closely watching for signs of inflation, rose 6¢ to $27.77.  Over the year, average hourly earnings have increased by about 3.2%, slightly missing expectations of 3.3%.  A majority of the job creation was concentrated in the professional & business services, which added 76K jobs in Apr.  Construction employment rose by 33K jobs, while employment in the health care sector expanded by 27K jobs.  Financial activities job creation ticked up by about 12K.  Manufacturing, however, was little changed for the 3rd month in a row:  Only 4K jobs were created in this sector during Apr & over the past 12 months, the industry added a measly 22K jobs per month.  The job creation in April marks the 119th month of straight gains.  Over the past year, the economy has added an average monthly gain of 213K jobs.  The better-than-expected report likely provides new fodder to the Federal Reserve that its dovish policy stance is the best course of action to balance lingering headwinds, such as the global trade war & uncertainties surrounding Brexit, with otherwise strong economic data in the US.  Policymakers at the central bank signaled during their 2-day meeting this week that they won't hike or cut interest rates in the near-term, remaining on the wait-&-see track from earlier this year.  Most economists predicted that because the labor market is chugging along at a healthy & relatively steady pace, the Fed will be watching inflation to determine whether it needs to change the benchmark federal funds rate.  The Apr jobs report also comes on the heels of the release on Wed of the ADP National Employment report, which revealed that US private sector hiring last month grew by 275K jobs, surging past expectations of 180K.  In Mar, hiring rebounded from a measly month of job creation, with 189K jobs added by US employers.

US job growth surges in April, beating expectations with 263,000 added

Core consumer inflation has fallen since Dec, meaning the Federal Reserve remains far from its goal of stable 2% inflation, said Chicago Fed President Charles Evans.  In a speech, Evans echoed Fed Chairman Jerome Powell that some of the recent fall in core inflation may be due to transitory factors.  Still, "we don't want to be too dismissive of this development," he added.  "We cannot declare victory yet on our inflation mandate," he said.  Evans, who is a voting member of the Fed's interest-rate committee, noted that there are many crosscurrents facing the economy that continue to justify the Fed's wait-&-see approach regarding future changes in interest rates.  "While the risks from the downside scenarios do not seem as pronounced as they did a couple of months ago, I still feel they loom larger than those from the upside ones," he added.

Evans says Fed cannot declare victory yet on inflation

The Institute for Supply Management’s non-manufacturing index slowed to a reading of 55.5% in Apr from 56.1% in Mar, the worst reading since Aug 2017.  The forecast called for a 57.5% reading.  A related gauge from IHS Markit, its US services PMI, fell to 53 from 55.3 in Mar, which was that series worst reading since Mar 2017.  Components for new orders, employment, prices & backlogs were among that declined in Apr.  The decline in the employment gauge contrasts with the acceleration in services hiring reported by the Labor Dept for Apr.  The production gauge did accelerate, however, as did components for inventories & new export orders.  The slowing gauges suggest that the US economy may be heading for rockier times even with a strong jobs market.

ISM services index slows in April to lowest level in nearly two years

The Apr jobs report was excellent & corroborated the ADP report on private sector hiring earlier this week.  The Dow was strong out of the gate this morning, but subsequent selling reduced the advance by 70.  While buyers are bidding up prices for stocks, there is also demand for safe haven investments such as gold & Treasuries.  The outlook for trading in the PM in unclear.

Dow Jones Industrials

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