Dow retreated 75, decliners over advancers about 5-4 & NAZ crawled up 5. The MLP index stayed in the 224s & the REIT index was little changed in the 367s. Junk bond funds fluctuated & Treasuries had limited buying with little changes in yields (more below). Oil was steady, remaining above 80, & gold fell 9 to 2026.
AMJ (Alerian MLP Index tracking fund)
The number of Americans filing for unemployment benefits
came in higher than expected last week, an early sign the labor market
is beginning to soften in the face of higher borrowing costs. Figures released
by the Labor Dept show initial claims for last week
hit 228K, above the 2019 pre-pandemic average of 218K claims. That
is slightly below the level recorded the previous week, which was
revised sharply higher to 246K, the steepest level since Jan
2022. Continuing claims, filed by Americans who are consecutively
receiving unemployment benefits, rose slightly to 1.82M, an increase of 6K from the previous week. The labor market remains an unsolved puzzle in the Federal Reserve's
campaign to raise interest rates & slow the economy. Layoffs are on
the rise, but job openings remain near a record high. Private sector
hiring rose faster than expected in Feb, but jobless claims are
also ticking higher. Central bank officials have made it clear that they expect unemployment to climb as a result of higher rates, which could force consumers & businesses to pull back on spending. Job losses are "very likely," Fed Chair Jerome Powell told lawmakers earlier in Mar. Projections from the central bank's Mar meeting show that officials
expect unemployment to rise to 4.6% by the end of next year, up from the
current rate of 3.5%. That could mean more than 1M Americans lose their jobs between now & the end of 2023. Policymakers
have already approved 9 consecutive rate increases & have opened
the door to a 10th increase at their next meeting in early May, although
they have stressed the importance of upcoming economic data releases.
Jobless claims come in higher than expected ahead of jobs report
Companies announced nearly 90K layoffs in Mar, a sharp step up from the previous month & a giant acceleration from a year ago, outplacement firm Challenger, Gray & Christmas reported. Planned layoffs totaled 90K for the period, an increase of 15% from Feb. YTD job cuts have soared to 270K, an increase of 396% from the same period a year ago. The damage was especially bad in tech, which has announced 102K cuts so far in 2023. That's a staggering increase of 38,487% from a year ago & good for 38% of all staff reductions. Tech already has cut 5% more than for all of 2022 & is on pace to eclipse 2001, the worst year ever amid the dot-com bust. “We know companies are approaching 2023 with caution, though the economy is still creating jobs,” said Andrew Challenger, senior VP of Challenger, Gray & Christmas. “With rate hikes continuing and companies’ reigning in costs, the large-scale layoffs we are seeing will likely continue.” Benchmark revisions from the dept indicate that claims have been above 200K for virtually the entire period going back to late Oct 2022. Financial companies have announced the 2nd-highest rate of job cuts this year, with the 31K layoffs representing a 419% increase from the first qtr in 2022. Health care & retail are the next highest. At the same time, planned hiring waned in Mar, totaling just 9K, the worst for the month since 2015. On a year-to-date basis, planned additions are at the lowest quarterly total since 2016. The main reason cited for job cuts has been market & economic conditions, with cost-cutting the next most often mentioned factor.
Layoffs are up nearly fivefold so far this year with tech leading the way
Treasury yields were mixed as investors assessed recent labor market data in order to gauge the possibility of an upcoming recession. The yield on the benchmark 10-year Treasury note was flat at 3.29% while the yield on the 30-year Treasury bond rose by around 1 point to 3.57%. The 2-year rate, meanwhile dipped 3 basis points to 3.73%, falling for a 5th straight session. Yields move inversely to prices. Yields were under pressure yesterday after the ADP private payrolls report came in below expectations, signaling a slowdown in hiring in Mar, while the ISM Services index also showed slower-than-expected growth, adding to recession fears. Future monetary policy moves remain in focus, with the Federal Reserve continuing to tackle inflation & the aftermath of banking collapses that caused turmoil in bond markets in recent weeks. The Federal Reserve is next scheduled to meet in early May, & the market is split on whether the central bank will pause or hike rates by a further 25 basis points, according to the CME Group’s FedWatch tool.
Treasury yields are muted as investors track key economic data
Powell has warned numerous times that pain will come after the interest rate hikes & now it's here. More pain (measured by higher unemployment) can be expected for the rest of the year. Seemingly this will bring on a recession, although its effect may be mild.
Dow Jones Industrials
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