Markets tumble on a weak jobs report

Dow dropped 140, decliners over advancers 5-1 & NAZ fell 30.  The Financial Index fell 4+ to the 204s (down 10 from the highs last month).  The MLP index dropped almost 4 to the 388s & the REIT index fell about 4 to the 247s.  Junk bond funds were a little weak, but Treasuries were strong (see below).  Oil dropped as an employment report raised concern that US fuel demand will slow & Iran agreed to resume talks on its nuclear program.  Gold befitted from the jobs report on Fri,

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month	0.066%
U.S. 2-year	0.318%
U.S. 10-year	2.032%

CLK12.NYM

...Crude Oil May 12

...101.42

...... 1.89

(1.8%)

GCJ12.CMX

....Gold Apr 12

.........1,644.60

... 16.10

(1.0%)

Get the latest daily market update below:

Photo:   Bloomberg

Risk averse investing has returned to the markets.  Investors are plowing into Treasuries at a record pace while the supply dwindles.  Yields should remain low even if the Federal Reserve does not undertake more stimulus to fight unemployment.  Buyers bid $3.19 for each dollar of the $538B in Treasuries sold this year, the most since the gov began releasing the data in 1992 & on pace to beat the high of $3.04 in 2011.  The net amount of Treasury debt available will decline 30% once proceeds from maturing securities are reinvested.  Skepticism about the US recovery, as well as signs Europe’s debt turmoil isn’t over, is boosting demand, enabling the Treasury to fund a 4th consecutive deficit exceeding $1T at near-record low costs.  The 10 year Treasury yield has plunged from over 2¼% a couple of weeks ago to near 2% currently.  Demand for gold, the other principal safe haven investment, is also strong.

Record Treasury Demand Keeps Yields Low as Supply Shrinks

Photo:   Bloomberg

Inflation in China accelerated more than forecast in Mar on a pickup in food prices.  Policy makers may exercise caution in adding stimulus to boost growth.  Consumer prices rose 3.6% from a year earlier, the National Bureau of Statistics said (above the 3.4% estimate).  Food-related costs gained 7.5%.  Gov officials may need to remain alert to the risk of inflation bouncing back even after price increases stayed below the 4% target for a 2nd month.  Its economy may have expanded in Q1 at the slowest pace in almost 3 years, showing the limits of the nation’s contribution to global growth as US job growth weakens & concern mounts about Europe's sovereign-debt crisis.  When China sneezes, the rest of the world pays attention.

China Consumer Prices Rise Faster-Than-Estimated 3.6%

Photo:   Bloomberg

AOL stock surged after it said it agreed to sell 800 of its patents & license others to Microsoft (MSFT), a Dow stock, for more than $1B & plans to return some of the sale proceeds to its shareholders.  After the sale, AOL should have about $15 per share in cash.  Patents have become a hot commodity in the high-tech industry in recent years.  They're useful both for attack, for suing competitors, & for defense — for warding off lawsuits with threats of countersuits.  Software patents can have broad applications, & thousands of patents can apply to a complicated product like a cellphone.  Google (GOOG) is buying phone maker Motorola Mobility (MMI) for $12B to get hold of its patents.  After the sale, AOL will still hold over 300 patents & applications covering a variety of core & strategic technologies including advertising, search, content generation, social networking, mapping, multimedia, & security among others.  AOL also received a license to the patents being sold to MSFT.   "The combined sale and licensing arrangement unlocks current dollar value for our shareholders and enables AOL to continue to aggressively execute on our strategy to create long-term shareholder value,"  said CEO Tim Armstrong.  AOL intends to distribute a "significant portion" of the sale proceeds to shareholders before the sale closes by year end.  The stock shot up $7.85 (42%).  A short term chart is needed to show the dramatic rise today.

AOL to Sell, License Patents to Microsoft for $1.06 Billion

AOL Inc. (AOL)

As predicted, this is a dismal day for the markets following slower than expected jobs growth in Mar.  The European debt mess is not going away.  ECB financing for Portuguese banks rose to a record in Mar.  Spain needs help.  Then there's earnings season which kicks off tomorrow after the market close when Alcoa (AA), a Dow stock, reports.  The markets are anxious.  The chart below shows Dow has been stuck around 13K for a couple of months.  Today it fell below as S&P 500 dropped to 1379, solidly below the important 1400 ceiling.  Prepare for a rough road ahead.

Dow Industrials

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Market futures drop on disappointing jobs report

Photo:   Bloomberg

Fewer jobs were added than forecast in Mar, a reminder that recent gains may not be sustained without a pickup in growth.  The 120K increase in payrolls, the fewest in 5 months, followed a revised 240K gain in Feb that was bigger than first estimated according to the Labor Dept.  The Mar increase was even less than the most pessimistic forecast with a median estimate for a 205K rise.  Unemployment fell to 8.2%, the lowest since Jan 2009, from 8.3%.  The Mar data showed a 34K decrease in retail employment, the biggest decline since Oct 2009.  The jobless rate dropped as unemployed workers stopped looking for work & left the labor force. The participation rate, which indicates the share of working-age people in the labor force, fell to 63.8% from 63.9%.  Dismal numbers caused stock futures to decline.

Employers Added 120,000 Jobs in March, Fewest in Five Months


Dreary news on jobs will probably bring lower openings on Mon.  The problem is that the recovery has been overrated by the optimists.  Additionally, ugly European debt issues are returning.  Yields on Spanish bonds are rising.  Another bailout may be needed even though the ECB eventually will run out of money.  On this news, contrary investments are rising.  The yield on the 10 year Treasury (considered a safe haven investment) dropped  7 basis points (a big drop) & gold which has been under a lot of selling pressure is up $18.

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Lower stocks on higher European worries

Dow slid 14, decliners ahead of advancers 3-2 & NAZ rose 12 (helped by a 9 point rise for Apple to a new record).  Bank stocks drifted lower, taking the Financial Index down a fraction in the 209s.  The index has been going sideways since mid Mar.  The MLP index was up fraction to 391, but has had a tough go of it this year, while the REIT index fell 1 to 251.  Junk bond funds slipped & Treasuries rose, bringing lower yields.  Gold rose, as investors covered short positions, after a sharp 2-day pullback, & a rally in oil also buoyed the precious metal that sank earlier this week when investors grew pessimistic about further US monetary easing.

JPMorgan Chase Capital XVI (AMJ)

Click below for the latest market update:

Treasury yields:

U.S. 3-month	0.066%
U.S. 2-year	0.341%
U.S. 10-year	2.172%

CLK12.NYM

Crude Oil May 12

103.32

1.85 (1.8%)

JC Penney will lay off 600 workers (13% of the staff) at its headquarters in Texas, as the company looks to streamline its operations amid a major reinvention of the business.  It will also eliminate 300 more jobs at its customer call center in Pittsburgh when it closes in Jul.  The moves come as the new CEO Ron Johnson is transforming every aspect of the business, from pulling back on constant promotions to rethinking the brands it carries.  "We are going to operate like a start-up," said Johnson in a press release issued Thursday that didn't cite specific job cuts. "We are going to be nimble, quick to learn, quicker to react and totally committed to realizing our vision to become America's favorite store."  Johnson said the cuts involved "some very difficult decisions" but were essential for the business.  The company had said then it was targeting $900M in expense cuts to be completed over the first 2 years of its transformation, including $200M in savings from headquarters as well as $400M in cost savings at store operations & $300M in advertising savings.  The changes are expected to reduce expenses below 30% of sales by the end of next year.  Before the layoffs, JCP had 4400 employees at its headquarters.  While not significant at the big picture level, this will add to the unemployed looking for work.  The stock was off 49¢.

Penney cuts 600 workers, 13 percent of HQ staff AP

J.C. Penney Company, Inc. Holding Company (JCP)

The average rate on the 30-year fixed mortgage was mostly unchanged this week, as the cost of home-buying & refinancing remained near record lows.  Mortgage buyer Freddie Mac said that the rate on the 30-year loan fell slightly to 3.98% from 3.99% last week.  In Feb, the rate touched 3.87%, the lowest since long-term mortgages began in the 1950s.  The average rate on the 15-year fixed mortgage also fell, to 3.21% from 3.23%.  That's above the record low of 3.13% hit last month.  Mortgage rates have been below 4% for all but one week since early Dec which has helped lift the outlook for housing after 4 sluggish years of home sales.  Jan & Feb made up the best winter for re-sales in 5 years, when the housing crisis began & builders are more confident about the market. In February, they requested the most permits to build single-family homes & apartments in more than 3 years.  Applications for new mortgages rose in Mar & there was a sharp rise in the average loan size, suggesting a bigger appetite for home loans.  The average size of mortgage applications has increased by $20K since DecK, to  $235K last month.  A hopeful sign for housing. 

30-Year Mortgage Rate Falls to 3.98%

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Photo:   Yahoo

The President signed bipartisan jobs legislation that will help small businesses & make it easier for startups to raise capital, saying it could be a "game-changer" for entrepreneurs dreaming of founding the next Microsoft (MSFT), a Dow stock, or Facebook.  "When their ideas take root, we get inventions that can change the way we live," Obama said.  "And when their businesses take off, more people become employed."  While receiving bipartisan support, some Dems raised concerns that the bill softened investment protections enacted after the dot.com excesses & Wall Street meltdowns with changes that could lead to fraud & abuse.  The main part of the bill would phase in SEC regulations over a 5-year period to let smaller companies go public sooner.  Firms that have annual gross revenues of less than $1B would enjoy this "emerging growth company" status.

Obama signs small business legislation AP


The average price at the pump for gas is matching the high for last year & near the $4.11 record in mid 2008.

	Regular	Mid	Premium	Diesel	85	**E85 MPG/BTU adjusted price
Current Avg.	$3.936	$4.069	$4.200	$4.166	$3.345	$4.403
Yesterday Avg.	$3.928	$4.063	$4.195	$4.164	$3.335	$4.389
Week Ago Avg.	$3.921	$4.059	$4.190	$4.162	$3.313	$4.360
Month Ago Avg.	$3.764	$3.911	$4.044	$4.084	$3.216	$4.233
Year Ago Avg.	$3.707	$3.839	$3.968	$4.003	$3.119	$4.104

Source:   AAA


Investors weighed optimism about the American job market with renewed concern over Europe’s debt crisis & the latter was of greater concern today.  Earnings season kicks off next week with Alcoa (AA), a Dow stock, reporting on Tues.  Analysts are looking for a 5¢ loss versus a profit last year.  Dow gave up 152 this week but was able to hold above 13K.  S&P 500 has been waffling around 1400 (closing at 1398 today) without breaking thru since mid Mar.  The stock market looks very tired after a long run.

Dow Industrials

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Mixed markets on more Euro woes

Dow was up 8, advancers barely ahead of decliners & NAZ rose 8.  Bank stocks were higher, the Financial Index went up fractionally to 210.  The MLP index was up a fraction to 391 while the REIT index slipped a fraction to the 252s.  Junk bond funds edged higher & Treasuries gained.  Oil was up for the first time in 3 days as claims for unemployment benefits dropped to a 4-year low, raising hopes that demand for oil may increase.  Gold rebounded after yesterday's big sell-off.

JPMorgan Chase Capital XVI (AMJ)

Treasury yields:

U.S. 3-month	0.071%
U.S. 2-year	0.345%
U.S. 10-year	2.193%

CLK12.NYM

...Crude Oil May 12

...101.94

..... 0.47

(0.5%)

GCJ12.CMX

....Gold Apr 12

.........1,629.30

... 17.00

(1.1%)

Get the latest daily market update below:

• 

Photo:   Yahoo

The number lining up for new jobless benefits fell to the lowest level in nearly 4 years last week.  Initial claims for benefits fell 6K to 357K, the lowest sin Apr 2008, according to the Labor Dept.  The claims data could bolster the case that the healing labor market is lowering the need for the Federal Reserve to do more to boost growth.  It is expected that the employment report tomorrow will show the economy added 203K jobs last month, a 4th straight month of solid job (the longest stretch of monthly employment gains topping 200K since 1999).  The 4-week moving average for new claims, a measure of labor market trends, declined 4K to 362K.  Employers also appear optimistic enough to cut layoffs further.  The number of planned layoffs at US firms fell in Mar to the lowest level in 10 months, according to Challenger, Gray & Christmas.  The prior week's figure was revised up to 363K from the previously reported 359.  The number still receiving benefits under regular state programs fell 16K to 3.3M in the latest week, the lowest since Aug 2008.  A total of 7.05M were claiming unemployment benefits under all programs, down 107K from the prior week.  The data continues to look good.

Jobless Claims in U.S. Fell to Lowest Level in Four Years

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Photo:   Yahoo

Retailers reported better-than-expected sales in Mar, the latest sign that consumers are feeling better about the economy.  A combination of warm weather & high demand for spring fashions boosted revenue for the month.  Consumers have continued to cut back on spending in the slow economic recovery, but they're starting to be encouraged by the improving job market.  Only a handful of retailers report monthly figures, but there's optimism that the numbers offer a snapshot of consumer spending, which accounts for more than 70% of all economic activity.  Overall, revenue in stores open at least one year rose 4.1%, according to a preliminary tally of 22 retailers by the International Council of Shopping Centers.  Retailers catering to customers in all income brackets had monthly gains that beat expectations.  While Mar revenue figures are encouraging, analysts caution that retailers should not count their eggs before they hatch.  Gas prices, around $4, continue to weigh on consumers & that hurts stores that cater to lower-end shoppers.  It's believed that a more accurate picture of spending will emerge after Apr since an earlier Easter holiday this year likely pushed some sales into Mar.

Retailers report positive March sales AP

Prime Minister Rajoy

Photo:   Bloomberg

A slide in Spanish markets deepened as investors’ concerns that Spain may require intl aid rattled markets.  Spain, the area’s 4th-largest economy, is in “extreme difficulty,” PM Rajoy said yesterday.  This raised the likelihood of a bailout for the 2nd time this week.  A rally triggered by more than $1T of ECB loans to stave off a credit crunch is running out of steam &, while Italian Prime Minister Monti is pressing ahead with an economic overhaul, Rajoy is failing to meet deficit targets amid a worsening recession.  Spanish bonds fell, pushing the yield on the 10-year Treasury bond to the highest in 4 months at 5.79% & widening the spread with similar-maturity German bunds to more than 4 percentage points.  That yield has jumped nearly one percentage point since Mar 2, when Rajoy announced the gov would miss its budget deficit target this year.  He set the target for 2012 at 5.3% of GDP, lowering it from 5.8% under EU pressure, instead of 4.4% & warned public debt will surge to a record 79.8% of GDP as it imposes the deepest austerity in at least 3 decades.  Another looming disaster to cope with & ECB is running out of ammunition.

Spain’s Economic Woes Rattle Investors; Europe Markets Slide


This is turning out to be a lumbering along kind of day going into a long weekend (US markets closed tomorrow).  The jobless claims data was good & the Mar jobs report tomorrow should be another good one, but markets are not responding.  Maybe buyers began the weekend early.  MLPs continue lagging the markets.   The yield for the index is 6.1%, low by historical standards & that may be weighing down MLPs.

Dow Industrials

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