Mixed markets ease after weak jobs report

Dow slipped 11, advancers ahead of decliners 2-1 & NAZ lost only 1.  The Financial Index jumped another 2 to 210, a new high since the start of Apr.  The MLP index lost a fraction to the 395s & the REIT index rose a fraction to the 271s, a new yearly high (barely).  Junk bond funds were mixed to lower & Treasuries advanced for the first time in 4 days on Federal Reserve wagers.  Oil fell for the first time in 3 days after US payrolls increased less than expected in Aug.  Gold continued rising, betting on negative results after more stimulus.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month	0.101%
U.S. 2-year	0.246%
U.S. 10-year	1.601%

CLV12.NYM

...Crude Oil Oct 12

...94.98

..... 0.55

(0.6%)

GCU12.CMX

...Gold Sep 12

.....1,730.10

... 27.50

(1.6%)

Get the latest daily market update below:

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Photo:   Yahoo

US employers added just 96K jobs last month, a very weak figure.  The unemployment rate fell to 8.1% from 8.3% in Jul because more people gave up looking for jobs.  People who are out of work are counted as unemployed only if they're looking for a job.  The gov also said that 41K fewer jobs were created in Jul & Jun than first estimated.  The economy has added just 139K jobs a month since the start of the year, below 2011's average of 153K.  Cash-short govs were a key reason the job market was weaker in Jun & Jul than first estimated.  Federal, state & local govs cut 39K jobs in those months, above the earlier estimate of 18K.  In previous recoveries, govs have typically added jobs, not shed them.  This report was discouraging throughout.  Hourly pay fell, manufacturers cut the most jobs in 2 years & the number in the work force dropped to its lowest level in 31 years. 

Payrolls in U.S. Increased Less Than Forecast in August

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Photo:   Yahoo

Intel, a Dow stock, cut its Q3 revenue estimate & withdrew its full-year forecast, saying demand for its chips declined as customers reduced inventory & businesses bought fewer personal computers.  Chip makers in the PC industry have been hit by a shaky global economy & consumers shifting toward tablets & smartphones.  INTC lowered its full-year revenue forecast in Jul, saying consumer spending in Europe & the US had been weaker than what the company had previously expected.  The company said on today it expects Q3 revenue of $13.2B, plus or minus $0.3B, down from its previous forecast of $13.8-$14.8B.  Full-year capital spending is expected to be below the low-end of its previous forecast of $12.1-$12.9B.  The company withdrew all other quarterly & full-year expectations.  INTC expects gross margin of 62% for Q3, plus or minus one percentage point, down from its previous expectation of 63%, plus or minus a couple of percentage points.  The stock fell 75¢.

Intel Cuts Third-Quarter Sales Outlook on Weaker-Than-Estimated PC Demand

Intel (INTC)

Photo:   Bloomberg

Italian Prime Minister Monti said the ECB's bond-buying plan reduced the stigma of asking for aid, as he followed Spanish counterpart Mariano Rajoy in resisting tapping the bailout program.  “The drama in the word ‘help’ has been reduced,” Monti said.  “Now, there are ways in the European Union, which must be used under careful conditionality and in the interest of all, to confront” unreasonable increases in borrowing costs, he added.  Monti said he was trying to avoid seeking aid, & echoed Rajoy in saying it was premature to comment on the details of the plan.  Rajoy said in Madrid he needed time to study the proposal, resisting pressure to say whether he would seek a rescue more than a month after saying he may consider it.  ECB President Draghi handed the initiative back to govs as he said the central bank would only buy debt from nations that seek aid tied to strict conditions from Europe's gov-led rescue facilities.  Rajoy, who faces a regional election next month amid a slide in popular support, may be playing for time as he tries to soften the austerity demands tied to such support.  Spanish bonds rose today, pushing the benchmark 10-year yield below 6% for the first time since May 25.  The yield on Italian debt of a similar maturity fell as low as 5.03%.

Monti Says ECB Bond-Purchase Plan Reduces Stigma as Rajoy Stalls on Aid


Markets aren't sure what to do.  They want to go higher but in the face of a weak jobs reports & a negative outlook from INTC, buyers don't want to commit.  Wait & see will probably be the main theme today.  Next week brings the FOMC meeting & everybody is waiting for what comes out of that.  But bulls are happy that Dow remains above 13K, near its highs for the year.

Dow Jones Industrials

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Markets soar on a better than expected jobs number

Dow surged 204 going over 13K, advancers over decliners 7-1 & NAZ rose 57. The Financial Index was up almost 5 to the 199s, its best level in 3 months. The MLP index added 2 to the 391s & the REIT index shot up almost 3 to the 269s (nearly matching its yearly highs).  Junk bond funds gained & Treasuries pulled back as stocks rallied.  Oil rallied, trying to get back over 90 while gold edged higher.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month	0.076%
U.S. 2-year	0.232%
U.S. 10-year	1.551%

CLU12.NYM

....Crude Oil Sep 12

...89.79

... 2.66

(3.1%)

GCQ12.CMX

...Gold Aug 12

......1,594.20

.... 6.80

(0.4%)

Get the latest daily market update below:

• 

Photo:   Yahoo

Employers added 163K jobs in Jul, a hopeful sign after 3 months of sluggish hiring.  But the Labor Department said that the unemployment rate rose to 8.3% from 8.2% in Jun.  Jul hiring was the best since Feb.  Still, the economy has added an average of 151K jobs a month this year, enough to keep up with population growth but not enough to drive down the unemployment rate.  A better outlook on hiring could make the Federal Reserve (FED) reluctant to take more action to spur growth.  The FED, which ended a policy meeting yesterday, signaled in a statement a growing inclination to take further steps if hiring doesn't pick up.

U.S. Payrolls Rise More Than Forecast; Unemployment 8.3%

Photo:   Bloomberg

Procter & Gamble, a Dow stock & Dividend Aristocrat, posted a higher-than-expected quarterly profit despite a drop in sales, just weeks after it took the blame for its disappointing performance & said it was focusing on ways to improve.  The forecast for the current qtr (fiscal Q1) is below the estimate by analysts, suggesting it could take several more months before the bulk of the company's restructuring efforts pay off.  PG also said it would repurchase $4B worth of its shares this fiscal year.  In Jun it said it did not expect to do so because it wanted to preserve its credit rating.  CFO Moeller said PG had changed its mind because it had growing confidence in its turnaround plan & more cash on hand than it had anticipated in Jun, while interest rates continued to fall.  EPS for fiscal Q4 was $1.24, up from 84¢, a year earlier.  Excluding some items, EPS was 82¢ versus an estimate of 77¢.  The stock rose 1.78. 

Procter & Gamble Profit Tops Estimates Amid Price Increases

Procter & Gamble (PG)

Photo:   Bloomberg

After more than 2 years of incremental crisis management & false starts, a bargain is beginning to emerge between Europe's politicians & central bankers over how to calm bond markets & end the debt tumult that threatens the survival of the €.  The ECB sketched out its side of the deal yesterday, offering to buy Italian & Spanish bonds on the market as long as the bailout fund makes purchases directly from the 2 countries’ treasuries & ties them to tough conditions.  Mario Draghi offered only a glimpse of the new strategy, with the actual interventions weeks or months away & a host of obstacles standing in the way before Europe can claim to be on a path out of the crisis that emerged in Greecce in late 2009.  Investors looking for a quicker fix sold the € & stocks of at-risk countries.  The € jumped over $1.24 on the initial ECB announcement, falling back as Draghi’s caution that “it was not a decision, it was guidance” sank in.  Then the currency slipped a penny.  The yield difference between 10-year Italian bonds & similar-maturity German bunds narrowed 7 basis points to 502 basis points, after jumping 54 basis points.  Spain’s yield difference compared to bunds rose 7 basis points to 600 basis points.  Skeptics recalled the failure of European authorities to deliver on prior crisis-fighting pledges, whether by restricting the use of the original €440B ($535B) rescue fund or forcing through a restructuring of Greece’s debt after promising not to.  No quick fix here.

ECB-Politicians’ Anti-Crisis Bargain Starts to Emerge


This is a day for the bulls.  Markets loved the jobs data & buyers are in a very good mood.  However fundamental problems remain.  The euro debt mess dribbles on, the US economic recovery is not getting a passing grade & the status of the Chinese economy is unclear.  But bulls are happy to see the Dow back over 13K.  Of course, it has not strayed far from that level for months, so maybe it's not all that important of a signal.

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Markets tumble on weak jobs report

Dow dropped 155, decliners over advancers 3-1 & NAZ fell 42 (Apple (AAPL) was no help today).  The Financial Index was off 1½ to the 194s.  The MLP index slipped 1 to 382 & the REIT index was off a fraction in the 264s.  Junk bond funds were mixed & Treasuries rose.  Oil fell a 2nd day in after the US added fewer jobs than forecast last month.  Gold is back below $1600.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month	0.071%
U.S. 2-year	0.274%
U.S. 10-year	1.544%

CLQ12.NYM

...Crude Oil Aug 12

...84.68

..... 2.54

(2.9%)

GCN12.CMX

...Gold Jul 12

.......1,593.80

... 15.10

(0.9%)

Get the latest daily market update below:

Photo:   Bloomberg

Employers hired fewer workers than forecast in Jun as payrolls rose only 80K after a 77K increase in May, according to the Labor Dept.  The forecast was for a 100K gain.  The unemployment rate held at 8.2%, matching the forecast.  Private employment, which excludes gov agencies, increased 84K, the weakest in 10 months.  The so-called underemployment rate, which includes part- time workers who’d prefer a full-time position & people who want work but have given up looking, increased to 14.9% from 14.8%.  This is grim data.

Payrolls in U.S. Rose 80,000 in June; Jobless Rate 8.2%

Photo:   Bloomberg

The IMF will reduce its estimate for global growth this year on weakness in investment, jobs & manufacturing in Europe, the US, Brazil, India & China, Managing Director Christine Lagarde said.  "The global growth outlook will be somewhat less than we anticipated just three months ago," Lagarde said.  "And even that lower projection will depend on the right policy actions being taken."  The new outlook will be announced in 10 days, after an Apr estimate of 3.5%.  Interest-rate cuts in China & Europe yesterday & the Bank of England's boost to an asset-purchase program underscored the fragility of the global recovery as austerity measures & debt burdens weigh on advanced nations.  Lagarde is pressing for fiscal union in Europe to aid growth & financial stability as nations such as Greece wrestle with balancing their books.  The "key emerging markets" of Brazil, China & India are showing signs of slowdown, Lagarde said.  Those 3 countries along with Russia will comprise more than 20% of the world economy this year, according to IMF data.  "Over the past few months, the outlook has regrettably become more worrisome," Lagarde said. "Many indicators of economic activity -- investment, employment, manufacturing -- have deteriorated. And not just in Europe or the United States."  The IMF has already lowered its US growth estimate to 2% from 2.1% in Apr.  EU leaders agreed last week to loosen bailout rules, lay the foundations for a banking union & break the link between sovereign & banking debt thru the direct recapitalization of lenders.  More uncertainty about where the global economy is headed.

Lagarde Says IMF to Cut Growth Outlook as Global Economy Weakens


The new Greek Prime Minister Samaras will outline shortly how his coalition gov intends to deal with the country's massive financial crisis, as an inspection of Greece's public finances continues.  He will address parliament at the start of a 3-day debate that will end in a vote of confidence in his 3-party coalition, that has 179 seats in the 300-member assembly.  The gov admitted yesterday that key elements of its painful economic adjustment program are off track, as meetings continue with inspectors from the EU, ECB & IMF.  Greece is suffering thru a 5th year of recession, with unemployment topping 22% (roughly double the eurozone average).  Senior ECB & IMF officials this week urged the new gov to make up for delays in structural reforms & appeared unwilling to discuss a potential renegotiation of bailout terms, a central pledge of the gov.  The left-wing main opposition Syriza party said it would press the gov on whether it had abandoned its election campaign pledge during the confidence debate in parliament.  Greece continues to be an unsettled mess.

New Greek PM to Outline Crisis Policy


Hardly anything went right today in the markets.  The jobs report was dismal, leaving little hope even for the optimists.  The global economy is not sending favorable signals. Greece hasn't gone away, it's just muddling along tryhing to manage an impossible situation.  The reduction in growth outlook for the US by the IMF is troubling.  There is a growing worry that behind those bank rate cuts (which sound good) are fears that the global economy situation is worse then is commonly assumed.  But with all these problems, Dow still has had a nice recovery from its lows a month ago.

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