Markets slide lower on jobs data

Dow was off 12, decliners over advancers 3-1 & NAZ fell a fractioin.  The MLP index sank another 6 to 450 & the REIT index was off 3+ to the 277s.  Junk bond funds were weak & Treasuries had a modest rise.  Oil went over 100 & gold is back in the black from its depressed levels.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month	0.04%
U.S. 2-year	0.34%
U.S. 10-year	2.46%

CLQ13.NYM

.......Crude Oil Aug 13

...101.46

.....1.86   (1.9%)

GCN13.CMX    ...Gold Jul 13    .....1,250.00      ...6.40  (0.5%)   

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Fewer Americans filed claims for unemployment benefits last week, as employers are holding off on layoffs.  Jobless claims decreased 5K to 343K from a revised 348K in the prior period that was higher than initially reported, according to the Labor Dept.  The forecast called for 345K claims.  Muted staff reductions are a sign that companies are keeping headcount steady even as economic growth struggles to gain strength.  The 4 week moving average decreased slightly to 345K.  The number continuing to receive jobless benefits fell to 2.93M from 2.99M in the prior period.  The number who have exhausted traditional benefits & are relying on emergency & federal extended aid dropped by about 39K to 1.67M.  The unemployment rate among people eligible for benefits held at 2.3 percent in the week ended June 22, today’s report showed.

Jobless Claims in U.S. Fall by 5,000 in Week to June 29




Photo:   Bloomberg

The US trade deficit jumped in May as imports climbed to the 2nd-highest level on record, pointing to an economy that is overcoming higher taxes & gov cutbacks.  The gap widened 12.1% to $45B, the biggest since Nov, from $40B in Apr, according to the Commerce Dept.  The forecast called for a $40B deficit.  The value of imports at $232B was 2nd only to a record $234B in Mar 2012.  Purchases of cellular phones, automobiles & fuel produced overseas add to signs demand from American consumers & businesses is picking up heading into H2.  The report also showed exports stagnated, reflecting slack global growth as markets from China to Europe struggle to gain momentum.  Imports climbed 1.9% from $228B in Apr.  Purchases of mobile phones and other household goods surged by $1.89B, demand for automobiles & parts reached a record while purchases of crude oil & petroleum products also rose.

Trade Deficit in U.S. Jumped in May as Imports Near Record


Markets are sliding in a holiday shortened day.   MLPs are taking it on the chin as Linn Energy (LINE) is under investigation for accounting practices by the SEC.  There should be minimal price movements today & on Fri, with many traders away on holiday.

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Markets fall on turmoil in Egypt

Dow lost 42, decliners over advancers 3-2 & NAZ was slid 1.  The MLP index sank 6 to the 456s but the REIT index rose 4 to 281.  Junk bond  funds were 1-2% lower (big in this world) & Treasuries saw a little buying.  Oil neared $100 as trading reached the highest level in months on growing Mideast tensions.  Gold declined for the first time in 3 sessions as improving US economic data strengthened the case for the Federal Reserve to slow the pace of stimulus & as a rising dollar cut the appeal of alternative investments.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

U.S. 3-month	0.01%
U.S. 2-year	0.34%
U.S. 10-year	2.47%

CLQ13.NYM

...Crude Oil Aug 13

...99.50

...1.51

(1.5%)

Photo:   Bloomberg

Federal Reserve Bank (FED)  of New York President William C. Dudley said economic growth will probably quicken in 2014, possibly warranting a reduction in the central bank’s bond purchase program.  “A strong case can be made that the pace of growth will pick up notably in 2014,” Dudley said.  “The private sector of the economy should continue to heal, while the amount of fiscal drag will begin to subside,” Dudley said in prepared remarks.  Policy makers are debating when to dial back accommodation following comments by Big Ben on Jun 19 that the FED may cut buying bonds this year & halt purchases around mid-2014.  Monthly buying has pushed up FED assets to a record $3.5T.  Dudley said in reply to an audience question that he “wouldn’t want to rule out” asset purchases exceeding the current monthly level of $85B if the central bank were to be “surprised on the downside” by weaker economic data.  “Inflation expectations are still pretty firmly anchored consistent with our 2 percent inflation objective and it’s really important that we keep it that way,” Dudley said. “Our policy is basically designed to prevent, to reduce to the absolute minimum amount possible, any risk of a Japanese-style outcome here in the United States.”

Fed’s Dudley Sees Faster Growth in 2014 as Fiscal Drag Wanes


General Motors said US sales rose 6% in Jun on continuing strong demand for large pickups.  Sales of the Chevrolet Silverado & GMC Sierra increased 29% & 33%, respectively, over last Jun.  The newly updated pickup trucks began arriving at dealerships last month & are selling quickly, averaging just 10 days on dealers' lots.  Cadillac sales gained 15% thanks to the new ATS & XTS sedans, while Chevrolet sales were up 7%.  Sales of the Chevrolet Cruze small car jumped 73%, while the Volt electric car rose 53%.  GMC sales rose 4.5%.  But Buick brand sales dropped 4% as weak sales of sedans offset double-digit sales increases for the Verano small car & Enclave SUV.  The stock was up pennies.

GM's US sales up 6 pct. in June Associated Press

General Motors (GM)

Photo:   Bloomberg

Junk-rated companies agreed to boost interest rates on more US loans than any time since at least 2011, as lenders extracted more compensation with prices of the floating-rate debt tumbling from a 6-year high.  Companies that sweetened terms on $17.7B of loans in Jun, accounting for 43% of total deals, according to Standard & Poor’s Capital IQ Leveraged Commentary & Data.  That’s 10 times greater than in May & the highest in data going back to Jan 2011.  Twenty issuers failed to get loan financing, versus 22 for the first 5 months of the year, as the average price of the senior-ranking debt fell by the most since May 2012.  Investors are demanding more in interest to fund the $550B market for leveraged loans.  Funds are flowing out of junk bond funds.  For the week ended Jun 26, investors pulled $3.1B from US junk-bond funds, putting the month on track to set a new record of about $16B of outflows, according to a Jun 27 report from Bank of America.  Junk bonds are stocks with high yield.

Junk-Loan Rates Soar on Record 43% on Debt as Buyers Balk


Political unrest in Egypt caused selling in the PM.  Dow fell more than 100 after going over 15K.  Those tensions brought out oil buyers which took oil to prices not seen since Sep.  Selling in junk bonds is worrisome.  What can be viewed as the riskiest stocks have lost favor.  Less risky stocks, the ones we all watch, may be next to lose investor favor.  Q2 earnings season begins next Mon evening.

Dow Jones Industrials

Today's Video Market Update

Markets rise on strong factory orders

Dow went up 71, advancers ahead of decliners 2-1 & NAZ rose 15.  The MLP index slipped 2+ to 260, but the REIT index was up 3+ to 280.  Junk bond funds were higher & Treasuries did little.  Oil continued climbing but gold sold off again.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month	0.02%
U.S. 2-year	0.34%
U.S. 10-year	2.47%

Photo:  Bloomberg

Orders placed with US factories rose in May, reflecting broad-based gains that signal manufacturing is stabilizing.  The 2.1% gain in bookings followed a revised 1.3% advance the prior month, according to the Commerce Dept.  The forecast called for a 2% increase.  Demand for capital equipment increased more than estimated last week.  Sales of motor vehicles, gains in residential construction, & a boom in domestic energy production are helping make up for weakness in the export markets.  A pickup in business investment in new equipment & improving consumer demand would help bolster manufacturing & the expansion in H2.  Factory orders excluding the volatile transportation component climbed 0.6% after a 0.2% increase in the prior month.  Bookings for commercial aircraft jumped 51% after climbing 18% in Apr.  Bookings for durable goods, which make up more than half of total factory demand, rose 3.7%.

Orders to U.S. Factories Rise on Demand for Machinery, Computers




Photo:   Bloomberg

Chinese landlords are forgoing rent & paying to outfit stores for mass-market fashion brand to blunt the impact of a boom in shopping-mall construction that threatens to push up vacancies.  Preferential leasing terms were reserved until recently for luxury brands, which are coveted because they bring shoppers into malls.  Now moderately priced labels are being enticed with offers as landlords work harder to fill shops.  Consumer demand is cooling as China's economy slows & President Xi Jinping reins in lavish spending by officials.  Big mall operators can withstand the slowdown at the expense of smaller ones.  Landlords focused on lower-tier markets will be under more pressure as smaller cities add retail space at a faster rate than larger ones.  Chinese developers built more malls & expanded into smaller cities as consumer spending & incomes grew, elevating China's economy to the 2nd largest in the world.  Half of the 32M square meters (344M square feet) of shopping centers under construction around the world are in China.  The Chinese economy has big problems & that impacts the global economy.

Chinese Malls Waive Rents as Vacancies Loom: Real Estate




Photo:   Yahoo

Home prices had their biggest annual gain in more than 7 years in May, with more increases expected through the summer months as the sector continues to mend, data analysis firm CoreLogic said.  Prices rose 2.6% from April & were up 12.2% compared to May last year, the biggest year-over-year increase since Feb 2006.  Excluding distressed sales, prices were up 11.6% on a yearly basis.  Distressed sales include properties that have been seized by lenders & short sales, where the struggling homeowner is allowed to sell the property for less than the outstanding mortgage.  The recovery in the housing sector has gained momentum this year, with tight inventory pushing prices higher.  Still, prices nationally remain cheap compared to during the housing boom, which has spurred demand from investors and homeowners.  The acceleration in prices compared to a year ago was in line with the closely watched S&P-Case/Shiller report which showed prices rose more than 12% on an annual basis in Apr

Home Prices Rise by Most in Seven Years in May: CoreLogic


Stocks are having another good day.  Economic data is coming in OK & auto sales seem to have done well in Jun.  Traders are awaiting comments from Federal Reserve officials which will probably keep their intentions muddy but good enough to keep traders happy.

Dow Jones Industrials