|Dow||-86.22 to 17,841.98|
|S&P 500||-9.31 to 2,080.15|
|Nasdaq||-19.69 to 4,919.64|
|10-YR Yield||+.064 to 2.24%|
|Gold||-$1.90 to $1,191.30|
|Crude Oil||+$0.23 to $60.63|
The Great American Jobs Machine is running out of steam!
That’s the conclusion from the payroll processing company ADP, which always releases the results of its jobs research two days before the Labor Department. According to the firm …
The U.S. economy created only 169,000 jobs in April. That was far below the average estimate of 205,000 from economists.
Not only that, but March’s reading was revised down by 14,000 to 175,000.
The manufacturing industry actually lost 10,000 jobs, even as the services sector added 170,000. Large companies (those with at least 500 employees) added just 5,000 jobs, much weaker than the 94,000 gain seen among smaller firms.
|The U.S. economy created only 169,000 jobs in April, far below the average estimate of 205,000 from economists.|
What’s the message here? What do these numbers tell us? That big multinationals, manufacturers and energy companies got killed by the rally in the dollar that started last June.
It crushed U.S. competitiveness on the global market by making our exports more expensive. It also helped drive energy prices sharply lower, kneecapping a domestic oil and gas industry that was helping create lots of high-paying jobs in several states.
The good news? It’s over! All those peripheral currencies I started highlighting for rallying against the buck a few months ago are continuing to do so. On top of that, the euro jumped by more than a cent and a half earlier today to a fresh 10-week high, while the Australian and Canadian dollars surged as well.
I believe that’s because investors are coming around to the view I espoused at the beginning of the year: Washington won’t put up with a stronger currency anymore, and will aggressively push back! That’s helping foreign stocks and ETFs that you buy here outperform domestically focused investments.
Meanwhile, we’re seeing the short end of the yield curve rise at a slower rate than the long end. That’s helping the banks that rely on a steeper yield curve to hold up better than the broader market.
We’re also seeing oil continue to hold its recent gains. Prices jumped above $62.50 at one point, before pulling back from their highs, after the Energy Information Administration (EIA) reported that crude inventories plunged 3.9 million barrels in the most recent week. Analysts were expecting supply to rise by around 1 million barrels. That provides more confirmation to me that the late, great inventory build — which hammered oil lower — is kaput!
Will the gubmint’s jobs numbers on Friday tell the same tale as ADP did today? You never know. But it definitely looks like the U.S. economy has lost momentum, in part because of the dollar, while foreign economies continue to show signs of relative improvement. That means all the trading ideas I’ve been espousing for the last few months remain intact!
How about you? Do you think foreign stocks, banks, and energy will continue to outperform, while bonds will stink up the joint? What about the latest jobs figures? Do they suggest the U.S. economy is sliding toward recession again? Or can Washington get things back on track by pledging to no longer be the global currency war’s whipping boy? I really want to hear from you over at the website, so hit it up when you can!
|Our Readers Speak|
After the breaching of another significant level in the oil market yesterday, it’s no surprise that energy remains front and center at the website.
Reader Paul F. said he thinks energy conservation here at home will help to suppress gasoline demand, and therefore prices. His take:
“Twenty years ago, I was driving a car that got 15 mpg driving in town. Now, I get 28 mpg in town. That is a huge difference. I know that China is now selling more cars per year than America, but I would guess they are not Hummers. People are becoming more conscious of what they drive.
“So I think that oil could stay fairly inexpensive for a number of years. With new technology to recover oil, it only points again to a more inexpensive price of oil going forward, maybe between $60-$80 in the next four or five years.”
Reader Pete H. added this perspective, based on his experience in the energy business: “I grew up in oil field. Production from new wells generally falls a few months after drilling, and plateaus for several years — can’t say if that is the issue, or if production is being curtailed.
“Current drilling is to complete pre-signed contracts, or companies with cash reserves to ride the low market are drilling and not completing wells to take advantage of lower rates on rigs. When the oil price rises above break even, drilling activity will resume at a rate that keeps price above break even.”
As for what to do about it, Reader Fuad weighed in with an investment idea to help Reader Robert out: “I would buy a diversified fund first, and then buy individual stocks. The iShares Global Energy ETF (IXC) is one example.
“IXC has more oil services and equipment companies, and therefore provides for more diversification. IXC has a higher concentration of U.S. companies, which bodes well because in addition to being the largest consumer of energy, the U.S. is also poised to emerge as the world’s leading energy producer.”
Thanks for all those comments on energy, and please do keep them coming. I’m always re-checking and re-analyzing my views on market segments like energy, so your perspectives are welcome. My general view, though, remains as it’s been for a few months: Rally on!
Finally, Reader Holygeezer asked about my Bloody Wednesday predictions, and whether they were off the mark. My response would be that each and every “Bloody Wednesday” policy meeting from here on out is fraught with danger, and opportunity. The Federal Reserve wants to get policy rates off of zero, and has made clear that moves now will depend on the data — NOT be on a pre-set course.
That means investors are going to react more and more violently to every data release — leading to much more volatility. But you can’t forget a key point I’ve made here and in Safe Money Report several times: The “bloodiness” will impact different markets at different times in different ways.
Case in point: April 29 was in fact an ugly day for bonds. Not only that, but interest rates have gone up virtually every single day since then. As a matter of fact, Bloomberg estimates that investors in bonds have lost a stunning $430 billion in just a week and a half! If that’s not bloody enough for you, I don’t know what would be.
Hope that clears things up. And please do keep the comments coming over at the website.
|Other Developments of the Day|
Impulsive mass murder is bad enough. But now it looks like German co-pilot Andreas Lubitz may have practiced his murder-suicide tactics on an earlier flight.
Specifically, the New York Times reported that Lubitz rehearsed setting the airplane’s altitude to only 100 feet on an earlier flight. Unfortunately, those maneuvers went unnoticed — resulting in the deaths of all those aboard Germanwings Flight 9525.
Remember that Maersk Tigris cargo ship that Iran surrounded and forced toward land several days ago? Iran said it would release the ship in a couple days because its operator agreed to pay a fine. The incident shows how high tensions remain in the Middle East, one of many factors contributing to rising oil prices.
Here’s a surprise: Greece and its European creditors are arguing about bailout money … again! The issues? Same as always: Greece doesn’t want to agree to enough governmental and economic reforms, and Europe doesn’t want to accept widespread losses on Greek debt. It doesn’t help that the International Monetary Fund (IMF) is now arguing with the European Commission over debt write-downs, too!
Talk about a biotech payday! Alexion Pharmaceuticals (ALXN, Weiss Ratings: B-) agreed to buy Synageva BioPharma (GEVA, Weiss Ratings: D+) for $8.4 billion. The combined cash and stock offer comes to around $226 per share — a whopping 136 percent premium to where GEVA closed yesterday. Guess a few bottles of champagne will be uncorked at headquarters.
So what do you think about what’s going on in Europe? Is Iran finally backing down here? Were you lucky enough to own a few GEVA shares? Hit up the website and let me know!
Until next time,