|Dow||+267.05 to 18,191.11|
|S&P 500||+28.09 to 2,116.09|
|Nasdaq||+58.01 to 5,003.55|
|10-YR Yield||-.034 to 2.15%|
|Gold||+$5.20 to $1,187.40|
|Crude Oil||+$0.44 to $59.38|
My daughters weren’t really into the Goldilocks story as young kids. That’s because they’re much more a part of the Disney princess/Nickelodeon generation.
But boy, does Wall Street love the tale! Investors go nuts when they get economic data that’s not too hot and not too cold — but rather just right. And that’s the kind of porridge the Labor Department just served up this morning! Specifically, it said …
==> The U.S. economy created 223,000 jobs in April, up from a downwardly revised 85,000 in March. The March reading was the weakest since the summer of 2012, while the April number was essentially spot on with economist forecasts.
|Investors love the kind of porridge the Labor Department just served up this morning!|
==> Unemployment fell to 5.4 percent from 5.5 percent in March. That put it at the lowest level since May 2008, and within spitting distance of the Federal Reserve’s unofficial target of around 5 percent.
==> Strong growth in industries like health care (+55,600) and construction (+45,000) helped offset losses in mining and energy (-15,000, the worst in six years) and weakness in manufacturing (+1,000).
==> Unfortunately, the average workweek held at 34.5 hours and wage pressure remained subdued. Average hourly earnings rose a weaker-than-expected 0.1 percent on the month, and only 2.2 percent from a year earlier. This happened despite a slight uptick in the labor force participation rate to 62.8 percent.
It’s no wonder stocks soared on the news, while the yield curve steepened, and the dollar weakened against several currencies (though not the euro). The figures show decent, but not spectacular job growth, with no sign of accelerating wage pressures.
|“More data released in the past few days confirms that overseas growth is improving from deeply depressed levels.”|
That means as much as I believe the Fed SHOULD have raised rates a long time ago to get off this crisis-era zero percent level, it doesn’t have to rapidly accelerate its hiking timetable. This tends to cause longer-term yields to rise faster, or fall more slowly, than short-term yields because it raises longer-term inflation risks.
At the same time, more data released in the past few days confirms that overseas growth is improving from deeply depressed levels. The British election results I talk about a bit further down are also easing some political and economic concerns in Europe.
Throw it all together and you have a rally recipe! Banks in particular should do well if the curve continues to steepen, and indeed, the KBW Bank Index (^BKX) is very close to breaking out to a fresh multi-year high.
Energy also still looks very promising. Heck, even as oil prices have taken a breather, natural gas prices are catching fire amid signs that inventories are topping out there. Gas futures soared more than 5 percent today alone!
So all of the investment ideas and theses I’ve been sharing here remain intact. And as I said yesterday, you can’t be too afraid of a $2 trillion sell off — unless it’s not a deflationary, depressionary one!
But that’s enough from me. Now it’s your turn to sound off! What do you think about the U.S. job market? Is it still relatively healthy in your backyard, or does it look to be weakening again?
Are you seeing anemic wage growth at your workplace too … or are raises and pay hikes becoming more common? What are the implications for your investing strategy? Let me know when you have a chance here.
|Our Readers Speak|
From interest rates to jobs to Tom Brady, the discussions over at the website are getting intense — so I hope you’re making your voice heard too!
Reader A.F. said that NAFTA shouldn’t be blamed for siphoning off American jobs. For the reasons why, he said: “NAFTA has nothing to do with lost jobs. Look at you. You most likely drive a Japanese or Korean vehicle, wear a t-shirt, shorts, sneakers, coat, etc. made in China because they are cheap.
“You most likely own an Apple computer, an Apple iPad and an Apple iPhone. Soon you will be rushing to buy an Apple Watch, of course being so cheap you have to buy more of them every two or three months because they are cheap and wear faster and who cares? They are cheap. That is where the jobs are going, not to Canada.”
Reader Phil largely agreed, offering the following anecdote: “To put this further into perspective, when my son got married, he wanted to buy a suit made in the U.S. We found a nice one, but by no means the most expensive, non-designer one for $2,500.
“Upon realizing he couldn’t afford that, he bought an Asian made suit that was equally nice for $300. And that’s why jobs are overseas.”
With regards to the recent rise in rates, Reader Chuck B. said: “If interest rates rise, bonds lose value if they need to be sold before they mature. If inflation increases, they lose value, period. Definitely a sucker bet.”
Finally, on the issue of Brady and the NFL, Reader Holygeezer said: “Cheating is cheating. What is the point of having rules if one can simply break them, knowing the worst that can happen is a slap on the wrist? The point is that some folks play by the rules and get screwed by those who don’t.
“The Patriots should have been disqualified from playing in the Super Bowl plain and simple. Just like Lance Armstrong had his Tour de France titles stripped. If you cheat, you pay consequences that actually mean something.”
Thanks for chiming in. I think it’s absolutely true that many more consumer goods on store shelves here come from Asia, rather than our geographic neighbors. Tough to say what will change that to the benefit of domestic workers, as it’s a trend that has been years in the making.
On rates, I agree with Chuck. Long-term bonds are NOT the kind of investment I want anything to do with here. And on Brady, I think some kind of punishment is required, but it has to fit the “crime.” On the relative scale, what Brady is alleged to have done is a lot less severe than all kinds of other garbage that goes on in sports. So that’s why I believe reasonable fines and a possible one or two game suspension is probably appropriate.
Then again, healthy debate is what makes a market — whether you’re talking about stocks or sports! So feel free to agree or disagree with me on this issue, or any other, over at the Money and Markets website.
|Other Developments of the Day|
The Conservatives won the U.K. elections, and by a wider margin than expected. That means Prime Minister David Cameron will be able to avoid forging a coalition government, and ensuring that a referendum will be held on whether the U.K. should stay in the European Union. The British pound rallied strongly on the news.
Concerns continue to grow about potential ISIS members or sympathizers here in the U.S. launching more attacks in the wake of the recent Texas shooting. Meanwhile, a 21-year-old Ohio man previously cited for threatening the U.S. Capitol just had his charges upgraded. The government is now alleging that Christopher Lee Cornell wanted to “provide material support and resources” to ISIS.
You can add the fertilizer industry to the list of those swept up in merger mania. Agriculture seed and herbicide producer Monsanto (MON, Weiss Ratings: B) reportedly offered $45 billion to buy Swiss competitor Syngenta (SYT, Weiss Ratings: B-).
Syngenta is rejecting the bid for now, saying it undervalues the company. The Swiss company also said Monsanto is underestimating the amount of regulatory scrutiny antitrust officials would focus on the combined entity.
Have you been following the U.K. elections, or our presidential election cycle? Are you worried about homegrown terrorists? And what thoughts do you have on the current wave of merger mania? Let me know over at the website — or feel free to comment on any other news stories I didn’t recap here.
Until next time,