By Carlos Guillen
Equity markets are making a nice move to the upside, after two days of declines, and the Dow Jones Industrial Average is once again attempting to surpass the infamous 16,000 mark. Apparently still weak economic data points are pushing stocks higher as the belief of no tapering any time soon is making the rounds again.
While very encouraging on the surface today, the down trend in the number of people filing for unemployment benefits continued, but last week's holiday added some uncertainty to the data. According to the Department of Labor, initial claims during the week ended November 16 totaled 323,000, decreasing from the 344,000 revised figure reported for the prior week and landing below the Street's estimate of 333,000, representing the fourth week below the 350,000 level that economists say is consistent with moderate labor market growth of about 150,000 net new jobs a month. Moreover, the initial claims' four-week moving average was 338,500, decreasing from the prior week's average of 345,250, representing the third week of declines. According to the Labor Department, last week included the Veterans' Day holiday, which made adjusting the data for seasonal swings more difficult.
Perhaps a bit encouraging was that prices paid by producers declined slightly for a second month. According to the Department of Labor, the Producers Price Index (PPI) in October decreased month-over-month by 0.2 percent, in line with the Street's consensus estimate. On the other hand, excluding food and energy contributions to the price index, core PPI increased month-over-month by 0.2 percent, while economists' average forecast called for a 0.1 percent rise as the cost of cars jumped by the most in four years. While the overall drop in prices is somewhat indicative of sluggish end demand, the good news is that it certainly should provide more impetus for the Fed to continue its "accommodative" stance when they meet in January 28-29 of next year.
Clearly very discouraging, but certainly not enough to prevent stocks from rising today, was that manufacturing in the Philadelphia region expanded at a slower than expected pace this month. According to the Federal Reserve Bank of Philadelphia, its diffusion index of current activity November result landed at 6.5, lower than the Street's consensus estimate of 11.9, decreasing from the 19.8 reached in October. Given that a level above zero indicates an economic expansion, this represents the worst level since May 2013 in the region covering eastern Pennsylvania, southern New Jersey, and Delaware; however, the result still showed expansion. Last Friday, manufacturing data from the New York region showed contraction as the general business conditions index for this month landed at -2.2; the result was lower than the Street's consensus estimate of 4.3, decreasing from the 1.5 reached in October. While one region still showed expansion and the other showed contraction, both indexes headed in an unfavorable direction.
In all, stocks continue to hold on to earlier gains, leaving the Dow up over 90 points and on track to close above 16,000. However; as we have seen time and time again, the Dow has failed to hold above 16,000, indicating great hesitation to move higher in the short term.
Oil Spurting, Gold Bricking
By David Urani
Oil prices are making their biggest gain today since September, up more than $2 to $95.43. That's an interesting move considering the mild Chinese manufacturing index from HSBC showing a decline from 50.9 to 50.4, indicating that industrial activity in that country is barely moving forward (a reading of 50 means no change). That said, the data out of the US is good today with jobless claims falling more than expected and our own manufacturing index from Markit rising from 51.1 to 54.3. One other factor possibly lifting oil prices is talks between world powers and Iran hitting a snag about the wind down of their nuclear program.
Nevertheless, the trend in oil prices has been great over the past couple of months and today's move is modest consolation after its plunge from more than $110 in early September.
Gold on the other hand has seen a relatively sharp decline in the past couple of days, down more than 2%. It was sparked lower by the seemingly more hawkish Fed statements yesterday. That puts gold on course to possibly retest the July lows at just below $1,220 (at $1,244 now), which in turn was the lowest point since 2010.