Dear PGM Capital Blog readers,
In this weekend’s blog edition we want to discuss some of the most important events that happened in the global capital markets, the world economy and the world of money in the week of March 2, 2015:
- Apple to join the DOW Jones Industrial on March 18, 2015.
- US Jobs report of March 6, 2015
- US-Dollar Index at 11.5-year high
APPLE TO JOIN THE DOW-30:
On Friday, March 6, the news hit the wire that, tech giant Apple (NASDAQ: AAPL) is joining the Dow Jones Industrial Average, after the market close on March 18.
The change will be effective with the opening of trading on Thursday, March 19.
Apple will replace telecommunication giant AT&T Inc. (NYSE: T), according to S&P Dow Jones Indices, the unit of McGraw Hill Financial Inc. that owns the Dow.
Apple has a market capitalization of about US$736 billion, making it the largest publicly traded company in the world. AT&T has a market value of nearly US$175 billion.
THE USA JOB REPORT OF MARCH 6, 2015:
The US Labor Department reported on Friday, March 6th, that employers added 295,000 workers in February.
The unemployment rate fell to 5.5 percent, its lowest since mid-2008, down from 5.7 percent in January. Last month, wages rose just 0.1 percent, according to the Labor Department, a disappointment coming off an increase of 0.5 percent in January.
Job growth last month came particularly from the service sector, with leisure and hospitality adding 66,000 jobs, as well as an expansion of 54,000 jobs in education and health. Construction added 29,000 jobs in February, while manufacturing increased by just 8,000.
On the other hand, the labor force participation rate hovered between 62.9 percent and 62.7 percent in the eleven months from April 2014 through February, as can be seen from below chart of the US Bureau of Labor Statistics.
Source: http://data.bls.gov/timeseries/LNS11300000
US-DOLLAR INDEX AT 11-5 YEAR HIGH:
As can be seen from below chart, the US-Dollar jumped on Friday to an 11.5-year high against a basket of currencies as news of robust U.S. employment growth bolstered market sentiment that the Federal Reserve was closer to raising interest rates.
As can be seen from above chart, the dollar index, which values the greenback against six other major currencies, appreciated with US$ 1.38 or about 1.38 percent, to close the week at 97.72, its highest level since September 2003.
The Euro on the other hand fell 1.60 percent on Friday, March 6, to close the week at US$ 1.0843, its lowest value against the US-Dollar in almost 12 years, as can be seen from below chart.
PGM CAPITAL COMMENTS:
APPLE:
Joining the prestigious DOW-30 index, can be seen as the latest milestone for Apple, which has emerged in recent years as the standard-bearer for a resurgent U.S. technology sector.
Based on soaring sales of iPhones, the Cupertino, California, company reported a Q4-2014 net income of US$18 billion, the largest quarterly profit on record.
Apple’s addition caps the ascendancy of tech in the Dow Jones Industrial Index, which started in 1999 when software giant Microsoft Corp. (NASDAQ: MSFT)Corp. and semiconductor maker Intel Corp. (NASDAQ: INTC) joined the world most prestigious stock market index.
THE USA JOB REPORT:
One consistently dark patch in the recovery has been the sluggish growth of wages. Average hourly wages for private-sector workers have been rising slowly, at around 2 percent annually, for the last few years.
Slow wage growth suggests that the economy is still far from returning to its potential and is a big factor behind the feeling of many Americans that the recovery has left them behind.
When we look further under the hood of the employment report, we see that the number of people not in the labor force rose by 354,000 in February, rising to a record 92,898,000 number of Americans not in the labor force.
Without wanting to mingle with internal US politics, it is worth mentioning that in January 2009, when President Obama took office, there were 80,529,000 Americans who were not participating in the office, which means that since then, 12,369,000 Americans have left the workforce.
End result: the labor force participation rate dropped once more, declining to only 62.8%, which as the chart below shows is just off the lowest print recorded since March 1978, as can be seen from below chart.
It is also worth mentioning that Zero Hedge reports that the decline in the oil price has resulted in almost 40,000 laid off workers during January and February, but the payroll jobs report only finds 2,900 lost jobs in oil for the two months.
THE US-DOLLAR INDEX AT 11.5 YEAR HIGH:
The dollar also rose 0.66 percent against the Japanese yen after the jobs data to close the day at 120.83 yen as can be seen from below chart.
The British pound also fell sharply against the dollar on Friday, dropping to a four-week low, and it’s on track for a drop of some 2.3 percent over the week—its biggest weekly loss since late 2011. The Sterling was down about 1 percent at U$1.505 against the greenback.
The stronger dollar also weighed on oil prices on Friday as Brent oil was down about nearly 1 percent at $60.00 a barrel, while U.S. crude fell 2.26 percent to US$ 49.78 a barrel.
Gold and Silver prices suffered also on Friday, for which the Gold price declined with 2.45 percent to close the week at US$ 1,168.70 an ounce.
As can be seen from below chart, based on rate hike fears, investors dumped the US 10-year note sending its yield to 2.24% its highest level since December 23, 2014.
The fact that all US-Index fell sharply on Friday can be seen as a sign that the market isn’t that impressed with either the US-Job report or the surge of the US-Dollar-Index.
The S&P 500 fell 1.4 percent, the most since January 5, to 2,071.26 at 4 p.m. in New York. The equity gauge lost 1.6 percent for the week. The Dow retreated 278.94 points, or 1.5 percent, to 17,856.78 for its worst drop in five weeks. The Nasdaq Composite Index slipped 1.1 percent. More than 7.4 billion shares changed hands on U.S. exchanges, 7.2 percent above the 30-day average.
Until next week.
Yours sincerely,
Eric Panneflek