More attention is being paid to politics than to actual market events. The U.S. labor market continues to be of great concern since an "unemployed or underemployed consumer does not consume" except for essentials such as food and energy. The international scene is not much better with high employment in the third world country members of the Eurozone which is also detrimental to economic growth or expansion.
Interest Rates: The 30-year Treasury bond closed at 163 15/32nds, up 7/32nds but on Thursday Treasury yields at their highest levels since late March thanks to the stronger than expected jobless claims report and a poor result for the 30-year Treasury auction. The minutes from the Federal Reserve’s March meeting indicated that several of the Fed officials are in favor of a June rate hike and that put pressure on Treasury prices. Our view remains consistent in as much as the U.S. economy, in my opinion, remains in a contractual mode. Expect wide price swings on bonds and yields going forward.
Stock Indices: The Dow Jones industrials closed Friday at 18,057.65, up 98.92 points or 0.6% and for the week gained 1.7%. Fridays gains in equities were attributable to the better than expected jobs data but influenced more by the General Electric surge of 11% following the announced comprehensive restructuring plan and large stock repurchases. That strength carried into the other indices with the S&P 500 gaining 10.88 points to close at 2,102.05 and its 1.7% weekly gain as well. The Nasdaq gained 21.41 points to close at 4,995.98 and was up 2.2% for the week. Rallies in European issues and Asia attributed to some extent to Greece meeting its debt payment. We remain concerned over the Eurozone economic conditions among some of its member countries. We are in earnings season and await individual corporate results before commenting further. For now we continue to consider the U.S. equity market as extremely overbought and once again suggest strongly the implement of strategic risk hedging programs for holders of large equity positions.
Currencies: The U.S. dollar closed 2.6% higher against the Euro on Friday and its first weekly gain in four weeks after we indicated the dollar was overbought in our opinion. My commentary at that time before my health problems simply stated the dollar had gone to far and was due for a correction. The U.S. dollar index closed at 99.67, up 27.5 Friday with losses posted in the euro of 36 points to $1.0612, the Swiss Franc losing 1 tick to $1.0240, the British pound 46 points to $1.4640 and the Australian dollar 7 ticks to 76.52c. Gains were posted in the Japanese yen of 34 points to 0.08326, and the Canadian dollar 10 points to 79.4c. The dollar gain can be attributable to the minutes of Fed Meeting indicating the willingness of some of its members to raise rates in June. We will have to see but our feeling is that the ongoing U.S. labor situation remains stagnant at best and unable to fathom a rate increase in the near term. Stay out for now.
Energies: May crude oil closed at $51.64 per barrel, up 85c or 1.7% and for the week gained 5.1%. That followed a 6% decline on Wednesday as gains were reported in U.S. inventories. While the U.S. Administration is still pushing for a "deal" with Iran on its nuclear ambition, we feel Iran is playing the "delaying" game and I doubt any deal is forthcoming. It is also confusing as to why we would try to negotiate with people whose leaders proclaim "death to America" and "wiping out Israel off the face of the Earth." Is this a matter of "dumb and dumber" as relates to the U.S. Administration trying too hard to develop a "legacy?" I hope we "wake up" and start to analyze the "military" option. Keep it on the table and let Iran know we consider all options.
Precious Metals: June gold closed at $1,204.60 per ounce up 0.9% after recent selling around the $1,200 level. Gold trades back and forth andFriday’s action was prompted by technicals rather then any definitive news. We prefer the sidelines. May silver closed at $16.465, up 2.9c following gold but once again remains rangebound. We see no reason to buy except for those that "must have" a precious metal in their portfolio, then we prefer silver to gold. April platinum closed at $1,174.6 per ounce, up $18.20 while June palladium gained $15.80 per ounce to close at $778.20. Platinum has fallen 12% last year and remains at its lowest level since 2009. We prefer the sidelines.