Home' Trinidad and Tobago Guardian : February 8th 2015 Contents FEBRUARY 8 • 2015 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG9
"Safety" wasn't safe Friday.
A blockbuster US jobs report sent investors
fleeing traditional places of comfort: divi-
dend-paying stocks, as well as bonds and gold.
The selling left major indexes slightly lower.
When nervous investors crowd into safe-
haven assets, it's known on Wall Street as a
"flight to safety." On Friday, it was a flight
from safety as investors grew more confident
that the economy would grow.
"The January employment report was strong
across the board," said Michelle Girard, an
economy at RBS Securities, in a note to clients.
"The data were clearly very healthy."
Gold fell more than 2.0 per cent. As bond
prices fell, the yield on the 10-year Treasury
note jumped to 1.95 per cent from 1.81 per
cent, a large move. Yields on shorter-term
Treasury securities moved even more.
High-dividend utility stocks, one of the best
performing parts of the market over the last
12 months, took a beating. The Dow Jones
utility index, a collection of 15 utility companies,
plunged four per cent, its worst day since
January's jobs report startled investors who
have become accustomed to near-zero interest
rates. US employers added 257,000 jobs last
month and wages jumped by the most in six
years, evidence that the job market is closer
to full health. The gain was far better than the
230,000 jobs economists had expected.
The government also said hiring was far
stronger in November and December than
previously estimated. Wages, which have been
mostly stagnant since the recession, rose at
the fastest pace since 2008.
The Dow Jones industrial average fell 60.59
points, or 0.3 percent, to 17,824.29. The Stan-
dard & Poor's 500 index lost 7.05 points, or
0.3 per cent, to 2,055.47 and the Nasdaq com-
posite fell 20.70 points, or 0.4 per cent, to
Understanding why a strong jobs report
could cause the stock market to slide requires
some counterintuitive thinking.
Unlike their counterparts in Europe and
Asia, US central bankers are poised to start
raising interest rates. The exact timing of the
Federal Reserve's interest rate move is unknown,
but every investor has an opinion on when
and how it will happen. Strategists say the
January jobs report, as well as the November
and December revisions, gives the Fed more
ammunition to justify an interest rate increase
sooner rather than later.
"There's an underlying nervousness in this
market built on cheap money," said Russ Koes-
terich, global chief investment strategist at
Trading Friday in Fed fund futures, securities
that reflect investors' views on when the Federal
Reserve might change interest rates, suggested
a rising likelihood that the Fed could raise
interest rates as soon as June.
Near-zero interest rates have been a key
factor driving the stock market's dramatic rise
since March 2009. By keeping interest rates
low, the Fed has made bonds seem expensive
and, by comparison, stocks cheap. So if interest
rates are to rise, a richly-priced stock market
would tend to be less attractive to investors,
This dynamic was reflected in trading in
utility stocks on Friday. Utility stocks typically
pay consistently high dividends and tend to
fluctuate less than other stocks, giving them
some attributes of a bond. That makes them
appealing to investors seeking income with
relatively less risk compared with other parts
of the stock market.
"It's much more difficult to justify these
high prices for utility stocks with yields rising
like this," Koesterich said.
Banks, which can profit from higher rates
by charging more for loans, rose Friday.
Despite Friday's downturn, it has been a
good week overall for investors. The Dow
ended up 3.8 per cent and the S&P 500
climbed 3.0 per cent. Stocks have now
reclaimed the ground the lost in January.
The price of oil also rebounded this week.
US crude jumped 7.0 per cent, its biggest gain
since February 2011, during the Arab Spring
and turmoil in Libya.
On Friday US crude rose $1.21 a barrel, or
2.4 per cent, to close at $51.69 a barrel. Brent,
the international standard, gained US$1.23, or
2.2 per cent, to end at US$57.80 a barrel in
The price of oil is still down by about half
from last June because of a glut in global sup-
In other metals trading, silver fell 50 cents,
or 2.9 per cent, to $16.69 an ounce and copper
fell a penny to US$2.59 a pound.
In other futures trading on the NYMEX:
--- Wholesale gasoline rose 3.4 cents to close
at US$1.559 a gallon.
--- Heating oil rose 3.3 cents to close at
$1.839 a gallon.
--- Natural gas fell 2.1 cents to close at $2.579
per 1,000 cubic feet. It was the eighth down
day for natural gas out of the last 9, pushing
natural gas to its lowest level since June of
bonds sink after
US hiring surge
How the Dow Jones Industrial
Average fared Friday
The Dow Jones industrial average lost
60.59 points, or 0.3 per cent, to 17,824.29.
The Standard & Poor's 500 index fell 7.05
points, or 0.3 per cent, to 2,055.47.
The Nasdaq fell 20.70 points, or 0.4 per
cent, to 4,744.40.
For the week:
The Dow is up 659.34 points, or 3.8 per
The S&P 500 index is up 60.48 points, or
3 per cent.
The Nasdaq is up 109.16 points, or 2.4 per
For the year:
The Dow is up 1.22 points, or 0.01 per
The S&P 500 index is down 3.43 points,
or 0.2 per cent.
The Nasdaq is up 8.34 points, or 0.2 per
European stocks touched a seven-year high
on Friday, recovering early losses after a robust
US jobs report pointed to underlying strength
in the world's biggest economy.
Non-farm payrolls increased by 257,000
last month, against a Reuters forecast for
234,000, while data for November and
December was revised to show a hefty 147,000
more jobs created than previously reported.
US wages also rebounded strongly.
"There's been an across-the-board
improvement in economic data from the Unit-
ed States, which really assuages concerns we
had that there might've been a slowdown in
January," Chris Beauchamp, analyst at IG,
"We should be encouraged, especially by
the strong earnings growth."
The FTSEurofirst 300 index of top European
shares closed up 0.2 per cent at 1,490.84
points, having touched a seven-year high of
However, investors remained cautious over
Greece, where shares in the countries top
banks Alpha, Piraeus and National fell 5-12
per cent after suffering downgrades in light
of a stand-off between the new government
and Greece's creditors.
Tate & Lyle was the biggest loser on the
STOXX Europe 600, skidding 13.7 per cent
after the British ingredients company said
annual profits would be below the range it
forecast in September, hit by a weak per-
formance in sweeteners in its third quarter.
In contrast, telecom equipment maker
Alcatel-Lucent rose 3.5 per cent, after pledging
to lift profitability again this year through
cost cuts after six straight quarters of improv-
ing gross margins.
About 60 companies listed on the broad
STOXX Europe 600 index have reported
results, with 61 per cent exceeding analyst
forecasts for profits, according to Thomson
Reuters I/B/E/S data. In a typical quarter, 48
per cent of STOXX 600 companies beat esti-
However, while fourth-quarter profits are
expected to increase 24.4 per cent from the
fourth quarter of 2013, revenue is expected
to fall 3.2 per cent over that period, suggesting
that some firms are achieving profitability
"While a good number of companies are
beating earnings estimates, the earnings quality
isn't good. If revenues are flat and profits still
beat expectations, that's not so encouraging,"
KCG Europe managing director Ioan Smith
Among other standouts, measurement
technology and software group Hexagon
jumped 7.2 per cent, hitting record highs after
posting forecast-beating earnings and an
improvement in sales growth.
Shares in Swiss telecoms company Sunrise
made a solid market debut, rising 11.8 per
cent above its listing price of 68 Swiss francs.
Backed by European private equity fund
CVC, Sunrise is raising 1.36 billion francs
with the listing, which went ahead despite a
surge in the franc after the Swiss National
Bank scrapped the currency's cap against the
euro on January 15. Reuters
European shares touch seven-year high
FILE: In this December 21, 1999 file photo, Nicholas Torres, centre, shouts an order in the
eurodollar pit at the Chicago Mercantile Exchange just as the Fedeal Reserve was announcing
that there would be no change in interest rates. Floor trading has shrunk to a fraction of its
volume from two decades ago as faster, cheaper, computers take over the process of
establishing prices on everything from pigs to Exxon Mobil's stock. AP
People look at their mobile phones in front of an
electronic stock board of a securities firm in Tokyo
Friday, February 6, 2015 as Japan's Nikkei 225 gained
143.88 points or 0.8 per cent to close at 17,648.50 for
the day. Asian stock markets were muted Friday as
investors awaited monthly US employment figures
and the risk of a Greek default increased. AP
Links Archive February 7th 2015 February 9th 2015 Navigation Previous Page Next Page