Wall Street rose higher as the ADP employment report showed that the US job market was stronger than expected. The optimism upstaged Philly Fed President Plosser’s reiteration of his stance that the last round of asset purchases by the Fed should be tapered. The Fed also released the latest Beige Book but is caught little attention. In short, the report suggested that economic activity generally expanded at a “modest to moderate pace”. In the commodity sector, crude oil prices slipped amid higher than expected increase in crude inventory and a surprising drop in utilization rate. Gold ended the day flat. The yellow metal stayed firm despite strength in the US dollar amid concerns over the renewed geopolitical tensions as the US representative walked out of talks with Iran and North Korea’s threat of cancelling the 60-year armistice.
In the US, the ADP employment report showed that private payrolls increased +198K in February from an upwardly revised 215K gain in the prior month. The majority of the payroll increase was driven service providing companies. Echoing Dallas Fed President Fisher’s call to slow the of the asset purchases, Philly Fed President Plosser suggested the central to “taper these purchases with an aim toward ending them before the end of the year", given the “meager benefits” to be provided by these measures. Plosser is not a voter in the FOMC committee this year but he stressed that his stance is based on the assumption that the US economy would expand to an extent that the unemployment rate would be lowered by almost a full percentage point by the end of the year.
The Fed also released the Beige Book yesterday. The report suggested that economic activity expanded at a “modest to moderate pace” with the majority of Districts reporting a “modest” improvement in labor market conditions. Hiring plans were, however, “limited” in several Districts. On consumer spending, most Districts reported an expansion despite slowdown in several others. Manufacturing activities “modestly improved in most regions” and residential real estate markets “strengthened in nearly all Districts”.
On oil inventory, the DOE/EIA reported that total crude oil and petroleum products stocks declined -2.43 mmb to 1086.64 mmb in the week ended March 1. Crude stockpile increased +3.83 mmb to 381.35 mmb as inventory soared in 4 out of 5 PADDs. Cushing stock added +0.26 mmb to 50.84 mmb. Utilization rate was down -2.90% to 82.2%.
Gasoline inventory dipped -1.86 mmb to 227.88 mmb although demand slipped -2.71% to 8.36M bpd. Production dropped -6.57% to 8.61M bpd while imports climbed +6.05% to 0.61M bpd. Distillate inventory fell -3.83 mmb to 120.35 mmb as demand gained +10.14% to 3.86M bpd. Imports dipped -28.21% to 0.11M bpd while production fell -5.08% to 4.26M bpd during the week.
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