Friday, October 15, 2021

Markets extend gains after retail sales data and earnings

Dow climbed 382, advancers over decliners a modest 5-4 & NAZ went up 73.  The MLP index added 1 to the 198s & the REIT index was even at 463.  Junk bond funds drifted lower & Treasuries saw more selling.  Oil was fractionally advanced 1 to the 82s & gold sank 29 to 1768 (more on both below).

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Richmond Federal Reserve Pres Thomas Barkin said he's on board with reducing the amount of economic help the central bank is providing as concerns grow about inflation.  With the Fed indicating that it's likely to start pulling back on its monthly bond purchases, Barkin said that seems reasonable, & he's leaning toward beginning the process in Nov.  Minutes from the Sep Fed meeting indicated that officials want to start tapering either next month or in Dec.  “If we do decide to taper at the next meeting, we’re going to have a discussion on which of those two dates, I’m sure, and my instinct would be if you’re going to decide it, go ahead and move,” he added.  “But I’m certainly going to be open to debates on both sides.”  Fed officials have indicated they've met their inflation goal of 2%, though the full & inclusive employment part of the mandate remains elusive despite significant progress.  Like many of his colleagues, Barkin pointed to temporary factors like supply chain problems that have pushed car prices higher as a major factor in driving inflation, which is running around a 30-year high.  But he also conceded that it’s been a bigger problem that he expected.  “I do think there’s risk on the inflation side, and I’m watching that very carefully,” he said.  The minutes showed that the pace of bond purchases likely will slow by about $15B each month — $10B in Treasurys & $5B in mortgage-backed securities.  Fed officials have stressed that even after the start of tapering, it will be some time before interest rate hikes begin.  Market pricing currently is for the first increase to come in Jul 2022, with another likely before the end of the year.

Fed’s Barkin backs tapering plans and expresses concern about inflation

An influential Food & Drug Administration advisory committee said the agency should authorize boosters of Johnson & Johnson’s (JNJ), a Dow stock & Dividend Aristocrat, single-shot Covid-19 vaccine to the more than 15M Americans who have already received the initial dose.  The unanimous vote – by the agency's Vaccines & Related Biological Products Advisory Committee – is a critical step before the US can begin giving 2nd shots to JNJ recipients, some of whom have said they are anxious to get the additional protection.  One dose of the vaccine has been shown in studies to be comparatively less effective than the 2-dose messenger RNA vaccines made by Pfizer (PFE) - BioNTech (BNTX) & Moderna (MRNA).  The panel recommended the boosters to everyone 18 & over who’s already received JNJ's first shot at least 2 months after the initial dose.  Many committee members said it should be considered a 2-dose vaccine much like MRNA & PFE's.  JNJ stock went up 1.28.
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FDA panel unanimously recommends J&J Covid booster shots to adults who already got the first dose

Pres Biden signed into law a bill raising the nation's debt limit until early Dec, delaying the prospect of an unprecedented federal default that would cause economic disaster.  The House passed the $480B increase in the country's borrowing ceiling after the Senate approved it on a party-line vote last week.  The eventual approval came after a protracted standoff with Senate Reps, who derailed initial Dem efforts with filibusters, delays that require 60 votes to halt.  Ultimately, a handful of Senate Reps agreed to join Dems & voted to end GOP delays & move to a final vote on the legislation, but Minority Leader Mitch McConnell has said Reps will offer no support for another increase in Dec.  Treasury Secretary Janet Yellen had warned that the US would hit its borrowing limit, an unprecedented situation that she & others cautioned could lead to economic catastrophe for a nation still reeling from a global pandemic.  Routine gov payments to Social Security beneficiaries, disabled veterans & active-duty military personnel would potentially be delayed, & the economic fallout in the US could ripple thru global markets.  The passage of the short-term debt ceiling increase ensures that, for now, the US will continue to meet its obligations.  But it sets up another potential cliff at the end of the year — at a time when lawmakers will also be working to pass a federal funding bill to avert a gov shutdown.  Reps have said Dems should use a budgetary maneuver to pass an increase in the debt limit without Rep support, like the process Dems are using for Biden's massive climate change & social safety net plan.  But Dems have resisted that option.  The clash between the 2 parties leaves Congress without a clear solution to avert the next default deadline in Dec, but the White House has emphasized it is still pursuing a bipartisan increase.

Biden signs debt limit hike, but December standoff looms

A rise in Treasury yields & US stock market put pressure on gold.  Gold futures ended lower, as strength in Treasury yields & the US stock market help lead prices to their first loss in 4 sessions, but the precious metal still notched its best weekly advance in 6 weeks.  Dec gold fell 1.7% ($29) to settle at $1768 an ounce, after picking a modest gain yesterday & settling at the highest since Sep 14.  For the week, gold gained 0.6%, which marked its steepest weekly climb since the week ended Sep 3.  Gold's gains over the week have been tenuous, but partly supported by a more subdued $ & some retreat in yields for gov debt even though the Federal Reserve plans to start to wind down its bond buying program now that the economy is recovering from the pandemic.  The 10-year Treasury note yield was at around 1.57%, up for the session, but down compared with 1.604% at the end of last week.  Meanwhile, the $ was down 0.1% on the week.  Weakness in bond yields & the $ for the week have provided a pathway higher for assets, such as gold, which are priced in $s & that don't offer a coupon like govt debt.  Gold held at lower levels early today after a report on US retails sales for Sep showed a climb of 0.7% on the month, above forecast.  Retail sales, excluding autos & gas prices, increased 0.8% on the month.  Separately, a reading of business conditions in the New York area, the Empire State Manufacturing Index fell to 19.8 in October.  Gold prices briefly pared some of its losses after preliminary estimate of the index of consumer sentiment by the University of Michigan showed a decline to 71.4 in Oct from 72.8 in Sep..

Gold ends lower, but prices log strongest weekly gain since early September

Oil prices extended their rise to multiyear highs, with US & global benchmark crude scoring an 8th weekly gain in a row — the longest such streak of gains for a front-month Brent contract in over 2 decades.  Prices found support from expectations that global power producers will look to use oil, in place of natural gas & coal, amid shortages.  Natural-gas futures, meanwhile, gave back yesterday's gain & then some, with prices down by nearly 5% today — pulling prices lower for the week.  West Texas Intermediate crude (WTI) for Nov rose 97¢ (1.2%) to settle at $82.28 a barrel, with front-month prices marking their highest finish since 2014.  Dec Brent crude, the global benchmark, rose 86¢ (1%) to $84.86 a barrel after hitting a session high above $85.  Prices ended the session at their highest since 2018.  Brent crude saw a weekly rise of 3%, up an 8th week in a row.  That was the longest weekly streak of gains since 1999.  WTI, the US benchmark, was up about 3.7% for the week, also up an 8th straight week — the longest weekly winning streak since 2004.  Oil prices surged yesterday after the Intl Energy Agency noted a “massive” switch to crude by power generators as natural gas, liquefied natural gas & coal supplies shortages drag on.  Prices finished below the session's best levels after US gov data showed a 3rd-straight weekly rise in domestic crude inventories, the biggest since Mar.  Data from Baker Hughes suggested that increases in US oil production are ahead, with the number of active US oil drilling rigs up 12 at 445 this week, climbing for a 6th consecutive week.

Oil futures finish higher, with prices up an 8th straight week

Investors are feeling good & bidding stocks higher in the early part of earnings season.  The Dow rose 550 this week, taking it over 35K & near its high for 2021.  More earnings reports will be coming next week along with dreary news from DC.

Dow Jones Industrials

Markets jump as retail sales beat estimates

Dow advanced 277, advancers over decliners 5-2 & NAZ climbed 80.  The MLP index added 1+ to 199 the REIT index rose 3 to the 465s.  Junk bond funds were off a tad & Treasuries saw heavy selling bringing higher yields.  Oil went up about 1 to the 82s (more below) & gold dropped a big 20 to 1777.

IAMJ (Alerian MLP index tracking fund)

CL=FCrude Oil82.33




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Consumer spending unexpectedly rose in Sep as retailers benefitted from back-to-school shopping &more workers returning to the office.  Retail sales, a measure of spending at restaurants, stores & online, last month rose 0.7% to $625B, according to the Commerce Dept.  The forecast was expecting a 0.2% decline.  The reading was 14.9% above a year-ago levels.  Aug's reading was revised up to a 0.9% gain from the previous print of a 0.7% increase.  Gasoline stations saw a 1.6% month-over-month increase & were 38.2% above year-ago levels.  Food services & drinking places, meanwhile, booked a 3.7% rise last month & jumped 29.5% from last year.  Retail sales excluding autos jumped 0.8% month over month compared with the 0.2% decline that was anticipated.  Ex autos, retail sales rose 2% in Aug.

Retail sales unexpectedly rise as workers return to office

The White House said it would allow intl travelers who are fully vaccinated against Covid-19 into the US. starting Nov 8, lifting a ban on visitors from the EU, UK & other countries.  The White House last month said it planned to lift the travel restrictions, which barred most non-US citizens who had recently been in Europe, Brazil, South Africa & elsewhere, in early Nov.  The rules were first set Trump administration early in the pandemic to slow the spread of Covid-19 & extended by the new Biden administration in the winter.  The Biden administration had said visitors would have to be fully vaccinated against Covid to enter.  The measure is a relief for large airlines which have struggled to return to profitability with intl travel curbed for more than 1.5 year's.

U.S. to lift travel ban on Nov. 8, allowing vaccinated international visitors into the country

Oil prices climbed, heading for gains of more than 2% for the week, on increasing signs of tight supply over the next few months as rocketing gas & coal prices stoke a switch to oil products.  US West Texas Intermediate (WTI) crude futures rose 30¢ (0.4%) to $81.61 a barrel, adding to an 87¢ jump yesterday.  The contract was heading for a 3% gain on the week.  Brent crude futures rose 28¢ (0.3%) to $84.28 a barrel, after picking up 82¢ in the previous session, leaving the contract set for a 2.3% rise for the week.  Analysts pointed to a sharp drop in OECD oil stockpiles, to their lowest level since 2015.  Demand has picked up with recovery from the COVID-19 pandemic, with a further boost coming from industry turning away from expensive gas & coal to fuel oil & diesel for power.  The Intl Energy Agency yesterday said the energy crunch is expected to boost oil demand by 500K barrels per day (bpd).  That would result in a supply gap of around 700K bpd thru the end of this year, until OPEC & allies (OPEC+) add more supply, as planned in Jan.

Oil prices rise on tight supply, set for weekly gain of more than 2%

Investors liked the retail sales reports & early Q3 earnings reports are also encouraging.  At the same time inflation continues to be a nagging problems.  Nervous investors sold gold today.

Dow Jones Industrials


Thursday, October 14, 2021

Markets jump despite September producer price index data

Dow jumped 534 to session highs, advancers over decliners 3-1 & NAZ  gained 251.  The MLP index rose 2+ to the 197s & the REIT index advanced 5+ to the 462s.  Junk bond funds fluctuated & Treasuries continued in demand.  Oil climbed to go over 81 & gold went up 5 to 1800 (more on both below).

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Live 24 hours gold chart [Kitco Inc.]

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The producer price index (PPI) for final demand increased 0.5% from the prior month & 8.6% from a year earlier, Labor Dept data showed.  Excluding volatile food & energy components, the core PPI rose 0.2%, the smallest advance this year, & was up 6.8% from a year ago.  The forecast called for a 0.6% month-over-month advance in the overall PPI & an 8.7% gain in the core figure.  The cost of services rose just 0.2%, the smallest gain in 3 months, partly reflecting an almost 17% drop in prices for airline passenger services.  Including cheaper car rental prices, the data highlight inflationary cross-currents as the spread of the coronavirus impacted activities like travel.  At the same time, goods prices kept rising at a steady pace.  Prices paid to producers for goods increased 1.3%, the most in 4 months.  40% of the advance in goods was attributed to energy, the Labor Dept said.  The PPI has climbed steadily this year as interruptions in supply networks & constraints that include shortages of materials & labor, drive up production costs.  Firms have passed along at least some of those costs to their customers, which explains a recent acceleration in consumer prices.

U.S. Producer Price Growth Slows by More Than Expected

Walgreens Boots Alliance (WBA), a Dividend Aristocrat, profit rose for the recent qtr, with its role in administering COVID-19 vaccines continuing to help lift sales.  The drugstore chain has provided 13.5M vaccinations in the qtr.  The company said it has administered more than 40M COVID-19 vaccinations & more than 16M COVID-19 tests to date.  The company posted sales of $34.3B for its fiscal 4th qtr, up from $30.4B last year & surpassing estimates.  Adjusted EPS were $1.17, ahead of the $1.02 expected.  The Centers for Disease Control & Prevention said 65.6% of the US population has received at least one dose of COVID-19 vaccine.  US pharmacy sales increased 6.7% & retail sales in the US rose 6.5%.  Health & wellness sales increased 14%, helped by items like at-home COVID-19 tests & vitamins.  The stock jumped 3.51.
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Walgreens posts higher profit as COVID-19 vaccinations continue to lift sales

Progressive House Dems have put down their marker in the debate over how to cut costs from Pres Biden's sprawling economic plan.  Top Congressional Progressive Caucus members urged House Speaker Nancy Pelosi to keep all of the proposed programs in the package intact.  Instead, they proposed cutting the duration of the programs in order to reduce spending.  Top Dems are deciding whether to make policies last for fewer years or scrap programs entirely in order to slash the plan's price tag to appease centrists.  “If given a choice between legislating narrowly or broadly, we strongly encourage you to choose the latter, and make robust investments over a shorter window,” 27 lawmakers led by Congressional Progressive Caucus Chair Rep. Pramila Jayapal wrote in a letter to Pelosi.  The representatives added that they believe setting up temporary programs will “establish a track record of success that will pave the way for a longterm extension of benefits.”  Dems are locked in talks over how to structure their massive investment in the social safety net & climate programs.  They aim to pass the plan, along with a bipartisan infrastructure bill already approved by the Senate, before the end of the month.

Progressives urge Pelosi to keep programs in Biden social and climate bill intact

Gold futures stretched their gains into a 3rd consecutive session to settle at the highest highest price in a month, with analysts attributing the metal's strength to concerns about inflation.  Dec gold rose $3 to settle at $1797 an ounce, with intraday high at $1801, following a 2% gain yesterday.  Prices for the most-active contract settled at the highest since Sep 14.  Gold, which has historically been seen as a hedge against inflation, got a boost yester after a US consumer-price index reading showed a climb of 0.4% in Sep.  Data today showed the US producer price index jumped 0.5% last month.  Gains in bullion & other precious metals today came as the US & Treasury yields staged a modest pullback.  However, some analysts believe that gold's ascent will be capped by the likelihood that Treasury yields will eventually resume their climb as the Federal Reserve kicks off its tapering of monthly purchases of gov debt & mortgage-backed securities before year-end.

Gold posts third gain in a row after brief climb above $1,800 an ounce

Oil futures rose, with US & global benchmark prices notching fresh multiyear highs after the Intl Energy Agency underlined climbing demand from power generators in the face of soaring prices for natural gas & coal.  Prices finished below the session's best levels, however, as US gov data revealed a 3rd straight weekly rise in domestic crude inventories, the largest since Mar.  The Energy Information Administration (EIA) reported that US crude inventories rose by 6.1M barrels for last week.  The increase defied expectations for an average 500K barrel decline expected. The American Petroleum Institute reported a 5.2M-barrel climb for last week.  West Texas Intermediate crude for Nov rose 87¢ (1.1%) to settle at $81.31 a barrel on the New York Mercantile Exchange after tapping a high at $81.68.  Dec Brent crude, the global benchmark, added 82¢ (1%) to $84 a barrel, down from an intraday high of $84.50.

Oil prices log fresh multiyear highs on bets for higher demand, but EIA posts biggest weekly U.S. supply climb since March

The stock market ignored the dreary inflation numbers.  And this is the important measure because it gives hints at future inflation trends, & they are not good.  The Dow keeps plodding along in a chappy sideways trend despite seeming-less endless problems in growing the economy.

Dow Jones Industrials