Thursday, January 14, 2021

Markets pare gains ahead of Biden's proposed stimulus package

Dow went down 68 finishing under 31K with selling in the last 2 hours of trading, advancers over decliners better than 2-1 & NAZ gained 16.  The MLP index added 2+ to the 161s & the REIT index added 2+ to the 366s.  Junk bond funds crawled higher & Treasuries continued to be sold.  Oil rose to the 53s & gold was off 9 to 1845 (more on both below).

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Pres-elect Joe Biden shortly will unveil his long-awaited coronavirus stimulus proposal designed to jump-start the nation's economy amid fresh evidence that the recovery is sputtering.  The plan, which could carry a price tag of at least $1.5T, is widely expected to include a commitment for $1400 stimulus checks, an extension of supplemental unemployment benefits that are poised to expire in Mar, funding for vaccine distribution & aid for state & local govs.  The $1400 payments would be in addition to the $600 that most Americans received this month, bringing the total check amount to $2K.  Biden will introduce the aid package during an evening speech.  He has repeatedly said that passing another round of emergency aid is a priority for his administration and has pledged to "hit the ground running" on passing legislation.  On Mon, Biden asked the Senate whether the chamber could divide its schedule so that lawmakers could consider his agenda & hold an impeachment trial for Pres Trump.  “I hope that the Senate leadership will find a way to deal with their Constitutional responsibilities on impeachment while also working on the other urgent business of this nation," Biden said yesterday.  He estimated last week the bill would cost "trillions of dollars," including "billions of dollars" to speed up vaccine distribution, arguing that more spending early on could reduce the long-term damage caused by the pandemic.  "If we don't act now, things are going to get much worse, and it'll be harder to get out of the hole later," he said last week.  More than 380K people in the US have died of COVID-19 & more than 23M infected.  Lockdown measures adopted across the country to curb the spread of the virus have cost Ms of Americans their jobs.  It's unclear whether the proposal will garner bipartisan support, with deficit-weary Reps likely to balk at the proposal's price tag.  The gap between what the gov spent & what it collected hit a record $3.4T for the 2020 fiscal year.  Sen Joe Manchin, a moderate Dem, has rejected another round of stimulus checks, but Sen Marco Rubio, incoming Senate Finance Committee Chair Ron Wyden & incoming Senate Majority Leader Chuck Schumer have all endorsed upping the $600 benefit included in the $900B coronavirus relief package to $2K.

Biden to unveil new relief plan expected to include another stimulus check

Federal Reserve Chair Jerome Powell affirmed his commitment to keeping interest rates low for the foreseeable future even as he expressed hope for a strong economic recovery.  “When the time comes to raise interest rates, we’ll certainly do that, and that time, by the way, is no time soon,” the central bank chief said.  Powell also spoke about how the Fed handled the challenges brought on by the Covid-19 pandemic as well as his expectations for what is ahead.  In its most recent policy statement, issued in Dec, the policymaking FOMC) said it would keep an accommodative stance until it sees “substantial further progress” towards is employment & inflation goals.  On the employment mandate, Powell stressed the Fed;s new approach to inflation in which it will not raise rates even if unemployment falls below levels that historically would have been considered a warning sign for pricing pressures ahead.  “That wouldn’t be a reason to raise interest rates, unless we start to see inflation or other imbalances that would threaten the achievement of our mandate,” he added.  One such imbalance would be inflation.  In recent days, a few Fed officials have cautioned that inflation could move up sooner than the Fed expects & might force the removal of some policy accommodation sooner than committee members have forecast. 

Powell sees no interest rate hikes on the horizon as long as inflation stays low

US automakers are suffering from the deepest sales decline in decades, the country is still politically divided & it's in the middle of a pandemic.  But if US officials can quickly rollout a Covid-19 vaccine & stabilize the nation, automotive execs & analysts have reason to hope US vehicle sales will return to some form of normalcy in 2021.  Industry execs & analysts predict strong consumer demand will continue this year & a return of commercial fleet sales as local officials roll out the Covid-19 vaccine.  Early forecasts for new vehicle sales this year range from about 15.6-16M vehicles, which would be an increase of between 7.6% & 10.3% compared to 2020.  Last year's sales were down 14.8% to 14.5M vehicles, according to Cox Automotive.

U.S. auto sales are optimistically projected to rise by as much as 10% in 2021

Gold futures finished with a modest loss, as the recent rise in US bond yields & a firmer $, as well as strength in the stock market created some headwinds for bullion buying.  US benchmark stock indexes traded higher as gold futures settled, with the Dow touching an intraday record, drawing some haven interest away from gold.  Gold futures had settled at $1835, the lowest since since early Dec.  Today, Feb gold prices fell $3 to settle at $1851 an ounce, after a 0.6% rise yesterday.  The longer-term outlook for the yellow metal among some dealers is for higher prices, amid expectations for further US gov relief to boost the economic recovery from the coronavirus pandemic.  Pres-elect Joe Biden later will outline a $2T fiscal spending package that would include more direct payments to American families & significant state & local funding.  Meanwhile, Federal Reserve Chair Jerome Powell said inflation may rise as the economy recovers from the pandemic but is unlikely to be persistent & the central bank had no plans to change monetary policy anytime soon.  Gold prices in the longer-term could rise as govs around the world use both fiscal & monetary policy to reflate their economies.

Gold prices end lower on rise in U.S. bond yields, risk-on sentiment

Johnson & Johnson's (JNJ), a Dow stock & Dividend Aristocrat, one-dose coronavirus vaccine is safe & appears to generate a promising immune response in both young & elderly volunteers, according to trial data published in the New England Journal of Medicine.  JNJ scientists randomly assigned healthy adults between the ages of 18-55 & those 65 & older to receive a high or low dose of its vaccine — called Ad26.COV2.S — or a placebo.  Some participants in the 18-55 age group were also selected to receive a 2nd dose of the vaccine.  Most of the volunteers produced detectable neutralizing antibodies, which researchers believe play an important role in defending cells against the virus, after 28 days.  By day 57, all volunteers had detectable antibodies, regardless of vaccine dose or age group, & remained stable for at least 71 days in the 18-55 age group.  The most common side effects were fever, fatigue, headache, muscle aches & pain at the injection site.  Side effects were less common in the older age group, who received only one dose of the vaccine, as well as those who received a lower dose of the vaccine.  The phase I & II clinical trial data shows a single shot of the vaccine “gives sustainable antibodies,” Dr Paul Stoffels, chief scientific officer at JNJ, said.  He added it gives the company “confidence” the vaccine will be highly effective against the virus.  The trial tested 805 volunteers. The company is expected to release results from its 45K-person phase III trial later this month.  JNJ is using the same technologies it used to develop its Ebola vaccine for its Covid-19 vaccine.  The stock rose 2.75 (2%).
If you would like to learn more about JNJ, click on this link:

J&J’s one-shot Covid vaccine is safe and generates promising immune response in early trial

Oil futures booked gains, with US benchmark prices finishing at their highest since Feb, buoyed by the continuing COVID-19 vaccine rollout & expectations that the Biden administration's stimulus package will help improve demand for crude.  West Texas Intermediate crude for Feb rose 66 (1.3%) to settle at $53.57 a barrel.  Prices for the front-month contract settled at their highest since Feb.  Mar Brent, the global benchmark, tacked on 36¢ (0.6%) to $56.42 a barrel.  US prices have held ground above the $50 mark for more than a week.  Oil traders also eyed the pace of Chinese oil imports, global demand forecasts & declines in US crude inventories against a backdrop of surging COVID-19 cases.  China's crude imports declined to a 27-month low of 9.1M barrels a day in Dec, though total 2020 imports jumped 7% to 10.8M barrels a day.  OPEC left its forecast for world oil-demand growth in 2021 unchanged from its Dec estimate.  The cartel expects crude demand to only partially recover from the 9.8M barrel decline suffered in 2020 due to the COVID-19 pandemic.  OPEC said it expects demand growth to rise to 95.9M barrels a day this year, up 5.9M barrels a day.

Oil books gains, with U.S. prices closing at their highest in 11 months

As this is being written, negative news is bringing on selling.  Meanwhile Treasury yields & oil prices are rising.  Tomorrow has the makings of a wild day for stocks.

Dow Jones Industrials

Markets rise on stimulus hopes although jobless claims disappoint

Dow climbed 103, advancers over decliners better tha 2-1 & NAZ advanced 79.  The MLP index went up 1 to 161 & the REIT index added 1+ to the 365s.  Junk bond funds were mixed & Treasuries had modest selling.  Oil retreated in the 52s & gold lost 8 to 1846.

AMJ (Alerian MLP index tracking fund)

CL=FCrude Oil52.88

GC=FGold    1,842.90



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The number of Americans filing for first-time uemployment aid last week jumped to the highest level since mid-Aug, the latest sign the economy's recovery is stalling amid a surge in Covid-19 infections nationwide.  Figures from the Labor Dept show 965K Americans filed first-time jobless claims last week, higher than the 795K forecast.  The number is nearly 4 times the pre-crisis level but is well below the peak of almost 7M that was reached when stay-at-home orders were first issued in Mar.  Almost 70M Americans (40% of the labor force) have filed for unemployment benefits during the pandemic.  The number of people who are continuing to receive unemployment benefits rose to 5.3M, an increase of about 199K from the previous week. Roughly 18.4M Americans were receiving some kind of jobless benefit at year-end.  The report provides fresh evidence that a record-setting rise in coronavirus cases – the US reported more than 4200 deaths on Tues, bringing the nation's total to 381K – & new lockdown measures are weighing on the labor market.  A separate report released last week shows that employers cut 140K jobs in Dec, marking the first loss since the early months of the pandemic.  Many more Americans are receiving jobless aid from 2 federal programs that Congress established with the passage of the CARES Act in Mar:  One extends aid to self-employed individuals, gig workers & others who typically aren't eligible to receive benefits, & the other provides aid to those who have exhausted their state benefits.  The federal gov renewed those programs at the end of Dec with the passage of a $900B relief act, which includes a supplemental $300-a-week jobless benefit, a one-time $600 stimulus check for most adults & new funding for a small business rescue program.

Another 965,000 Americans filed for unemployment aid last week

China exported more to the rest of the world last year than ever before, despite the global COVID-19 pandemic-related recession, figures from the country’s customs administration showed.  The trade surplus hit a historic high of $78B in Dec.  Exports grew by double digits for the 3rd consecutive month, up 18.1% in $ terms in Dec from a year earlier, on the back of strong sales of medical goods & pandemic-related products such as home computers.  This happened despite a steep recession in the country’s European & American markets, & the 6% rise of the Chinese currency against the $ in 2020.  China underwent a steep industrial recovery starting in Apr, after vigorous measures taken to control the COVID-19 pandemic that started in the Wuhan region.  Imports also rose strongly in Dec, up 6.5% on the month.  The Chinese economy was the only one among the world's major powers to grow in 2020.  Official GDP numbers will be released next week &, according to most forecasts, should show growth of around 2% last year.  That compares to a 4% decline for the global economy.  Economists expect China's exports growth to slow in the coming months if & when western economies manage to control the COVID-19 pandemic's 2nd wave & resume normal activity.  But, as shown by the rise of imports, China's domestic market & the country's consumers may then help sustain growth — if that happens.  The strength & resilience of the Chinese economy would then be a blessing for recovering Europe & the US, whose exporters will benefit from a fast-growing market.  That should help soften a possible protectionist backlash, especially since the administration of Pres-elect Joe Biden is unlikely to be as strident about Chinese trade as its predecessor.

Chinese exports shot to a record high in 2020 as the world economy sank

Dr Scott Gottlieb warned coronavirus vaccine recipients against letting their guards down right away, adding that they should adhere to public-health measures such as wearing masks.  The former Food & Drug Administration (FDA) commissioner said the advice is particularly important for elderly Americans who are at higher risk of death or serious illness from Covid-19.  “I think for an older individual who is vulnerable to this virus, certainly .. wait for a period of time after the second shot until you’re likely to have full protective immunity,” Gottlieb said.  “I don’t think people should feel completely secure after the first shot.”  Both Covid vaccines that have received emergency use authorization from the FDA require 2 doses.  Roughly 10.3M Americans have received their initial Covid shot, according to the Centers for Disease Control & Prevention.  About 29.4M doses have been distributed.  The shaky vaccine rollout comes as the nation continues to see high levels of coronavirus infection & more deaths from Covid-19.  The country's 7-day average of new daily cases is 245K, according to data compiled by Johns Hopkins University.  An average of 3360 Americans have died from Covid per day over the last week, the 2nd-highest tally on record.  Vaccine recipients need to still take public-health precautions because the US outbreak remains so significant & “infection is everywhere,” Gottlieb said.  “If you’re a vulnerable individual, even if you’ve had the second shot and you think you have full protective immunity from the vaccine, it’s still very prudent to continue to wear a mask and take precautions.”  “That doesn’t mean you have to hibernate and have to avoid seeing family,” added Gottlieb.  “Maybe you can lean forward in that regard but wear a mask. Be more careful in those interactions, because in a high-prevalent environment, you’re still at risk.”  As more Americans become vaccinated, Gottlieb said that should lower overall US infection rates & significantly curtail the intensity of the epidemic.  At that point, he added, it will be more sensible to “relax” some precautions.  “That’s hopefully going to be the summer, the spring, if these new variants don’t get a foothold here in the United States and change our trajectory,” he said, referencing the coronavirus strains initially found in the UK & South Africa that are believed to be more transmissible.Markets rise on stimulus hopes although jobless claims disappoint

Gottlieb: Covid vaccine recipients should not let their guards down right away

Hopes spring eternal & buyers are hoping throwing more money at the economic recovery will help.  Somewhat offsetting the China data, Germany's economy (the largest in the EU) declined 5% last year.  The big banks should be reporting earnings shortly & they are expected to be good.

Dow Jones Industrials


Wednesday, January 13, 2021

Markets rise in a choppy session as tech stocks recover

Dow was 8, advancers over decliners about 5-4 & NAZ went up 56.  The MLP index added 1 to 160 & the REIT index climbed 5+ to the 364s.  Junk bond funds continued strong & Treasuries remained in demand bringing lower yields.  Oil slid back to the high 52s & gold went up 9 to 1853 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

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A record 4327 people died from Covid-19 in the US yesterday, marking the deadliest day of the pandemic so far as the federal gov tries to speed up the rollout of lifesaving vaccines.  It comes as researchers in Ohio say they have found 2 new variants that likely originated in the US   The new record is the 2nd time in the last week that Covid-19 deaths have exceeded 4K in one day.  It also pushes the nation's weekly average of deaths per day to 3342 — a 26% increase compared with a week ago, according to data compiled by Johns Hopkins University.  So far, 34,804 people have died in Jan, on track to become the deadliest month of the pandemic in the US.  Medical experts say the nation is now in its post-holiday surge & the situation will likely worsen before it improves.  The US has reported more than 22.8M Covid-19 cases since the beginning of the pandemic & cases are rising in a majority of states every day.  As of yesterday, the average number of new cases over the last week climbed by at least 5% in 36 states & DC.  “We were in a bad place even before the actual holidays came upon us,” White House health advisor Dr Anthony Fauci said.  “We’re in a very difficult situation, and it’s getting worse,” Fauci added.  “I hope that as we get towards the end of January that we’ll see a peaking and a turning around, particularly if people hang in there and don’t get discouraged by Covid-19 fatigue and let down on their public health measures.”  The record number of Covid-19 fatalities comes as the Trump administration — with just a week until Pres-elect Joe Biden takes office — tries to speed up the distribution of coronavirus vaccines.

U.S. Covid deaths reach another record, as researchers find two new variants in Ohio

A 3rd of the US central bank's 12 districts reported flat or declining activity over Nov & Dec, according to the latest Federal Reserve Beige Book survey.  The majority of districts said activity increased only modestly.  Some districts reported declining retail sales, an unusual development for the end of year holiday season.  Car sales were weaker.  However, there was a pickup in activity in the energy sector for the first time since the onset of the pandemic.  A growing number of Fed districts reported a drop in employment levels over the last 2 months of 2020.  Inflation seemed to be bubbling, with almost all districts reporting modest prices increases & businesses said they were able to pass some of these costs to consumers.  Economists think economic conditions are going to get worse before they get better.  The prospect of wider vaccinations against COVID-19 have raised expectations for a further economic recovery after Jun.  The next 2 qtrs could be challenging.

A third of Fed’s districts experienced flat or declining activity as 2020 closed, Beige Book survey says

The US gov ran a budget deficit of $144B in Dec & the gap is likely to grow even higher in the next few months after the US approved more federal aid for the economy.  The deficit increased last month from just a $13B budget gap in the same month of 2019, the Treasury Dept said.  The budget gap in the first 3 months of the current fiscal year was 61% higher compared to a year earlier — $573B vs $357B.  The increased deficit almost entirely reflects a surge in gov spending to try to keep the economy afloat until the coronavirus pandemic fades away.  The gov has spent trillions on stimulus checks for families, more generous unemployment benefits & grants to struggling businesses.  It ran a budget deficit of $144M in Dec & the gap is likely to grow even higher in the next few months.  The high level of taxes stems from a strong rebound in the economy since the pandemic erupted last spring & the ability of most companies to adjust.  Tax receipts could slow again, however, after a record spike in cases & more gov restrictions on business.  The new restrictions are not nearly as widespread, though.  Gov spending climbed 40% from a year earlier to $490B in Dec.  Most of the increase in spending last month was tied to health care & Social Security benefits.  And the federal gov is spending more on coronavirus vaccines & related treatments.  Historically large budget deficits are expected to persist for some time.  Last month the guys in DC approved nearly $1B in fresh aid for the economy, with Pres-elect Joe Biden promising even more help is on the way.  The deficit topped $3T in the fiscal year that ended in Sep, the largest deficit as a percentage of GDP since 1945.  The deficit was expected to be halved in the current fiscal year, according to the Congressional Budget Office, but that will depend on the actions taken under the new Biden administration

U.S. budget deficit climbs to $144 billion in December – and more red ink on the way 

Futures for gold finished higher after a report on US inflation & as investors monitored a House vote on impeaching Pres Trump, for a 2nd time, days before he is set to relinquish power to Pres-elect Joe Biden on Jan 20.  Feb gold prices traded $10 (0.6%) higher to settle at $1854 an ounce, after settling 0.4% lower yesterday.  Gold futures added to gains early today after the consumer-price index (CPI) showed a climb of 0.4% in Dec & a core reading, minus food & energy, rose 0.1% in Dec.  The year-over-year reading came in at 1.4% & 1.6% for the core figure, compared against estimates for 1.3% & 1.6%, respectively.  The headline CPI has now risen for 7 months straight but remains below the Federal Reserve’s 2% target.  Investors have largely looked past renewed political rancor in DC.  The Dem-controlled House was expected to vote later today to impeach Trump for his apparent role in a violent attack on the Capitol.  A handful of House Reps have said they would vote to impeach.  Lately, gold has been trading in a relatively muted range & tending lower, with a risk of slipping below a psychologically important price at $1800, which would be seen as near-term bearish by some technical strategists.  Meanwhile, a business survey of the Federal Reserve's 12 business districts, indicated declining activity over Nov & Dec in some areas released after the gold settlement.

Gold prices end higher as investors watch Trump impeachment vote

Oil futures ended lower in a choppy session, snapping a 6-day winning streak for the US benchmark, after the $ gained ground & inventories of gasoline & distillates rose more than expected.  West Texas Intermediate (WTI) crude for Feb fell 30¢ (0.6%) to $52.91 a barrel.  WTI's 6-day winning streak was the longest since Mar.  Mar Brent, the global benchmark, fell 52¢ (0.9%) to close at $56.06 a barrel.  Both benchmarks finished yesterday at their highest since Feb 21.  The Energy Information Administration said US crude inventories fell by 3.2M barrels last week, slightly less than the 3.8M barrel drop expected.  It was also smaller than the 5.8M fall reported by the American Petroleum Institute yesterday.

Oil snaps 6-day winning streak as U.S. dollar rises, product inventories build

Traders were twiddling their thumbs today.  Not much was happening, except for the excitement in DC.  Rising deaths in the US & around the globe are no great concern to those guys.  The stock market may be stumbling along over the short term while the new administration gets started.  The Dow was steady during in Dec.  After a quick  rise to new records in Jan, it has been  pretty much going sideways although NAZ with its tech stocks under fire lately has been volatile.  There was a little selling in the last hour.

Dow Jones Industrials