Friday, July 10, 2020

Markets rise on hopes a vaccine for the virus will be ready by December

Dow shot up 368, advancers over decliners about 3-1 & NAZ gained 69 (another record).  The MLP index rise 1+ to the 124s & the REIT index went 1 to the 343s.  Junk bond funds inched higher & Treasuries finished the day lower in price.  Oil went up 1 to go over 40 again & gold slid back 1 to 1801 (more on both below).

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Pres Trump said he is not currently thinking about negotiating a “Phase 2” trade deal with China as relations between DC & Beijing sour over the coronavirus pandemic & other issues.  Trump, when asked about the possibility of a 2nd phase trade deal following implementation of a Phase 1 agreement this year, said “I don’t think about it now,” adding that he has many other things on his mind.  “The relationship with China has been severely damaged. They could have stopped the plague, they could have stopped it. They didn’t stop it,” Trump said.

Trump opens up about US-China relationship, 'Phase 2' deal prospects

The International Energy Agency (IEA) predicted slightly improved global oil demand for 2020, but said much hinges on the progression of the pandemic.  "The recent increase in Covid-19 cases and the introduction of partial lockdowns introduces more uncertainty to the forecast," the global energy authority said in its Jul report.  The IEA estimates that global oil demand this year will average 92.1M barrels per day, down by 7.9M barrels per day versus 2019, a slightly smaller decline than forecast in the last report.  "This is mainly because the decline in 2Q20 was less severe than expected," it said.  For 2021, demand will be 97.4 mb/d; but due to the improved outlook for 2020 the recovery next year is lower at 5.3 mb/d.

IEA slightly improves oil demand forecast for 2020, but says much hinges on Covid-19

Walt Disney World will reopen in Orlando, Florida, on Sat amid a growing number of Covid-19 cases within the state.  The pandemic has devastated Disney (DIS), a Dow stock.  The company has been forced to shutter its theme parks, push back its film openings & run ESPN without live games from major US sports leagues.  One bright spot for DIS has been its streaming service Disney+, which saw its number of app downloads jump 74% ahead of its release last week of the filmed stage production of Lin-Manuel Miranda's “Hamilton” featuring the musical's original cast.  Reopening its parks, which accounted for 37% of the company’s $69.6B in total revenue last year, is a top priority for DIS.  Already, its competitors have reopened to limited capacity in Orlando.  DIS was among the first parks to close in the state in mid-Mar & will be one of the last to reopen.  Despite extensive safety procedures and approval from local gov, there is still apprehension from potential guests & experts about whether Disney World should reopen its gates to the public.  Especially, after Florida Gov Ron DeSantis extended Florida's state of emergency for another 60 days on Tues.  The stock rose 2.52.
If you would like to learn more about DIS, click on this link:

Disney confident in reopening this week even as coronavirus cases reach new highs in

Gold futures ended lower, but held ground above $1800 an ounce to score a 5th weekly gain in a row as the spread of coronavirus in many states & other countries raised the need to hedge against risk amid continued uncertainty over the economic outlook.  Aug gold fell by $1 to settle at $1801 an ounce.  Gold futures ended lower yesterday, pulling back after scoring a settlement Wed at the highest since 2011, but the haven metal held ground above $1800 an ounce after data showed weekly US jobless benefit claims remained well above 1M.  For the week, gold rose roughly 0.7% from last Thurs's settlement, which was the week's last session due to the Independence Day holiday.  The metal now has tallied a 5th weekly rise in a row & trades up by more than 18% for the YTD.  Analysts have tied gold's rally in part to a continued fall in bond yields, which have eroded or eliminated the opportunity cost tied to holding non-yielding assets such as gold.  The 10-year Treasury note yield was lower for the week, trading at 0.619% today, a day after closing at its lowest since Apr 24.  Gold also has kept its appeal amid worries that aggressive stimulus efforts could spark inflationary pressures.

Gold prices end lower, but tally a 5th straight weekly gain

Oil futures climbed, buoyed by positive results tied to a COVID-19 treatment, but US prices ended lower for the week as a report from the Intl Energy Agency (IEA) cautioned that weaker demand caused by the coronavirus pandemic will linger, even if the worst of the hit to economies has subsided.  The news also provided support to the US stock market.  The IEA in a monthly report raised its annual forecast for crude demand to 92.1M barrels per day, up 400K barrels a day from its outlook last month, citing a smaller-than-expected Q2 decline as lockdowns eased in many countries.  However, the agency said that a resurgence of cases of COVID-19 could pose problems for oil demand going forward.  The monthly report said “the large, and in some countries, accelerating number of COVID-19 cases is a disturbing reminder that the pandemic is not under control and the risk to our market outlook is almost certainly to the downside.”  There were more than 63K new cases of COVID-19 in the US yesterday, setting a fresh daily record, as cases & US hospitalizations in California & Texas rose.  Investors were also watching the relaunch of the Messla oil field & Sarir refinery in Libya, closed since Jan due to civil unrest in the country.  Libya coming back on line could add more pressure to an energy market that has been attempting to find its footing amid the economic damage wrought by the coronavirus pandemic.  Aug West Texas Intermediate crude rose 93¢ (2.4%) to settle at $40.55 a barrel, after sliding 3.1% yesterday to hit the lowest level for a front-month contract this month.  Global benchmark Brent oil for Sep added 89¢ (2.1%) at $43.24 a barrel, following a 2.2% drop a day earlier to its lowest finish in a week.  For the week, WTI saw a 0.3% weekly decline, while Bren's Fri gain led to a weekly increase of 1%.  In the US, the market saw further signs of production declines.  Baker Hughes reported that the number of active US rigs drilling for oil edged down by 4 to 181 this week.

Oil climbs, but U.S. benchmark ends lower for the week as IEA warns of coronavirus risk

Hope springs eternal.  Thoughts about a vaccine brought out buyers & they kept bidding the Dow higher all day.  The Dow finished up 200 this week & staying near 26K.  Not impressive, but it could have been worse.  Opening up the US economy is on everybody's' minds & a significant market advance will need to see results.

Dow Jones Industrials

Markets rise on coronavirus treatment hopes

Dow rose 162, advancers over decliners 5-2 & NAZ gave back 20.  The MLP index fell 1 to 122 & the REIT index was even at 343.  Junk bond funds fluctuated & Treasuries were steady.  Oil went up to 40 & gold added 5 to 1809.

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CL=FCrude Oil39.84

GC=FGold   1,806.70

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Mask-wearing is key to ensuring a faster economic recovery from the coronavirus pandemic & subsequent lockdown, Dallas Federal Reserve Pres Robert Kaplan said.  "If we all wore a mask, it would substantially mute the transmission of this disease, and we would grow faster," Kaplan said.  "We would have a lower unemployment rate, we'd grow faster, and we'd be far less likely to slow some of our reopenings. But we've been uneven so far on our mask-wearing."  Daily coronavirus cases in the US have again started to regularly hit record highs, driven by a resurgence in California, Texas & Florida.   Some states have hit pause on their plans to reopen, while others are reimposing restrictions they had previously lifted.  More widespread usage of face masks, which is recommended by the Centers for Disease Control, could be pivotal in aiding the economy's nascent recovery & preventing another devastating shutdown of nonessential businesses.  "If there was one recommendation you'd probably hear from me, while monetary and fiscal policy have a key role to play, the primary economic policy from here is broad mask-wearing and good execution of these health care protocols," Kaplan added.  "If we do that, we'll grow faster."  Kaplan said he still anticipates the economy to shrink by an unprecedented 35% in Q2 but projected it will grow in Q3 & Q4, putting the economy on track to shrink by about 5%  for the year.

Fed prez: US economy would recover from virus crisis if everyone did this

The US reported a daily record 63K new cases of Covid-19, according to Johns Hopkins University.  It's the 2nd time this week the US topped its record for new infections reported in a 24-hour period as outbreaks expand across a number of states, mostly across the American South & West.  California, Florida & Texas reported more than 30K new cases collectively on Tues, accounting for nearly ½ all new cases in the US.  The US has reported 54K new cases on average over the past 7 days, a record high 7-day average, up nearly 17.6% compared with a week ago.  The US 7-day average has hit a new record every day for more than 2 weeks.  White House health advisor Dr. Anthony Fauci has warned that the US is “not in total control” of the coronavirus pandemic & daily new cases could surpass 100K new infections per day if the outbreak continues at its current pace.  “What we are seeing is exponential growth. It went from an average of about 20,000 to 40,000 and 50,000. That’s doubling. If you continue doubling, two times 50 is 100,” Fauci said.  “Any state that is having a serious problem, that state should seriously look at shutting down.”  Cases were growing, on average, by at least 5% in 36 states & DC.  Coronavirus-related hospitalizations are also up, on average, by at least 5% in 25 states.  Some of the rise in total cases is likely due to increased testing.  Nationally, the US has ramped up screening from an average of just over 174K diagnostic tests per day thru Apr to more than 650K tests per day in July.  However, the % of tests coming back positive has also risen, which epidemiologists say is a sign of a virus that is spreading more rapidly.  While new cases have continued to soar, deaths caused by Covid-19 have remained relatively stable & comparatively low.  Health officials have attributed this better treatment strategies & clinical care for Covid-19 patients as well as to the comparatively low average age of people infected with the virus now.  The average age of a Covid-19 patient has dropped by about 15 years compared with the beginning of the outbreak, & younger people have lower fatality rates.

U.S. reports record single-day spike of 63,200 new cases of coronavirus

Personal-computer sales rebounded in the Jun qtr, driven by higher demand from workers & students forced to study and work from home amid the coronavirus  according to preliminary data from 2 industry-research firms.  Global PC shipments rose 11% to 72.3M in the qtr, with the US posting its highest quarterly-shipment volume in more than a decade, according to preliminary data from International Data (IDC).  Meanwhile, Gartner said the qtr's shipments grew 2.8% to 64.8M & pointed to a short-term recovery as vendors restocked channels & mobile-PC demand increased.  Shipments in Q1 were bogged down by production & logistical challenges, despite higher demand from remote work & school orders in response to the pandemic.  Despite some lingering logistics issues early in the Jun qtr, cost & frequency of air & sea freight moved closer to pre-pandemic levels, IDC said.  At the same time, the firm said, PC makers ramped up production, in some cases surpassing previous levels, helping vendors meet the surge in demand.  “What remains to be seen is if this demand and high level of usage continues during a recession and into the post-Covid world since budgets are shrinking while schools and workplaces reopen,” said Jitesh Ubrani, research manager for IDC's Mobile Device Trackers.  Much of the difference in the data from the data providers comes from how each company defines PCs.  Hardware makers in recent years have increasingly blurred the lines between personal computers & devices such as tablets.  IDC data ranked HP (HPQ) as the #1 vendor, followed by Lenovo, while Gartner data had Lenovo slightly ahead.

PC sales surge, boosted by homebound workers and students

Stocks are back to meandering, staying near 26K & close to its recent trend line.  Investors may be getting use to dreary news on rising new cases for coronavirus.  Cases are up but deaths have not risen in the same fashion.  There remains plenty of controversy about reopening the economy & schools.  And gold stays fairly close to its record highs 9 years ago.

Dow Jones Industrials

Thursday, July 9, 2020

Markets decline as jobless claims remain high

Dow dropped 361 (above session lows), decliners over advancers about 3-1 but NAZ went up 55 to a new record.  The MLP index lost 4 to the 123s & the REIT index gave back 3+ to 342.  Junk bond funds continued weak & Treasuries rose in price, taking the yield on the 10 year Treasury down to 0.6%.  Oil fell 1+ to the 39s (more below) & gold retreated 18 to 1808 (it's 9 year high).

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US wholesale inventories tumbled in May as the Covid-19 `pandemic drove imports to near a 10-year low, supporting expectations that Q2 will see the sharpest contraction in economic growth since the depression.  The Commerce Dept said that wholesale inventories dropped 1.2% in May as estimated last month.  Stocks at wholesalers gained 0.2% in Apr.  The component of wholesale inventories that goes into the calculation of GDP fell 0.7% in May.  Goods imports dropped in May to their lowest level since 2010 as the coronavirus crisis suppressed demand & upended global trade.  Imports have also been curbed by the trade war with China.  Though the shrinking import bill is a positive in the calculation of GDP, it has been overshadowed by an even bigger decline in exports.  That has led a widening of the trade deficit, which together with the continued inventory drawdown are expected to contribute to the steepest decline in GDP on record.  The economy contracted at a 5.0% annualized rate in Q1, the sharpest pace of decline in GDP since the 2007-2009 recession.  The economy fell into recession is Feb.  Economists expect GDP shrank at as much as a 35% pace in the Apr-Jun qtr.  The gov will publish its advance Q2 GDP estimate later this month.  The decline in inventories in May was broad, with a 5.1% decline in stocks of motor vehicles & parts.  Sales at wholesalers rebounded 5.4% in May after plunging 16.4% in Apr.  At May's sales pace it would take wholesalers 1.53 months to clear shelves, down from 1.63 months in Apr.

Wholesale inventories tumble in May

The number of Americans unable to make their full on-time housing payment hit a new high in Jul, as a resurgence in coronavirus cases threatened to derail the economy's nascent recovery.  Roughly 1/3 of households, 32%, have not made their complete housing payment in Jul, according to a survey published yesterday by Apartment List, an online rental platform.  That's up from 30% in Jun & 31% in May.  About 19% of Americans made no housing payment at all during the first week of Jul, while 13% paid only a portion of their rent or mortgage.  It marked the 4th consecutive month that a "historically high" percentage of renters & homeowners were unable to pay their entire housing bill.  Renters, young & low-income households and residents in dense urban areas were the most likely to miss their payments.  Still, a majority of households that miss the payment in the first week of the month tend to make up with late payments.  89% of respondents had paid their Jun bill in full as of the first week of Jul, which is consistent with the end-of-month payment rate for prior months.  The report comes amid a rapid rise of COVID-19 cases; a spike in infections in California, Texas & Florida drove the US to a new single-day record of infections, with 60K new cases reported.  There are 3M confirmed cases in the US, the most in the world.  "The number of new coronavirus cases has surged, and reopening plans have been paused or rolled back throughout the country, making clear that effects of the pandemic are far from behind us," the report said.  "This continued economic hardship is having serious implications for housing security."  The federal eviction moratorium, which covers individuals in properties backed by Fannie Mae or Freddie Mac, has been extended until Aug 31.  In 2019, roughly 43% of new mortgages were federally backed.

Number of Americans unable to pay full housing payment hit all-time high in July

China's factory gate prices fell for the 5th consecutive month in Jun but at a slower-than-expected pace, with persistent deflation in the industrial sector highlighting the lasting economic impact of the coronavirus pandemic.  The producer price index (PPI) in Jun fell 3.0% from a year earlier, China's National Bureau of Statistics (NBS) said, compared with a 3.2% estimate & a 3.7% decline in May.  But in a sign of modest improvement in the manufacturing sector, PPI rose 0.4% from the previous month, turning around from a 0.4% decline in May.  Chinese officials have said the economy is recovering from the sharp contraction in Q1 when the coronavirus outbreak in the mainland reached its peak & crippled large parts of the economy.  The pandemic, which has infected more than 12M & killed about 546K globally, has sunk world demand & sent many economies into deflation as factories & retailers shut their doors.  An official survey on the manufacturing sector last week showed that activity expanded at a quicker clip, as Beijing's success in drastically reducing the number of new coronavirus infections has allowed it to reopen the economy in a welcome boost to business & domestic consumption.  But export orders have continued to contract, reflecting the widespread global impact of the COVID-19 pandemic.  Many Chinese manufacturers are grappling with falling profits & have been forced to let workers go to cut costs.  NBS data also showed that the consumer prices rose 2.5% from a year earlier, in line with forecasts & slightly faster from 2.4% growth in May.

China's producer prices extend declines amid sluggish demand

Treasury Secretary Steve Mnuchin indicated that the White House will not back the kind of sweeping coronavirus relief it supported in earlier bills, instead opting for narrower aid even as the pandemic ravages the US.  Congress plans to return from a Fourth of Jul break later this month for 2 weeks of work before its Aug recess.  Lawmakers aim to craft another relief package before the end of the month, but Reps & Dems appear at odds over how much aid to send a country still in the thick of fighting an outbreak that has killed more than 132K Americans.  While the Trump administration backs direct payments to individuals in the next bill, it has not embraced broad aid proposed by Dems including hazard pay for essential workers, a longer extension of strengthened unemployment benefits, mortgage & rent relief and support for state & local govs.  Mnuchin said “we do support another round” of stimulus checks to individuals, after most Americans received a $1200 sum as part of the $2T rescue legislation passed in Mar.  But he did not say whether he backed a potential $40K income cap floated by GOP lawmakers, lower than the $75K where the previous payment started to phase out.  Mnuchin noted that he spoke to Senate Majority Leader Mitch McConnell & would discuss the “level and criteria” for checks with senators when they return to DC.  The Treasury secretary also addressed one of the most urgent issues Congress faces in the talks: an income cliff Ms will face at the end of Jul when the $600 per week enhanced federal unemployment benefit expires.  Even though the economy gained nearly 5M jobs in June, the unemployment rate dropped to a still staggering 11.1%.  Mnuchin said the White House wants to change rather than extend the enhanced unemployment provision.  He did not give details on how it would want to structure aid to unemployed workers.  “You can assume that it will be no more than 100%” of a worker’s usual pay, Mnuchin said.  He echoed Reps who argue the generous insurance deters some people from resuming work because they make more at home than they otherwise would at their jobs.  On other fronts, Mnuchin said the White House supports an extension of the Paycheck Protection Program loans for small businesses but wants new relief to be “much, much more targeted” than past rounds of funding.  Congress has put $670B into the loan program & it had about $130B.  He also downplayed the need for more relief money for states and municipalities, as lost revenue and higher costs due to the outbreak force some governments to consider trimming essential services.  He said the administration does not want to “bail out” states that were “mismanaged” before the virus hit.  Dems put nearly $1T in aid for state & local govs in a $3T relief bill the House passed in May.  House Speaker Nancy Pelosi considers the funds a priority.  McConnell has repeatedly said he wants to see liability protections for doctors & businesses in any new relief legislation.  Officials in DC could find themselves at an impasse over how to handle an ongoing economic & health crisis that Pres Trump has largely downplayed following two strong months of jobs growth.

Treasury’s Mnuchin backs narrower coronavirus aid package as talks with Congress resume

Oil futures fell, with US benchmark prices settling back below $40 a barrel, as commodity traders contended with rising cases of coronavirus in the US & some other countries that may threaten to unsettle demand for crude.  Aug West Texas Intermediate crude fell $1.28 (3.1%) to settle at $39.62 a barrel, after climbing 0.7% yesterday.  Prices today were at the lowest for a front-month contract since Jun 30.  Global benchmark Brent oil for Sep lost 94¢ (2.2%) at $42.35 a barrel, the lowest since Jul 1.  Feeding expectations for a slowdown in economic recovery & weakness in energy demand, the US reported more than 58K new coronavirus cases, according to data compiled by Johns Hopkins University.  Infections have topped 3M in the country, with world-wide cases exceeding 12M.  Yesterday, the Energy Information Administration reported that U.S. crude inventories rose by 5.7M barrels for last week.

Oil falls, with U.S. benchmark settling back under $40 as coronavirus concerns swirl

Another dreary day in the stock market, although there was buying in tech shares.  The coronavirus is getting the headlines because it refuses to go away, even though the data from NY-NJ show declines in the prominent virus indices falling over 95% from their peaks.  Until there is major improvement in southern & western states, recovery for the US economy will be limited.  Gold is still in demand from nervous investors, although today it fell 18 to 1808.

Dow Jones Industrials