Friday, September 17, 2021

Markets drift lower on sluggish consumer data

Dow dropped 166, decliners over advancers 2-1 & NAZ was off 137.  The MLP index lost 2+ to the 177s & the REIT index fell 4+ to the 462s.  Junk bond funds slid lower & Treasuries continued weak.  Oil was hit with profit taking in the 72s & gold fell 4 to 1752 (more on both below). 

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

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Restaurants around the county were looking ahead to the economy's reopening over the last few months, as Covid vaccines became more widespread & pent-up consumer demand was palpable.  But headwinds from supply chain disruptions to a labor shortage & rising costs are hitting the industry as the contagious delta variant clouds hopes of a return to normalcy.  Food, restaurant & hospitality small business owners are more worried than most about the pandemic's continued disruptions to operations, according to new data from the Goldman Sachs 10,000 Small Business Voices program.  The data found 84% of owners in these sectors are concerned about the impact of rising Covid-19 infection rates on business, compared with 75% of the overall small business population.  Nearly all have seen an increase in operating costs, with 93% saying inflationary pressures have risen since Jun, having negative effects on finances.  The data subset of 117 food, restaurant & hospitality owners comes from a broader survey of 1145 participants in the Goldman Sachs 10,000 Small Businesses program earlier this month.  The figures underscore the sustained pressure facing restaurants even in an economy that has rebounded from the worst of the damage inflicted by the coronavirus.  While the rollout of vaccines & looser public health restrictions have moved the industry closer to normalcy, challenges abound as restaurant owners look toward the fall.  Labor challenges have also hit restaurant, food & hospitality owners at higher rates than seen in the broader small business community.  The data show 79% of those business owners say workforce challenges have worsened since before the pandemic, compared with 64% overall.  Recent data from the National Federation of Independent Business underscores the labor issues weighing on small business optimism.  Unfilled job openings were above the 48-year historical average in Aug for the 2nd month in a row.  As the pandemic taxes restaurant operators, Goldman's data found nearly 40% of food & hospitality businesses say they expect to have to take out a loan or line of credit for their business this fall or winter.  That compares with 29% of businesses overall.  The Small Business Administration recently announced an overhaul to the Economic Injury Disaster Loan program for businesses.  The loan cap will increase to $2M & recipients will be allowed to use the funds to prepay business debt, which would let restaurants put the money toward commercial debt & more.  Beyond these changes, small business & restaurant owners & advocates have called on lawmakers to replenish the $28.6B Restaurant Revitalization Fund.  It provided grants to the industry but was quickly tapped out due to high demand.

Inflation, labor and delta pressure restaurants heading into fall, survey finds

Consumer sentiment rose less than expected in Sep.  The preliminary reading of the University of Michigan consumer sentiment index, which is considered one of the most up-to-date assessments of the US economy, rose 0.7 points in Sep to 71.0.  The forecast called for an increase to 72.0.  The current conditions index fell 1.4 points to 77.1 & the expectations index jumped 2 points to 67.1.

Consumer sentiment rises less than expected

An independent committee advising the FDA is convening to weigh data on Pfizer's (PFE) COVID-19 vaccine booster shot & vote whether current evidence supports approval for use in people 16 years & older.  The country's plan for a booster shot rollout among the larger US population has been mired with conflicting views from experts, including 2 senior FDA advisers stepping down over the issue, arguing that data don't support administration of a booster shot for most Americans.  Top health officials last month issued a plan to begin offering boosters developed by Moderna (MRNA) & PFE starting the week of Sep 20 but since advised only a review of data relating to PFE's shot would meet the deadline.  The booster debate also exists in the context of global vaccine equity issues, as roughly ½ of the population around the world remains unvaccinated, & leaders at the World Health Organization have urged wealthier countries to halt booster shot rollout until at least the end of the year.

FDA panel to weigh COVID-19 vaccine boosters: What to know

Gold futures ended lower, with prices tallying a 3rd consecutive session loss & a 2nd weekly decline in a row, as the $ strengthened ahead of the Federal Reserve's policy meeting next week.  Dec gold declined by $5 to settle at $1751 an ounce, following a 2.1% decline yesterday.  Prices, based on the most-active contract, logged their lowest settlement since Aug 10.  Bullion also marked a 2nd straight weekly drop, down 2.3% for the week.  That was its first successive weekly fall since the 3-week period ended Jun 18.  A better-than-expected report on Aug retail sales yesterday was partially credited with boosting the $ & weakening bullion.  Retail sales increased 0.7% last month & the forecast was for a 0.7% drop.  That data, along with a batch of others, is raising the prospect that the Fed during its Sep 21-22 meeting could aim to announce a tapering of its bond buying program that was implemented to provide liquidity to the market during the worst of the COVID disruptions last year.  Also, the University of Michigan consumer sentiment index rose to 71 in Sep from 70.3 in prior month.  The increase was a bit below market expectations. 

Gold futures fall a third straight session to lose over 2% for the week

Oil futures declined, pulling back from 7-week highs as crude production in the Gulf of Mexico makes a slow comeback from Hurricane Ida, but US & global benchmark crude prices scored solid weekly gains for a 4th week in a row.  West Texas Intermediate (WTI) crude for Oct fell 64¢ (0.9%) to settle at $71.97 a barrel.  Nov Brent crude, the global benchmark, declined by 33¢ at $75.34 a barrel.  For the week, WTI futures saw a rise of 3.2%, while Brent was up 3.3% — with both up a 4th week in a row.  Yesterday, Brent closed at a 7-week high, while WTI ended unchanged, a day after it closed at its highest since Jul 30.  Baker Hughes revealed that the number of active US rigs drilling for oil rose for a 2nd straight week, up 10 at 411.  That followed a rise of 7 oil rigs the week before, but the oil-rig count had dropped by 16 for the week ended Sep 3, in the wake of Hurricane Ida, which made landfall at the Gulf Coast on Aug 29.  The Bureau of Safety & Environmental Enforcement (BSEE) today estimated that 23% of crude production in the Gulf of Mexico remains shut in, equal to around 422K barrels a day.  More than 34% of natural-gas production is also shut in, equivalent to 765M cubic feet a day of output, according to the BSEE.

Oil prices decline, but post a 4th straight weekly gain

The markets were in the red all day.  For the week the Dow slid back all of 25,  The virus keeps fighting back hard & that is putting a damper on the recovery.  Of course, a sluggish congress in DC is not helping build enthusiasm for investors.  A lot of investors are nervous in anticipation of the FOMC announcing next week it will begin tapering its bond buying program.  Watch on Wed!!

Dow Jones Industrials

Markets fall as growth fears weigh on global sentiment

Dow dropped 196, decliners over advancers 2-1 & NAZ pulled back 120.  The MLP index fell 3+ to the 176s & the REIT index was off 1+ to the 465s.  Junk bond funds drifted lower & Treasuries were sold bringing higher yields.  Oil was off 1+ to the 71s after recent strength & gold fell 6 to 1750.

AMJ (Alerian MLP index tracking fund)

CL=FCrude Oil71.31 
-1.30 -1.8%

GC=FGold   1,756.80



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Senate Minority Leader Mitch McConnell rejected a request by Treasury Secretary Janet Yellen for Reps to join Dems to raise or suspend the debt ceiling before the federal gov runs out of cash to pay bills in Oct.  "The Leader repeated to Secretary Yellen what he has said publicly since July: This is a unified Democrat government, engaging in a partisan reckless tax and spending spree," McConnell's spokesperson said.  "They will have to raise the debt ceiling on their own, and they have the tools to do it."  For months, Yellen has been urging Congress to increase the gov's borrowing limit, warning the Treasury Dept will exhaust its so-called extraordinary measures in Oct.  Yellen will "continue to talk to Republicans and Democrats about the critical need to swiftly address the debt ceiling in a bipartisan manner, to avoid the catastrophic economic consequences of default," a Treasury spokesperson said.  The debt ceiling, which hit $22T in Aug 2019, is the legal limit on the total amount of debt that the federal gov can borrow on behalf of the public, according to the Committee for a Responsible Federal Budget (CRFB).  Once the suspension lifted, the new limit was reinstated around $28.5T, a figure that includes debt held by the public & the gov.  At the beginning of Aug, the Treasury Dept began deploying extraordinary measures to ensure the gov can continue to pay its obligations for the time being.  But if the debt ceiling is not raised or suspended, the gov can no longer issue debt & will soon run out of cash on hand.  But Senate Reps are resisting a move to raise the nation's borrowing limit, with 46 of them pledging to oppose any increase this fall with a vote that would require at least 10 GOP lawmakers to pass.

McConnell puts his foot down, rejects Yellen debt ceiling request

Growth across a range of Chinese economic indicators pulled back sharply in Aug, as a new outbreak of the Covid-19 Delta variant & tighter gov regulations on the property market hit consumer spending & the housing sector.  Retail sales, a key gauge of China’s consumption, rose just 2.5% in Aug from a year earlier, down sharply from Jul's 8.5% year-over-year growth, according to data released by China's National Bureau of Statistics.  The result marked the lowest pace of growth in a year missed by a large margin the 6.3% increase expected.  Separate data by the statistics bureau showed home sales by value falling 19.7% in Aug from a year ago, the largest drop since Apr 2020—at the height of the pandemic.  Average new-home prices in 70 major Chinese cities inched 0.16% higher in Aug from the previous month, the smallest such gain this year.  Real-estate investment in the first 8 months of the year, meantime, increased 10.9% year over year, slowing from a 12.7% gain in the Jan-Jul period.  Construction starts, as measured by floor area, dropped 3.2% in the Jan-Aug period, accelerating from a 0.9% year-over-year decline in the first 7 months of the year.  China's property market has long been a key driver of the country's growth, while reorienting the economy toward domestic consumption has become a priority for policy makers concerned about an unhealthy tilt toward infrastructure- & export-led growth.  The weakness in these 2 sectors is likely to add to concerns about the growth trajectory in the world's 2nd-largest economy & prompt questions about whether authorities will intervene to support growth.  While policy makers remain comfortably on pace to hit their full-year growth domestic product target of at least 6%—H1 GDP growth was 12.7% year over year—further deterioration in these 2 sectors could change the calculus for leaders in Beijing.  The weakness in retail spending, in particular, came as Chinese authorities struggled with  a Delta variant outbreak that began in late Jul & quickly spread across the country, prompting the imposition of restrictions on people's movements.

China’s economy in trouble as COVID continues to plague country

The 10 year Treasury yield rose, following mixed economic data.  The yield on the benchmark 10-year Treasury note advanced by 5 basis points to 1.382% & the yield on the 30-year Treasury bond rose 4 basis points to 1.922%.  Yields move inversely to prices & 1 basis point is equal to 0.01%.  Data released yesterday showed retail sales in Aug rose 0.7%, versus an estimated 0.8% fall.  However, jobless claims for the week ended Sep 11 came in at 332K, above the forecast of 320K.

10-year Treasury yield rises slightly following mixed economic data

Many do not understand numbers & have difficult dealing with the debt ceiling limit.  But it is HUGE.  The guys in DC aren't worried & may not get excited until they are told there isn't enough money to pay them.  Then they will get busy.  Forgotten with all the chaos, those same guys have to fund the federal gov for the next 12 months,  That is dead in the water.  And then there's economic data.  It's fairly good all considered, but still soggy.  The stock market is only about even this month.

Dow Jones Industrials


Wednesday, September 15, 2021

Markets climb higher as oil rises to over $72

Dow tack on 236 (near session highs) advancers over decliners better than 5-2 & NAZ gained 123.  The MLP index rose 1+ to the 179s & the REIT index added 1+ to the 466s.  Junk bond funds were mixed & Treasuries continued weak.  Oil soared 2+ to the high 72s & gold dropped 12 to 1794 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

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The staff of the Food & Drug Administration declined to take a stance on whether to back booster shots of Pfizer's (PFE) Covid-19 vaccine, saying US regulators haven't verified all the available data.  “There are many potentially relevant studies, but FDA has not independently reviewed or verified the underlying data or their conclusions,” they wrote on the agency's website.  “Some of these studies, including data from the vaccination program in Israel, will be summarized during the September 17, 2021 VRBPAC meeting.”  The staff said some observational studies have suggested declining efficacy of the PFE vaccine over time against symptomatic infection or against the delta variant, while others have not. “Overall, data indicate that currently US-licensed or authorized COVID-19 vaccines still afford protection against severe COVID-19 disease & death in the United States,” they added.  The data the FDA is looking at includes efficacy numbers out of Israel, where researchers there have released observational studies showing the effectiveness of the PFE vaccine against infection waned over time.  The stock went up a dime.
If you would like to learn more about PFE, click on this link:

FDA staff declines to take stance on Pfizer’s Covid vaccine booster shots, citing unverified data

A well-known conservative anti-tax group is taking aim at the massive $3.5T spending package that Pres Biden & Dems are aiming to pass along party lines.  The Club for Growth is going up with a major advocacy ad blitz in 10 congressional districts that targets the Dems' package, which the group portrays as "out-of-control spending" that will spark further inflation.  And the commercials zero in on what the group calls "the $3 trillion tax increase proposed by the Democrats."  Club for Growth says it will spend $300K to run the ads on TV & digital for one week starting tomorrow.  But they highlight that that the spots will be the first phase of a $2M effort to oppose the Dems' wide ranging social spending package, which House Speaker Nancy Pelosi is pushing to pass thru the House by the end of the month.  "Nancy Pelosi and Stephanie Murphy pick your pocket. Their spending spree sparked record inflation, driving up prices and eating into the value paycheck," charges in the commercial that will run in the district of Dem Rep Stephanie Murray.  "Now they’re pushing a scam they call reconciliation. It’s really a $3 trillion tax hike that could cost your family $8,200. And experts warn its higher investment taxes could slam your retirement savings," the ad argues.  "Remind Murphy she works for you. Tell her to stop Nancy Pelosi’s tax scam."

Conservative group launches multi-million dollar push to derail Dems’ $3.5T plan

Police & firefighter unions, medical professionals & teachers are fighting against Pres Biden's & local officials' vaccine mandates, saying that America is a country of freedom & they will not comply with government overreach.  "Over the past couple of weeks, the idea of forced vaccination has caused much concern across the entire country," Riverside County, California, Sheriff Chad Bianco said.  "I will not enforce the vaccine mandate on Sheriff's Department employees."  Biden announced last week that companies with more than 100 employees must require vaccinations or weekly coronavirus testing, which affects as many as 100M Americans.  Employers who break the rules could face fines of $14K  per violation.  "The government has no ability and no authority to mandate your health choices," Bianco continued.  "As your sheriff, I have an obligation to guard your liberty and freedom."  His comments are emblematic of the sentiment of many police officials, nursing groups, firefighters & teachers across the nation who are trying to hit the brakes on the gov mandating vaccinations or face termination.  Some have even decided to walk off the job.  Nurses in a maternity ward at a hospital in upstate New York resigned over the state's vaccine mandate, forcing the hospital to temporarily halt all baby deliveries after Sep 24.  While in Alabama, medical professionals are bracing for a worsened staffing shortage over Biden's federal vaccine mandate if vaccine hesitant employees quit rather than comply.  "So what we want to see is everybody get vaccinated, and we want that to happen in a way that doesn’t force people to make a dichotomous choice to either stay in health care and get vaccinated or get out of the health care system," pres of the Alabama Hospital Association, Dr Don Williamson, said, noting that the staffing shortages in the state are already "dire."  Other local leaders in areas such as California & New York have also issued vaccine mandates in their jurisdictions with penalties such as termination.  Resistance to the mandates, however, has intensified since Biden's announcement.  The world's largest organization of sworn law enforcement officers, the National Fraternal Order of Police, issued a statement emphasizing vaccination is a "personal decision."

Staffing shortage fears intensify as workers fight vaccine mandates

Gold futures posted their first loss in 3 sessions, giving back almost all of the yesterday's gains that lifted prices to their highest settlement in nearly 2 weeks.  US inflation data yesterday proved to be supportive for prices of precious metals, lifting gold futures to their highest finish since early Sep as the $ slipped.  The consumer-price index climbed another 0.3% in Aug, compared with a rise of 0.5% in Jul.  Dec gold fell $12 (0.7%) to settle at $1794 an ounce.  Yesterday, the yellow metal tacked on $12 (0.7%) to $1807, the highest finish for a most-active contract since Sep 3.  The Fed's meeting next week may not provide the clarity investors are looking for, some analysts said.  Separately, the New York Fed's Empire State business conditions index surged 16 points to 34.3 in Sep, according to the regional Fed bank, though the forecast called for a reading of 17.2.  US industrial production rose by a less-than-expected 0.4% last month & capacity utilization climbed to 76.4%, the highest rate since Dec 2019.

Gold prices end lower after back-to-back session gains

Oil futures climbed to their highest settlement since late Jul, after gov data showed a more than 6M-barrel weekly drop in domestic crude supplies, marking a 6th-consecutive weekly decline.  West Texas Intermediate crude for Oct rose $2.15 (3.1%) to settle at $72.61 a barrel.  Nov Brent crude, the global benchmark, climbed $1.86 (2.5%) to $75.46 a barrel.  Both crude benchmarks post the highest settlements for front-month contracts since Jul 30.  The Energy Information Administration (EIA) reported that US crude inventories fell by 6.4M barrels last week, marking a 6th weekly decline in a row.  The drawdown was larger than the average decline of 3.5M barrels expected.  The American Petroleum Institute reported a 5.4M-barrel decrease.  The EIA data also showed crude stocks at the Cushing, Okla, storage hub edged down by 1.1M barrels for the week, but total domestic petroleum production climbed by 100K barrels to 10.1M barrels.  Hurricane Nicholas hit the Texas coast yesterday, bringing more rain & devastation to areas of the Gulf Coast previously inundated by Hurricane Ida in late Aug.  Offshore oil & natural-gas production in the Gulf of Mexico has been slow to recover in the wake of Ida.  The Bureau of Safety & Environmental Enforcement late yesterday estimated that 29% of offshore oil output in the Gulf remains shut in, equal to 537K barrels a day of production & around 39% of natural-gas output is also shut in, equivalent to nearly 1.1B cubic feet a day of output.

Oil prices end at highest since July as U.S. crude supplies fall a 6th-straight week

Buyers came out of hiding & bid prices higher late in the day.  But the Dow has only returned to where it was over 3 months ago (shown below).  Storms in the Gulf have reduced output which has been bullish for oil.  That will correct over time.  In the meantime storm clouds remain in DC's sky, starting with raising the debt ceiling, funding the gov for next year & the massive spending bill, are still around.  Worse, Covid has not given up its fight.

Dow Jones Industrials