Friday, September 25, 2020

Markets rise on renewed stimulus relief bill talks

Dow shot up 358 (closing near the highs), advancers over decliners about 3-1 & NAZ jumped 241.  The MLP index was steady in the 105s & the REIT index rose 5+ to the 341s.  Junk bond funds slipped lower & Treasuries was slightly higher.  Oil was steady, just above 40, & gold fell 7 to 1869 (more on gold below).

AMJ (Alerian MLP Index tracking fund)


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Treasury Secretary Steve Mnuchin said he & House Speaker Nancy Pelosi agreed to resume talks on another coronavirus relief package more than a month after negotiations first collapsed.  “I’ve probably spoken to Speaker Pelosi 15 or 20 times in the last few days on the CR,” Mnuchin told the Senate Banking Committee yesterday, referring to a continuing resolution (CR) to extend gov funding thru the end of the year.  "And we’ve agreed to continue to have discussions about the CARES Act.”  Pelosi also told reporters at the Capitol yesterday that she expected to revive negotiations with the White House shortly.  "We'll be hopefully soon to the table with them," she said.  Their comments come amid a high-stakes impasse between the 2 parties over another round of emergency relief for American workers & families still reeling from the virus-induced crisis.  Although Dems & Reps broadly agree that another bill is necessary to aid the economy's recovery, they sharply disagree over the size & scope of it.  Dems have offered to come down to $2.2T from the roughly $3T HEROES Act, which the House passed in May & insist the legislation needs to include extended unemployment benefits, a fresh round of $1200 stimulus checks & additional funding for state & local govs.  But the White House & Rep leaders want to keep the price tag closer to $1T amid growing concerns among some lawmakers over the ballooning deficit, which is projected to hit a record-shattering $3.3T this year, according to the Congressional Budget Office.  Asked last week whether she was allowing perfect to be the enemy of good by holding out for $2.2T, Pelosi said: "It's not perfect. Perfect is $3.4 trillion."  House Dems are drafting a $2.4T aid package in hopes of jumpstarting negotiations.  The revised measure is likely to include funding for state & local govs; a 2nd $1200 stimulus check; more than $100B in aid for schools to safely reopen & renewed funding for jobless aid.  Economists have urged lawmakers to cut a deal or risk imperiling the nascent recovery from the shutdown earlier this year.   "The CARES Act really did a lot of good in putting money in people's hands and keeping them in their homes and keeping them spending, keeping them in one piece," Federal Reserve Chair Jerome Powell said in congressional testimony this week.  "Going forward, more of that may be needed."  Congress is scheduled to be in session through early Oct.

Mnuchin, Pelosi agree to revive COVID relief talks; Dems draft $2.4T proposal

The US. recession was severe but also short and is now over, said Richmond Fed Pres Tom Barkin.  The US went into a recession on Mar 15 when the economy went into a lockdown to try to stem the outbreak of the coronavirus.  It ended in Jun or Jul, Barkin said.  The US economy sank at a record 31.7% annual rate in Q2.  Economists expect a sharp recovery in Q3.  A committee of economists led by the National Bureau of Economic Research decides the official timing of recessions & this is not known to be a swift process.  A decision could come “like three years from now,” about when the pandemic-hobbled economy slipped in & out of recession, Barkin quipped.  St Louis Fed Pres James Bullard said earlier  the economy could fully recovery on some metrics by the end of this year.  Even if the recession is over, Barkin said he didn-t think the economy would recover fully until 2021 or after.  The US economy “has kind of been in the hospital and we’re out of the hospital now but we’re recovering at home,” Barkin said.  “We’re vulnerable” to another adverse development, he added.  “That could be a lot of things. I mean imagine for a second some big showdown with Iran or China or imagine a terrorist incident on US soil.  Something else that wings in from left field, that's the thing I worry about the most.  “I do think the economy is getting healthier but we’re not healthy,” he said.

U.S. economy is out of recession but still vulnerable, Fed’s Barkin says

A rising tide worldwide of new cases & deaths from the coronavirus-borne disease COVID-19 has prompted calls for new shutdown measures overseas & more political wrangling in the US, but also reignited efforts to produce a stimulus bill to fend off a renewed pandemic-induced economic slowdown.  The global case tally reached 32M today as deaths grew to 984K, according to Johns Hopkins University.  In the US, the case toll climbed to nearly 7M & the death toll reached 203K.  There were 45K new cases reported in the US today, up from 41K yesterday.  That was close to the daily average of 42K over the past week, which was up 17% from the average 2 weeks earlier.  There were 885 new coronavirus deaths over the past day, down from 1091 a day before. 

U.S. cases rise toward 7 million, after jumping by more than 45,000 in a single day

Gold futures ended with a loss, with bullion booking its 4th decline in 5 sessions, prompting the asset to suffer its worst weekly slide in about 6 months.  Dec gold fell $10 (0.6%) to settle at $1866 an ounce, sending the metal to its lowest finish in 2months.  It saw a 4.9% weekly drop—the steepest for a most-active contract since mid Mar.  The chance for a 2nd Congressional stimulus package, which the stock market has been craving, remains slim.  This should also support the gold price.

Gold ends lower to suffer worst weekly slump since March

Stocks were around breakeven until midday when the announcement was made that talks resumed on another stimulus bill.  Stocks jumped even though the odds for a new bill (or significant bill) are weak.  Investors are hoping for the best but the 2 sides are still far apart.  The Dow finished the week down 500 & the NAZ finished up 100 thanks to late day buying today.  They're both in the red in the month.

Dow Jones Industrials








Markets climb on bargain hunting after recent selling

Dow rose 121, advancers over decliners about 5-4 & NAZ advanced 128.  The MLP index fell 1+ to the 104s (100 was the starting value 24 years ago) & the REIT index added 1+ to 337.  Junk bond funds pulled back & Treasuries were purchased.  Oil slid back to 40 & gold was off 11 to 1865.

AMJ (Alerian MLP Index tracking fund)

stock chart

CL=FCrude Oil39.75
-0.56-1.4%

GC=FGold1,856.50
-20.40-1.1%

White House economic adviser Larry Kudlow said the administration had relief $s left over from the CARES Act that it could put toward other stimulus measures.  When asked whether he thought a new stimulus package could possibly pass Congress now that the Supreme Court vacancy has become a key issue, Kudlow indicated he didn't think the administration's relief plans would be affected by the judicial situation “at the moment.”  “Our side has an efficient targeted assistance package, stuff we think is necessary,” Kudlow said, adding that there is money left over that could be “repurposed” toward those efforts.  During the first round of PPP relief, the Small Business Administration said more than 5.2M loans were approved, valued at a cumulative $525B.  There is about $130B that has not been used.  Reps have proposed a more targeted 2nd round of PPP loans intended to help businesses that have been most severely impacted by the pandemic.  A proposal in Jul called for $190 B worth of PPP funding to be made available to business owners with 300 employees or fewer whose revenue declined by at least 50% as a result of the coronavirus pandemic.

White House has money to ‘repurpose’ for additional coronavirus stimulus, Kudlow says

House Dems are preparing a new, smaller coronavirus relief package expected to cost about $2.4T as they try to forge ahead with talks with the Trump administration.  The bill would include enhanced unemployment insurance, direct payments to Americans, Paycheck Protection Program (PPP) small-business loan funding & aid to airlines, among other provisions.  To reach the price tag, Dems would chop roughly $1T from their previous proposal for a 5th pandemic aid plan.  The party aims to restart stimulus negotiations with the White House after talks fell apart last month.  House Speaker Nancy Pelosi has repeatedly pushed Treasury Secretary Steve Mnuchin & White House chief of staff Marl Meadows to boost the administration’s roughly $1.3T offer by another T $s.  Pelosi directed Dem committee chairs to draft legislation.  The House could vote on a bill as soon as next week, but Dems have not yet decided on a plan.  Dems & Reps have failed to come to agreement on more aid to combat the health & economic damage from the crisis, even after a $600 per week supplemental unemployment benefit, a federal moratorium on evictions & the window to apply for PPP loans lapsed.  Hopes for more legislation dwindled in recent weeks as Reps grew wary of spending & election-year politics infiltrated the process.  The GOP put together a scaled-back bill after a measure costing about $1T that they released in Jul failed to lead to a bipartisan breakthrough.  The discussions about a relief proposal come as concerns grow about the potential for the US economic recovery, boosted by the Ts in relief Congress has passed this year, appears to falter.  Federal Reserve Chair Jerome Powell, among other economic experts, has warned the economy could take a hit without more fiscal stimulus.

House Democrats prepare new $2.4 trillion stimulus plan with unemployment aid, direct payments

New orders for key US-made capital goods increased more than expected in Aug & demand for the prior month was stronger than previously estimated, suggesting a rebound in business spending on equipment was underway after a prolonged slump.  The upbeat report from the Commerce Dept, however, did not change views that the economy's recovery from the COVID-19 recession was slowing as gov money to help businesses & tens of Ms of unemployed Americans runs out.  New coronavirus cases are rising in some parts of the country.  That could crimp consumer spending, with retail sales already slowing.  Federal Reserve Chair Jerome Powell this week stressed the need for more fiscal stimulus, telling lawmakers that it could make the difference between continued recovery & a much slower economic slog.  Another rescue package appears unlikely before the Nov 3 presidential election.  Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 1.8% last month, the Commerce Dept said.  Data for Jul was revised up to show these core capital goods orders increasing 2.5% instead of 1.9% as previously estimated.  The forecast called for core capital goods orders gaining 0.5% in Aug.  Core capital goods orders last month were boosted by increased demand for machinery, primary metals, computers & electronic products.  But orders for fabricated metal products & electrical equipment, appliances & components fell.  Shipments of core capital goods increased 1.5% last month.  Core capital goods shipments are used to calculate equipment spending in the gov's GDP measurement.  They advanced 2.8% in Jul. Business investment tumbled at a record 26% annualized rate in Q2, with spending on equipment collapsing at an all-time pace of 35.9%.  Investment in equipment has contracted for 5 straight qtrs.  Economic activity rebounded sharply over the summer as businesses reopened after mandatory closures in mid-Mar to slow the spread of the coronavirus.  GDP is expected to rebound at as much as a record 32% annualized rate in Q3 after tumbling at a 31.7% rate in the Apr-Jun period, the worst performance since the gov started keeping records in 1947.

U.S. core capital goods orders beat expectations; business investment rebounding

Stocks began trading meandering, but bargain hunters are conseratively bidding prices higher.  Efforts to pass another stimulus bill are not getting much done.  GDP growth in Q2 should be dramatic & that will be followed by limited growth in Q3.  Meanwhile Ms of Americans are still looking for work.  Investors are being careful about investing funds after the 6 month rally.

Dow Jones Industrials

Thursday, September 24, 2020

Markets eke out gains after a weak jobless claims report

Dow rose 52 in a day of volatile trading, advancers barely ahead of decliners & NAZ was up 39.  The MLP index was flattish in the 105s & the REIT index rose 1+ to the 335s.  Junk bond funds were little changed & Treasuries crawled higher in price.  Oil went up above 40 again & gold finished up 2 to 1870 (more on both below).

More Americans are focused on paying their bills on time as the economy steers a recessioin brought on by the coronavirus pandemic.  Nearly ½ of American households have seen a decline in their income since the outbreak, and with Ms out of work or making less, the financial implications are far-reaching.  According to a new study by Bankrate, 46% of US adults have prioritized catching up or staying current on bills over the past few months.  That figure is up 38% from the same time last year.  The survey questions, which asked participants about their financial priorities over the past few months & the extent to which those priorities were met, has been administered about ½ a dozen times since 2012.  Saving more money remains the 2nd most-cited financial priority from previous years, followed by paying down credit card debts or student loans & providing financial assistance to family members of friends.  “While staying current on bills is typically the top answer, we have not seen it to the reported extent and by such a wide margin in quite some time,” CFO at Bankrate Greg McBride said.  “That was the alarming result. What we are seeing here is a reflection of the fact that that has become more widespread in this recession.”  Financial priorities have not discriminated either.  Across all income brackets, 49% of households have seen a decline in income since the pandemic.  And among every demographic classification of income group, gender, race, age, geographic location & political affiliation, staying current on the bills was the most commonly cited priority.  While 52% of households with an annual income of under $50K cited this as their top financial priority in recent months, 45% of upper-middle class households & 37% of higher-income households reported the same.  Between generations, ½ of baby boomers ranked staying current on bills as their top concern, followed by millennials, with nearly ½ of those ages 24-39 stressing the importance of staying up-to-date on payments.  Even though no age group or income bracket has been immune to the financial repercussions brought on by the pandemic, the impact has fallen hardest on younger & lower-income workers.  Unemployment and income reduction tends to skew younger.  As result, millennials continue to take more of the brunt of joblessness & reduced income during the pandemic.  As the economy heads into a deeper economic woes, more Americans are focused on trying to pay the bills every month.  “We are all in for an extended period of financial difficulty for millions of households due to elevated unemployment, extended periods of joblessness and reduced incomes,”  McBride said.  “Americans have been running down on what were meager savings to begin with. The longer the economic effects of a pandemic stretch on, the more financial hardship households will feel and the more households that will feel.”

More Americans are concerned about paying bills on time during pandemic

The US economy is within reach of a nearly full recovery by the end of the year, said St Louis Fed Pres James Bullard.  The economy is expected to have rapid growth in Q3, reversing the steep decline in the Apr-Jun qtr when the pandemic shut down the economy.  Economists now expect strong growth in the Juy-Sep qtr.  If this continues in Q4, Bullard said the US could return to the average level of national income, one way to measure the broader economy, in 2019.  For instance, if GDP grows at a 35% rate in Q3, it would need growth at a 10% rate in the final 3 months of the year to hit that level.  Such a forecast is “a little bit outside of what even the optimistic forecasters are saying but I wouldn’t put it out of the realm of possibility that you could have the fourth quarter GDP close to our average for 2019 and that would be a great outcome for the U.S. economy,” Bullard added.  Economists expect Q3 GDP will grow at a 25% annual rate as it snaps back from the worst of the shutdown & they believe Q4 will see growth at a slower 6% pace.  The economy plummeted by a record 31.7% rate in Q2.  Bullard said the fact that hitting the 2019 average income level is a possibility “shows you how far we’ve come.”  He said a 2nd wave of the pandemic was possible but that it shouldn't dominate forecasts.  “What I’m kind of pushing gently back against in the forecasting community and maybe showing my colleagues, is that the baseline case is really that the private sector is adapting,” Bullard said.  He didn't think the US was “that far from having simple, easy, technological solutions” that could lead to a return to activity, pointing to advances in rapid testing.  He cautioned that downside risks remain substantial & things could go wrong, adding that he wasn’t advocating a change in the Fed's low-interest-rate policy & agreed with other Fed officials that the economy was still in a deep hole.

Fed’s Bullard says U.S. economy within reach of full recovery this year

The global tally for confirmed cases of the coronavirus that causes COVID-19 climbed to 32M, according to data aggregated by Johns Hopkins University<, while the death toll rose to 977K.  The US was the world's leader with almost 7M cases & 202K deaths.  There were at least 1091 new deaths in the US yesterday, up from 942 the day before, while new cases reported increased to 42K from 37K the day before.  The new case tally compares with the daily average 41.8K over the past week, which is up 14% from the average 2 weeks earlier.  Brazil has the 2nd highest death toll in the world at 138K & 3rd highest case tally at 4.6M,.  India is 3rd with 91K deaths & 2nd with 5.7M cases.  Mexico is 4th with 75K deaths & 7th with 710K cases.  The UK has 42K deaths & 412K cases, the highest death toll in Europe & 5th-highest in the world. 

Coronavirus tally: U.S. death toll jumps by more than 1,000 in a day

Gold futures ended higher to tally their first gain in 3 sessions, as a recent price drop to a 2-month low raised the precious metal's appeal among bargain hunters.  Prices for the metal had been trading lower early in the session & remains more than 4% lower for the week, with overall strength in the $ contributing mightily to the deterioration in bullion.   Dec gold rose by $8 (0.5%) to settle at $1876 an ounce.  Prices based on the most-active contract logged a 3rd straight session decline yesterday & settled at their lowest since late Jul.  Gold had been trading lower as a weekly reading of those seeking unemployment benefits, used as a running gauge of the health of the economy amid the viral pandemic, came in somewhat weaker than expected. 

Gold futures score first gain in 4 sessions

Oil futures finished higher, supported by signs of tighter US crude supplies, despite persistent concerns that rising cases of COVID-19 will lead to weaker energy demand.  West Texas Intermediate crude for Nov edged up 38¢ (1%) to settle at $40.31 a barrel after tapping a low at $39.12.  Nov Bre, the global benchmark, added 17¢ (0.4%) to trade at $41.94 a barrel.  Oil rose yesterday after the Energy Information Administration reported that US crude inventories fell for a 2nd straight week, by 1.6M barrels last week.  That was much less than the forecast for a decline of 4M barrels, but the American Petroleum Institute yesterday had reported an increase of 691K barrels.

Oil prices end higher, buoyed by signs of tighter supplies

Stocks struggled in the AM & then rallied during the midday period.  The sellers to the Dow briefly into the red followed by limited buying into the close.  The weak jobless claims report plagued the market all day.  More news about the virus fighting back was another negative for the the market.  Attempts for stocks to rally this month have sputtered.

Dow Jones Industrials