Tuesday, April 7, 2020

Markets rally ends in volatile session

Dow finished down 26 after being up almost 1K in early trading, advancers over decliners 3-1 (hard to believe) & NAZ fell 25.  The MLP index added 2+ to the 97s & the REIT index added 2 to the 308s.  Junk bond funds continued strong & Treasuries were sold.  Oil gave back 1+ to the 24s & gold fell 14 to 1679 (more on both below).

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Treasury Secretary Steve Mnuchin asked Congress to approve an additional $250B to replenish the fund for small business loans as thousands vie for the gov-backed aid.  Mnuchin said he spoke with Senate Majority Leader Mitch McConnell, Senate Minority Leader Chuck Schumer, House Speaker Nancy Pelosi & House Minority Leader Kevin McCarthy about securing the extra funding at the request of Pres Trump.  McConnell said he will attempt to fast-track a vote on the additional funds for Thurs, as small businesses flood the 3-day-old program seeking emergency relief.  The pending request would go toward a $349B small business program that was an integral part of the $2.2T coronavirus relief package passed at the end of Mar.   Known as the Paycheck Protection Program, it's designed to get cash in the hands of struggling small businesses & incentivize them to keep staff on payroll, or re-hire workers who have already been laid off.  Banks & the Small Business Administration have been flooded by applications since the program began operating on Fri.  So far, more than 225K loans worth more than $60B have been processed by 3K lending institutions, according to a Small Business Administration official.  Community banks continue to lead the way, while some of the nation's biggest banks are accepting applications, but have not yet processed the loans thru the SBA.  “There was overwhelming interest, and we are working person by person to get the information we need to input (by hand) the information into the SBA system,” a spokesperson for JPMorgan Chase said.  “We have thousands of bankers working with our small business customers to help them get the funds they need.”  Wells Fargo did not begin accepting applications until Sat, & by Mon, said it hit the $10B limit it established for loans under the program.

Treasury's Mnuchin asking for $250B to replenish small business loan program

More than ¼ of the US economy has suddenly gone offline as the coronavirus pandemic forces an unprecedented shutdown of business throughout the country, according to new research.  The study, published by Moody's Analytics, found that while 8 in 10 US counties are under lockdown orders, they represent nearly 96% of national output.  At least 41 states & DC have ordered some businesses to close, with just 4 states — Arkansas, Iowa, Nebraska, North Dakota & South Dakota — fully holding out from directing Americans to remain at home, according to Moody's.  Restaurants, bars, hotels, gyms, beauty salons, entertainme not venues & other businesses deemed non-essential have been ordered to close.  As a result, US economic output has plunged by roughly 29%, compared with the first week of Mar, before the country began shutting down.  Moody's Analytics chief economist Mark Zandi, however, said that he does not believe the 29% monthly drop in daily output will be sustained over 2 more months, which he said could lead to a 75% drop in the nation's GDP during the 2nd qtr.  Instead, he expects many counties to reopen before the summer & forecast a 30% decline in Q2 growth.  Still, the magnitude of the drop in daily output is stunning: Between 1929 & 1933, during the Great Depression, annual output fell 26%.  Quarterly output fell 4% between late 2007 & mid-2009, during the last recession.  “This is a natural disaster,” Zandi said.  “There’s nothing in the Great Depression that is analogous to what we’re experiencing now.” The US lost 701K jobs in Mar, the steepest one-month decline since 2009.  Restaurants & bars accounted for a bulk of the losses, losing 417K positions alone last month.  The Labor Dept’'s employment report, which is based on surveys conducted in the early weeks of the month, when large swaths of the economy had not yet shut down, does not fully reflect the depth of the economic calamity that the virus outbreak has inflicted.  In the final 2 weeks of the month, 10M Americans applied for unemployment benefits.

US economic output plunges by 29%

New York City's death toll from the coronavirus eclipsed the number of those killed at the World Trade Center on 9/11, health officials said.  In Britain, Prime Minister Boris Johnson was in intensive care with the virus.  More than 3200 have died in New York from COVID-19, according to the count released by the city.  The deadliest terror attack on US soil killed 2753 in the city & 2977 overall, when hijacked planes slammed into the twin towers, the Pentagon & a Pennsylvania field on Sep 11, 2001.  New York state recorded 731 new coronavirus deaths, its biggest one-day jump yet, for a statewide toll of nearly 5500, Gov. Andrew Cuomo said.  “Behind every one of those numbers is an individual. There’s a family, there’s a mother, there’s a father, there’s a sister, there’s a brother. So a lot of pain again today for many New Yorkers,” he added.  But in an encouraging sign, Cuomo reported that hospital admissions and the number of those receiving breathing tubes are dropping, indicating that measures taken to force people to keep their distance from one another are succeeding.  And alarming as the one-day increase in deaths might sound, the governor said that's a “lagging indicator,” reflecting severely ill people who had been hospitalized before this week.  Over the past several days, in fact, the number of deaths in New York appeared to be leveling off.  “You see that plateauing — that’s because of what we are doing. If we don’t do what we are doing, that is a much different curve,” he said.  “So social distancing is working.”  Across the US, the death toll topped 11K, with around 370K confirmed infections.  Some of the deadliest hot spots included Detroit, New Orleans & the New York metropolitan area, which includes parts of Long Island, New Jersey & Connecticut.  In London, the 55-year-old Johnson, the world’s first head of gov known to have fallen ill with the virus, was in stable condition & conscious at a hospital, where he was receiving oxygen but was not on a ventilator, said his spokesman.   Foreign Secretary Dominic Raab was designated to run the country in the meantime.  “We’re desperately hoping that Boris can make the speediest possible recovery,” said Cabinet minister Michael Gove, who is among scores of British officials in self-isolation.  Elsewhere around the world, Japan's prime minister declared a state of emergency for Tokyo & 6 other regions after a spike in infections, but it was a stay-at-home request — not an order — & violators will not be penalized.  Japan has relatively few infections & deaths but has the world's oldest population, & the elderly have proved especially vulnerable to the virus.

New York sees deadliest day for virus

As the Trump administration & congressional leaders push forward with another stimulus package to prop up the US economy during the coronavirus pandemic, House Speaker Nancy Pelosi has told Dems that a 4th relief plan will be at least another $1T.  She vowed to put together the package in time for a House vote this month.  The House & Senate aren't scheduled to be back in session until at least Apr 20, but it's possible to pass legislation with most members out of town, so long as no one objects.  Senate Majority Leader Mitch McConnell said that there will be another package & that health care must be at the “top of the list.”  He also said Congress needs to focus on correcting any shortcomings in the earlier aid bill.

Pelosi says fourth coronavirus stimulus package could cost $1T

Gold futures settled lower, giving up earlier gains that saw the metal top $1700 an ounce to reach its highest intraday level since 2012.  Jun gold declined by $10 (0.6%) to settle at $1683 an ounce, after jumping 2.9% in the previous session.  It touched an intraday high of $1742 today, the highest intraday mark for a most-active contract since late 2012. 

Gold ends lower after topping $1,700 to tap highest intraday level since late 2012

Oil futures gave up earlier gains to settle lower, pressured after a US gov report lowered its US & global benchmark price forecasts & outlook for domestic production for this year & next.  Traders also weighed prospects for a global output cut when major producers hold a virtual meeting later this week.  The outlook for prices looked more bearish after the Energy Information Administration lowered its 2020 forecast for West Texas Intermediate & Brent crude oil prices, according to the Short-Term Energy Outlook report released today.  The gov agency also cut its expectations for 2020 US crude-oil production by 9.5% to 11.7M barrels a day—less than some may have expected.  West Texas Intermediate crude for May delivery fell $2.45 (9.4%) to settle at $23.63 a barrel.  Jun Brent crude, meanwhile, lost $1.18 (3.6%) to $31.87 a barrel.  News reports said Saudi Arabia & Russia were making progress toward an agreement that would curb production, ending a price war that has flooded the world with unneeded crude & filled storage tanks even as demand evaporated as major economies shut down in an effort to contain the COVID-19 pandemic.  Major oil producers are scheduled to hold a virtual meeting on Thurs.It was reported that OPEC+ will only agree to deep output cuts if the US & others joint in with the output curbs, while the Energy Dept said that domestic output was already falling without gov action.

Oil ends lower as EIA cuts price forecasts and traders weigh prospects for a global output cut

The Dow was strong in the first hour of trading, then sellers came in.  Trading was volatile with some traders taking profits.  The war over coronavirus may have taken a turn for the better.  But that is not clear & even if correct, recovery will take a lot of time.  The economy keeps stumbling with dismal repoprts as seen above in the output report.  Thurs draws near when the next jobless claims report will update data & that promises to be dreary.  The economy is in a severe depression even though the time frame is not measured in years like in the 1930s.  This is a depression which is why the gov is throwing money around to start a recovery.  Additionally, there was a report that Japan is considering a $1T spending program to help its economy.  These are tough times for everybody & nervous investors keep buying gold.

Dow Jones Industrials

Markets rise as Trump is looking for ways to open part of the economy

Dow jumped up 524 (off early highs), advancers over decliners better than 6-1 & NAZ gained 82.  The MLP index jumped up 5+ to 100 (the starting point 25 years ago) & the REIT index rose 11 to 317.  Junk bond funds found more buyers attracted by high yields & Treasuries were sold as stocks were bid higher.  Oil rose to the 26s on renewed hopes for production cut & gold slid back 2 to 1691.

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Treasury Secretary Steve Mnuchin said that President Trump is looking at how to reopen parts of the US economy as the coronavirus pandemic forces an unprecedented shutdown of business throughout the country.  "The president is very much looking at how we can reopen parts of the economy," Mnuchin said.   "There are parts of the country, like New York, where obviously this is very, very concerning. There are other parts of the country where it’s not."  Restaurants, bars, hotels, gyms, beauty salons, entertainment venues & other businesses deemed nonessential have been ordered to close, while 41 states have enacted strict stay-at-home policies, bringing American life to a grinding halt.  The result has been an economic free-fall that experts warn will be worse than the 2008 financial crisis.  In the final 2 weeks of Mar, a record-shattering 10M Americans filed for unemployment benefits, a stunning sign of the depth of the downturn.  Estimates vary drastically for how high unemployment will climb, but economists broadly agree that it will be grim.  An analysis published by the Federal Reserve Bank of St Louis last week projected that unemployment could hit 32% in Q2 as more than 47M workers are laid off because of the pandemic.  That would exceed the 25% peak during the Great Depression.  To prop up the economy, Congress passed a $2.2T stimulus package that includes a one-time cash check of up to $1200 for adults who earn less than $99K; $350B in forgivable loans for small businesses to maintain their payrolls & a $500B  fund for bigger companies.  Mnuchin said the direct payments are slated to be sent by the end of next week.  The $349B Payroll Protection Program, meanwhile, is designed to get cash in the hands of struggling small businesses & incentivize them to keep staff on payroll, or re-hire workers who have already been laid off.  To receive the aid, businesses must have been operational by at least Feb 15.  The $349B Payroll Protection Program, meanwhile, is designed to get cash in the hands of struggling small businesses and incentivize them to keep staff on payroll, or re-hire workers who have already been laid off.

Mnuchin: Trump now 'looking at' how to reopen parts of US economy

As the coronavirus pandemic clobbers the US economy, more voters in pivotal 2020 election states are worrying about losing their jobs or wages, a poll found.  More than 1/3 of respondents in the 6 key states who have already lost income or employment said they could afford food, housing & other essential costs for less than a month, according to States of Play, a joint CNBC/Change Research survey of swing states.  Even so, the likely voters polled in Arizona, Florida, Michigan, North Carolina, Pennsylvania & Wisconsin overwhelmingly said they are more worried about their health than their finances.  The COVID-19 outbreak has ripped thru the US, infecting more than 368K & leading to 11K deaths, according to data compiled by Johns Hopkins University.  Business shutdowns across the countrycaused the economy to shed 701K jobs in early March — though a tally of roughly 10M new jobless claims over 2 weeks indicates the economic destruction is much worse than the employment report showed.  While respondents’ worries about losing income have jumped since the first iteration of the swing state poll taken in mid-Mar, voters now fear for their health most.
  • 84% of respondents in Apr said they have “very” or “somewhat” serious concerns about themselves or a family member getting sick, up from 51% in Mar. 
  • 82% of likely swing-state voters said they were more worried about about their family's health & safety than their family's financial situation, while 18% said the opposite. 
  • 81% said they had significant concerns about a recession, a jump from 57% last month. 
  • Fears about lost wages spiked, with 65% now seeing it as a very or somewhat serious concern in Apr, versus 35% in Mar.
  • 39% said the same about losing a job, an increase from 16% last month. 
  • Only 35% of respondents said the US economy is good or excellent, versus 65% who called it poor or not so good.  It marks a major shift from Mar, when 57% of respondents rated it as good or excellent.
In the Apr survey, 30% of likely voters in the 6 states said they have lost wages because of the coronavirus, 27% responded that they have seen fewer hours at work & 11% said they have lost their job.  Among those who lost wages, 40% said they could cover their cost of living for less than a month, while 72% responded that they could pay for food, housing & other essentials for less than 2 months.  For people who lost jobs, those figures increased to 42% & 76% for one month & 2 months, respectively.

More Americans worry about losing wages, covering costs as coronavirus spreads, poll finds

The Federal Reserve announced it would take new action to support America's small businesses as coronavirus-related prevention measures have led to mass closures all around the country.  The central bank will pump up lending to small businesses by encouraging banks to make more loans thru the newly implemented Paycheck Protection Program (PPP).  It said that it will set up a facility to provide term financing backed by PPP loans, which would potentially free up room on lenders' balance sheets so they could make more loans.  The Small Business Administration launched the Paycheck Protection Program on Fri – a measure implemented as part of Congress multitrillion-$ stimulus package.  The program provides forgivable loans of up to $10M to small businesses, so long as they keep their staffing levels & salaries constant.  According to the administration, more than $40B worth of loans to small businesses had been processed.  That equates to more than 130K loans.  There are concerns that the $350B set aside for the program would not be enough.  Pres Trump tweeted that he would request additional funds for the program from Congress if the initial round is depleted.

How the Fed plans to save America's struggling small businesses

The Dow surged 800 in opening trades, then dropped over 500 & is bouncing back with buying.  As has become routine in recent weeks, there is high volatility making it difficult to understand what is truly going on in the stock market.  However, there are some simple truths.  Q2 will be dreadful for US GDP.  There will be a significant contraction, probably the largest in history.  Quibbling about numbers is meaningless.  It will be dreadful.  Managing the recovery will be done carefully because so much damage has been done already to the economy & understanding how to defeat the virus will take take time.  At least many investors are generally optimistic about the future but negative ones keep buying gold.

Dow Jones Industrials

Monday, April 6, 2020

Markets surge on hopes coronavirus is slowing

Dow skyrocketed a whopping 1627 (at session highs), advancers over decliners 10-1 & NAZ soared a staggering 540.  The MLP index rose 12+ to the 95s & the REIT index shot up 19 to 303s.  Junk bond funds had nice gains while Treasuries were in heavy demand.  Oil sank 2+ to the 26s on concerns about production cuts (more below) & gold jumped up 67 to 1713 (near multi year highs).

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The Trump administration & Congress have begun deliberations on a 4th aid plan intended to alleviate economic pain caused by the coronavirus pandemic.  In recent days, White House officials have discussed pitching a payroll-tax cut, a capital-gains tax cut, creating 50-year Treasury bonds & a waiver that would clear businesses of liability from workers who contract COVID-19, the respiratory illness caused by the novel coronavirus, on the job, a senior administration official confirmed.  But the proposals are very preliminary & do not reflect any sort of presidential direction beyond what Pres Trump has already mentioned.  Last week, Trump called for a $2T infrastructure bill focused on jobs & rebuilding the nation's crumbling bridges & roads that he said would serve as "phase 4."  Trump's chief economic adviser Larry Kudlow told reporters at the White House that he's discussed the possibility of a coronavirus-related Treasury bond to raise cash for relief efforts.  "We’re just looking at it,” he said.  “Let’s see where it leads."  Dems have pushed for another round of aid, as well, with House Speaker Nancy Pelosi pushing for more money for states, free coronavirus treatment, worker protections & expanded paid family & sick leave.  But Pelosi is publicly at odds with Senate Majority Leader Mitch McConnell & other Senate Reps, who have taken a wait-&-see approach to additional legislative help.  "I think we’ll have to wait and see," McConnell said last week.  "Remember, this bill was only signed into law last Friday. So it’s only been law for about four days. And the Speaker is already talking about another bill." 

What could be included in fourth coronavirus stimulus package

Russia is ready to reduce its production very substantially to prop up weak oil, according to 2 Russian source, without giving precise numbers.  They spoke as OPEC & other producers, known as OPEC+, plan to hold a video conference on Thurs to discuss how to support the oil market.  The Russian energy ministry did not respond immediately to a request for comment.  Kremlin spokesman Dmitry Peskov told reporters earlier today that Moscow was ready to work with other leading oil exporting countries.  A gov & an industry source, speaking on condition of anonymity, also said total cuts of 10M barrels per day proposed so far might not be enough to steady the global oil market given the weakness of demand following lockdowns to curb the spread of the new coronavirus.  Last week, Russian Pres Vladimir Putin said OPEC+ cuts could amount to around 10M barrels per day (bpd), or some 10% of global output.  Russian production reached 11.3M bpd in Mar.

Russia ready to cut oil output

Pres Trump's chief economic adviser Larry Kudlow suggested the US economy could bounce back from the coronavirus pandemic within 4-8 weeks, as the federal gov commits Ts of $ to protect workers & businesses from the health crisis.  "I still believe, given our assistance package, and hope and maybe pray that we're at a four- to eight-week period, we can get a pretty good snapback. A good snapback," Kudlow told reporters.  "That's my hope."  The US has the highest number of confirmed cases of COVID-19, the respiratory illness caused by the novel coronavirus, with over 337K infected, according to Johns Hopkins University data.  More than 9600 people in the country have died from the virus.  The depth of the economic downturn is still unknown, but early data indicates it will be severe: In the final 2 weeks of the month, a record-shattering 10M Americans applied for unemployment benefits, surging past the levels seen during the worst of the 2008 financial crisis.  Restaurants, bars, hotels, airlines, cruise lines, automakers & entertainment venues have been hit hard by the pandemic as a growing number of jurisdictions have ordered the closure of nonessential businesses & directed residents to stay at home.  Estimates vary drastically for how high unemployment will climb, but economists broadly agree that it will be grim.  An analysis published by the Federal Reserve Bank of St Louis last week projected that unemployment could hit 32% in Q2 as more than 47M  workers are laid off because of the pandemic.  That would exceed the 25% peak during the Great Depression.  "The sooner we begin to reopen, the faster that snapback is going to be," Kudlow added.  "We came into this with a very strong economy. It got interrupted by the virus, if that's the right word. if this thing can be stabilized fairly soon, yes I do think we'll snap back. It may be more of a prayer than I hope, I understand that, but I'm an optimist."

Kudlow says US economy could 'snap back' from coronavirus crisis

Americans' outlook on the economy deteriorated significantly in Mar as the coronavirus pandemic took hold in the US, forcing cities and states to take unprecedented measures to contain the outbreak.  The Federal Reserve Bank of New York said in its latest Survey of Consumer Expectations that among Americans, the perceived probability of losing unemployment jumped to 18.5%, the highest level recorded since the survey started in 2013.  A majority of those surveyed said they expect unemployment to rise over the next year.  The probability of finding a new job over the same time period fell to 53%, from Feb's 58.7%.  According to the bank, “the drop was broad-based across age, education and income groups.”  The survey also included a sharp decline in expectations for growth in income & spending, while expectations for home price gains fell to just 1.3%, another record low.  The report was conducted between Mar 2 & Mar 31, when jurisdictions across the country directed Ms to stay at home & forced nonessential businesses to shut down to mitigate the spread of COVID-19, the respiratory illness caused by the novel coronavirus.   Altogether, about 250M Americans (75% of the country) are under strict orders to stay at home.  Consumer confidence has nosedived as the 11-year economic expansion abruptly came to an end.  The depth of the economic downturn is still unknown, but early data indicates it will be severe: In the final 2 weeks of the month, a record-shattering 10M Americans applied for unemployment benefits, surging past the levels seen during the worst of the 2008 financial crisis.  The jobless rate rose to 4.4% from 3.5% in Mar, the fastest one-month pace since 1975 & could rise as high as 10% in Apr, some economists have suggested.

Consumer expectations plunge as coronavirus drags on economy

Oil futures settled with a loss, with US prices down for the first time in 3 sessions.  A key meeting of major oil producers that was originally expected today was pushed to Thurs, contributing to uncertainty in the market as traders await news potential crude production cuts.  May West Texas Intermediate oil fell $2.26 (8%) to settle at $26.08 a barrel following 2 consecutive sessions of gains.

U.S. oil prices mark first loss in 3 sessions

As has become common in recent weeks, stocks had another wild day.  This time buyers came out in force, bidding up stock prices & never looked back.  Investors hope for good news on fighting coronavbirus.  However, news on winning this war will take time.  NY has been the hardest in the US.  While everybody hopes its data is reaching an apex, that is still a big unknown.  Even if this turns out to be the high point for the virus, dreary numbers will be around for some time.  Given the enormous gains today, profit taking can be expected tomorrow & potentially after.  Meanwhile gold soared.  Investors with negative thinking about the recovery are buying gold.  Stocks & gold were not meant to surge simultaneously.

Dow Jones Industrials