Dow tumbled 603 (close to session lows), decliners over advancers about 4-1 & NAZ sank 148. The MLP index dropped 3 to the 204s & the REIT index dropped 5+ to 410. Junk bond funds (stock with high yields) slid lower & Treasuries continued in demand as stocks were sold. Oil fell to the 51s on an unusually wild day for trading & gold went up 4 to 1593 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Whenever you talk about a deadly event like the coronavirus, you have to show respect to the human side of the story. At the same time, you also have to think about the financial & economic side. Ground zero for the outbreak of the virus may be the Chinese city of Wuhan, but financially, Ground zero is oil. Oil prices are on track to have their most significant one-month net & percentage decline since the week ending Nov 30, 2018. The reason oil is being hit hard is because demand is the first thing that gets destroyed in this situation. Demand destruction is a permanent loss of oil demand due to unexpected events. So far, the coronavirus is creating oil demand destruction on a massive scale. As soon as it began to unfold, China, on Jan 23, took the unprecedented step of putting a quarantine on the city of Wuhan 11M people. They closed stores canceled plane flights & trains which brought oil demand to a near standstill. But that was just the beginning. Soon China expanded the order to the entire province of Hubei, effectively parking nearly 56M. This came on the important Lunar Day holiday for China. Chinese authorities saw a drop of almost 30% in travel from the year before. In an attempt to slow the spread of the virus, they decided to extend the Lunar Day holiday to Feb 2. In China, factories are still closed & will remain closed. Hundreds of flights out of Wuhan & the surrounding 16 cities in Hubei Province. This week the WHO declared the outbreak a "public health emergency of international concern" & another bold step unfolded yesterday when the State Dept issued a "Do Not Travel to China" advisory. Initially, global oil demand destruction was estimated to be around 200K barrels a day. Yet now as the virus fears spread its probably more than twice that amount. Due to canceled flights in China & across the globe, we may see 300K barrels a day of lost jet fuel demand alone. Today, American Airlines (AAL) & Delta (DAL) issued additional flight reductions to the region. Because of that, it looks like OPEC along with Russia, is in talks to add another 500K barrels of production cuts to offset the demand loss but if the virus fears continue to slow global economic growth, it might not be enough. On top of that, there has generally been warm winter around the globe. That caused a significant drop in diesel & jet fuel demand & pushed prices to a one-month net decline not seen since Nov 2018. Gas prices are also seeing substantial reductions having its most extensive one month net & percentage drop since last Aug. It did not help to see that China's manufacturing sector was struggling before the reports of the outbreak happened. China's Purchasing Managers’ Index (PMI) fall to 50.0 in Jan from 50.2 in Dec, China's National Bureau of Statistics (NBS) said today. The reading was in line with forecasts & hit the neutral 50-point mark that separates growth from contraction on a monthly. Yet what could also hurt demand is fear. Fear that the virus could spread. It is now being reported that the coronavirus has spread from China to around 20 countries, killing more than 200. If people start to fear the virus & stay home, it could have a more significant impact on the economy.
US health officials have quarantined 195 Americans evacuated from Wuhan, China, taking the rare step of issuing a mandatory order for the first time in more than 50 years to help contain an outbreak of a new coronavirus that’s spread to roughly 10K people across the globe. “CDC under statutory authority of the HHS secretary has issued federal quarantine orders for all 195 passengers,” Dr Nancy Messonnier, director of the National Center for Immunization & Respiratory Diseases, said on a conference call today. “While we recognize this is an unprecedented action, we are facing an unprecedented public health threat.” The new coronavirus, which was discovered about a month ago, can spread before symptoms show, she said, citing a new report from the New England Journal of Medicine. The illness has quickly spread throughout mainland China, with 7K new cases confirmed over the last week & at least 213 deaths. “This is a very serious public health situation and CDC and federal government has and will continue to take aggressive action to protect the public,” she added. “If we take strong measures now, we may be able to blunt the impact on the United States.”
CDC issues mandatory quarantine for first time in more than 50 years to Wuhan passengers
Gold settled lower, pulling back from the more-than-6-year high it settled at a day earlier, but prices scored a 2nd straight monthly climb. Against that backdrop, gold for Apr delivery lost $1.30 to settle at $1587 an ounce. Prices for the most-active Apr contract saw weekly climb of 0.6% & a rise of about 3.8% for the month. The settlement level also marked the highest weekly price finish since 2013. Gold's rally was boosted this week as worries mounted over the potential global economic impact of the spread of the coronavirus. Those concerns helped burnish gold's appeal as a haven as investors shunned risky assets, including stocks. Global equity markets were under pressure today, but US stocks had rebound on yesterday after the World Health Organization declared the outbreak a global emergency, with analysts tying the bounce to relief over the lack of a recommendation by the body to restrict travel to or trade with China. Beijing has reported nearly 9700 cases of coronavirus, while the death toll has climbed to 213. The US State Dept today urged Americans not to travel to China.
Manufacturing activity in the Midwest sank in Jan to the lowest level since 2015, according to a survey of businesses released today by MNI Indicators. The Chicago Purchasing Managers Index fell to 42.9 this month from 48.9 in Dec. Any reading below 50 indicates deteriorating conditions. The forecast expected a small dip to 48.5. All 5 of the major components declined, with orders backlogs & new orders leading the way & production also cooled. The Chicago PMI has been below 50 since Jul. Other regional manufacturing surveys have not been as weak & showed some improvement this month. Economists think the Boeing (BA), a Dow stock, production halt for the 737 Max is weighing on the index. Additionally Caterpillar (CAT), another Dow stock, expects demand for its machinery to slump this year. The closely watched national ISM manufacturing purchasing managers index will be released on Mon. The forecast is for a slight improvement from Dec's 47.2% reading, which was the lowest since 2009. The national index has been below 50 for 5 straight month.
After a dreary start, this turned out to be a brutal day for stocks. Fears on growing complications from the coronavirus drove the selling. This outbreak is so scary that buying in safe haven gold & Treasuries was limited. All investors are nervous. The Dow finished down 280 in Jan & the outlook for Mon looks to be be bleak without good word on containing the virus.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Whenever you talk about a deadly event like the coronavirus, you have to show respect to the human side of the story. At the same time, you also have to think about the financial & economic side. Ground zero for the outbreak of the virus may be the Chinese city of Wuhan, but financially, Ground zero is oil. Oil prices are on track to have their most significant one-month net & percentage decline since the week ending Nov 30, 2018. The reason oil is being hit hard is because demand is the first thing that gets destroyed in this situation. Demand destruction is a permanent loss of oil demand due to unexpected events. So far, the coronavirus is creating oil demand destruction on a massive scale. As soon as it began to unfold, China, on Jan 23, took the unprecedented step of putting a quarantine on the city of Wuhan 11M people. They closed stores canceled plane flights & trains which brought oil demand to a near standstill. But that was just the beginning. Soon China expanded the order to the entire province of Hubei, effectively parking nearly 56M. This came on the important Lunar Day holiday for China. Chinese authorities saw a drop of almost 30% in travel from the year before. In an attempt to slow the spread of the virus, they decided to extend the Lunar Day holiday to Feb 2. In China, factories are still closed & will remain closed. Hundreds of flights out of Wuhan & the surrounding 16 cities in Hubei Province. This week the WHO declared the outbreak a "public health emergency of international concern" & another bold step unfolded yesterday when the State Dept issued a "Do Not Travel to China" advisory. Initially, global oil demand destruction was estimated to be around 200K barrels a day. Yet now as the virus fears spread its probably more than twice that amount. Due to canceled flights in China & across the globe, we may see 300K barrels a day of lost jet fuel demand alone. Today, American Airlines (AAL) & Delta (DAL) issued additional flight reductions to the region. Because of that, it looks like OPEC along with Russia, is in talks to add another 500K barrels of production cuts to offset the demand loss but if the virus fears continue to slow global economic growth, it might not be enough. On top of that, there has generally been warm winter around the globe. That caused a significant drop in diesel & jet fuel demand & pushed prices to a one-month net decline not seen since Nov 2018. Gas prices are also seeing substantial reductions having its most extensive one month net & percentage drop since last Aug. It did not help to see that China's manufacturing sector was struggling before the reports of the outbreak happened. China's Purchasing Managers’ Index (PMI) fall to 50.0 in Jan from 50.2 in Dec, China's National Bureau of Statistics (NBS) said today. The reading was in line with forecasts & hit the neutral 50-point mark that separates growth from contraction on a monthly. Yet what could also hurt demand is fear. Fear that the virus could spread. It is now being reported that the coronavirus has spread from China to around 20 countries, killing more than 200. If people start to fear the virus & stay home, it could have a more significant impact on the economy.
Coronavirus is ground zero for crude
US health officials have quarantined 195 Americans evacuated from Wuhan, China, taking the rare step of issuing a mandatory order for the first time in more than 50 years to help contain an outbreak of a new coronavirus that’s spread to roughly 10K people across the globe. “CDC under statutory authority of the HHS secretary has issued federal quarantine orders for all 195 passengers,” Dr Nancy Messonnier, director of the National Center for Immunization & Respiratory Diseases, said on a conference call today. “While we recognize this is an unprecedented action, we are facing an unprecedented public health threat.” The new coronavirus, which was discovered about a month ago, can spread before symptoms show, she said, citing a new report from the New England Journal of Medicine. The illness has quickly spread throughout mainland China, with 7K new cases confirmed over the last week & at least 213 deaths. “This is a very serious public health situation and CDC and federal government has and will continue to take aggressive action to protect the public,” she added. “If we take strong measures now, we may be able to blunt the impact on the United States.”
CDC issues mandatory quarantine for first time in more than 50 years to Wuhan passengers
Gold settled lower, pulling back from the more-than-6-year high it settled at a day earlier, but prices scored a 2nd straight monthly climb. Against that backdrop, gold for Apr delivery lost $1.30 to settle at $1587 an ounce. Prices for the most-active Apr contract saw weekly climb of 0.6% & a rise of about 3.8% for the month. The settlement level also marked the highest weekly price finish since 2013. Gold's rally was boosted this week as worries mounted over the potential global economic impact of the spread of the coronavirus. Those concerns helped burnish gold's appeal as a haven as investors shunned risky assets, including stocks. Global equity markets were under pressure today, but US stocks had rebound on yesterday after the World Health Organization declared the outbreak a global emergency, with analysts tying the bounce to relief over the lack of a recommendation by the body to restrict travel to or trade with China. Beijing has reported nearly 9700 cases of coronavirus, while the death toll has climbed to 213. The US State Dept today urged Americans not to travel to China.
Gold eases back from highest level since 2013, but posts a second monthly climb
Manufacturing activity in the Midwest sank in Jan to the lowest level since 2015, according to a survey of businesses released today by MNI Indicators. The Chicago Purchasing Managers Index fell to 42.9 this month from 48.9 in Dec. Any reading below 50 indicates deteriorating conditions. The forecast expected a small dip to 48.5. All 5 of the major components declined, with orders backlogs & new orders leading the way & production also cooled. The Chicago PMI has been below 50 since Jul. Other regional manufacturing surveys have not been as weak & showed some improvement this month. Economists think the Boeing (BA), a Dow stock, production halt for the 737 Max is weighing on the index. Additionally Caterpillar (CAT), another Dow stock, expects demand for its machinery to slump this year. The closely watched national ISM manufacturing purchasing managers index will be released on Mon. The forecast is for a slight improvement from Dec's 47.2% reading, which was the lowest since 2009. The national index has been below 50 for 5 straight month.
Chicago manufacturing activity slumps in January to weakest reading since late 2015
After a dreary start, this turned out to be a brutal day for stocks. Fears on growing complications from the coronavirus drove the selling. This outbreak is so scary that buying in safe haven gold & Treasuries was limited. All investors are nervous. The Dow finished down 280 in Jan & the outlook for Mon looks to be be bleak without good word on containing the virus.
Dow Jones Industrials
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