Dow dropped 165 (but well above early AM lows), decliners over advancers about 3-2 & NAZ crawled up 1. The MLP index fell 1 to 201 & the REIT index was down 1 to the 434s. Junk bond funds were slightly higher & Treasuries rose in price. Oil was flattish in the 52s & gold soared 18 to 1604, a 7 year high (more below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
General Motors (GM), Fiat Chrysler (FCAU) & Toyota (TM) confirmed that they've reopened their factories or are beginning to restart production in China following an extended holiday shutdowns due to the COVID-19 outbreak. Michael Palese, a spokesman for FCAU, said the company's plant in Guangzhou, located hundreds of miles south of the coronavirus epicenter in Wuhan, has resumed production this week. The company's 2nd assembly plant in China is “expected to resume operations soon,” he said. Palese said the company “continues to monitor its global supply chain in relation to the coronavirus outbreak in China.” There has been no impact to the company's operations in North America, he added. GM, as planned, “began the process of restarting production” Sat as part of a 2-week process to reopen its 15 assembly plants in the country, according to Jim Cain, a company spokesman. He said the company has not experienced any impact to its US truck production, which union officials last week said could be impacted due to parts shortages in the coming weeks. GM declined to comment on how many plants are beginning to restart production. TM, according to company spokesman Eric Booth, said 3 of its 4 plants in China are beginning to operate single shifts this week. “Our priority continues to be the safety and security of the workplace and we will resume normal operations as soon as is deemed safe and appropriate,” Booth wrote in an email. The restart of vehicle production comes as total confirmed cases of coronavirus exceed 73K, including at least 1874 deaths.
GM, Fiat Chrysler and Toyota resume auto production in China
Gold prices climbed to their highest levels since 2013, as continued worries over the COVID-19 epidemic in China put pressure on stocks & sparked demand for assets perceived as havens, including gold & Treasuries. Gold for Apr rose $17 (1.1%) to settle at $1603 an ounce after topping a high at $1608. That marked the highest settlement & intraday level for a most-active contract since Mar 2013. In economic news, the NY Federal Reserve's Empire State business conditions index rose 8.1 points to 12.9 in Feb, the highest level since last May. Gold prices moved up in the immediate wake of the data early today, after a dip lower just ahead of the data.
This year will present “a more challenging environment” for US oil & gas production, & the watchword for the industry will be general “belt-tightening,” said Dallas Federal Reserve Pres Robert Kaplan. US production growth is expected to decline this year & there has been a “dramatic increase” in pressure from the financial sector to see “discipline” in capital allocation from energy & production firms, he said. Capital spending in the oil & gas sector is likely to be down by as much as 10%-15%, he forecast. “In light of this, we would expect that 2020 will be the year of restructurings, consolidation where possible, and general belt-tightening” for energy-services companies, Kaplan said, in an essay on the economic outlook for his district, which accounts for 36% of US crude oil production. Bond investors have priced in their concerns that oil price gains won't emerge to save the weakest US energy companies, where defaults have already been on the rise. Kaplan said that capital expenditures for drilling activity will have to be funded by internal cash flow versus debt issuance. “This is a fairly significant change from historical practice,” Kaplan continued. US shale oil has seen a slowdown in production growth since late 2018. Despite the challenges in the energy sector, Kaplan said he expects 2020 job growth in Texas to be about 2.1%. While the state's economy has grown more diversified over the past several decades, the energy sector still represents 9% of Texas GDP. Low oil prices is no longer a big win for the national economy as the benefit to US GDP from lower oil prices to consumers may be increasingly offset by the negative impact on domestic energy producers, Kaplan added. Economists at the Dallas Fed expect US GDP will grow 2-2.25% in 2020, in line with the average growth rate for the US economy since 2010. US manufacturing will remain sluggish but show some signs of stabilization, he said. Overall, the outlook remains clouded by the impact of the COVID-19 epidemic in China. “At this stage, it is still too soon to predict with confidence the ultimate impact of this virus on the U.S. and global economies,” Kaplan added.
For home builders, the good times keep on rolling. The National Association of Home Builders' monthly confidence index dropped one point to 74 in Feb from 75 the month prior, the trade group said. That’s just 2 points below Dec's figure, which represented the highest index reading since 1999. Index readings above 50 are an indication that confidence is improving, while a figure below that threshold would signal the opposite. The 3 main indicators that guide the overall index all fell by one point this month. The index of expectations for future sales over the next 6 months fell to 79 points, from a revised 80 points. The gauge of current single-family home sales dipped to 80, while the index that measures sentiment regarding prospective buyer traffic dropped to 57. On a regional basis, builder sentiment improved 5 points in the Northeast to a reading of 67 & 2 points in the South to 79. Sentiment declined by 5 points in the Midwest to 62 & 4 points in the West to 82. While builders' confidence may have declined in some parts of the country, nationwide it is elevated when compared to a year ago. In Feb 2019, the monthly confidence index was at 62, & in some parts of the country it had dropped below 50. Mortgage rates have hit a 3-year low, propping up the country’s housing market. The lower cost of home financing has kept demand among potential buyers elevated. With few options on the market for buyers looking to lock in a low mortgage rate, more Americans are turning to newly-built homes, which should keep builders' business booming for some time to come.
The NY Federal Reserve's Empire State business conditions index rose 8.1 points to 12.9 in Feb, the bank said, the highest level since last May. The forecast called for a reading of 4.0. Any reading above zero indicates improving conditions. The new orders index rose 15.5 points to 22.1 in Feb, the highest level in over a year. The shipments index also had a strong gain, rising 10.3 points to 18.9. Labor market indicators remained soft. Delivery times lengthened & inventories increased sharply. Optimism remained somewhat subdued. The index for future business conditions was little-changed at 22.9. Many regional manufacturing indexes & the national ISM manufacturing index registered surprising gains in Jan, raising hopes of a turnaround in a sector of the economy which has been hit hard by the US- China trade war & a weak global economy. There appears to be no disruption, at least not yet, from the deadly viral outbreak in China.
This was a tough day for stocks but some buyers returned later in the day to trim early losses. The Volatility Index (VIX) continued in the high 14s, not far above the lowest prices in the last year. Investers remain bullish with the Dow 300 below its record highs last week. However, safe haven gold continues in strong demand, being bid up above 1600. A lot is riding on getting coronavirus under control & that looks iffy presently.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
General Motors (GM), Fiat Chrysler (FCAU) & Toyota (TM) confirmed that they've reopened their factories or are beginning to restart production in China following an extended holiday shutdowns due to the COVID-19 outbreak. Michael Palese, a spokesman for FCAU, said the company's plant in Guangzhou, located hundreds of miles south of the coronavirus epicenter in Wuhan, has resumed production this week. The company's 2nd assembly plant in China is “expected to resume operations soon,” he said. Palese said the company “continues to monitor its global supply chain in relation to the coronavirus outbreak in China.” There has been no impact to the company's operations in North America, he added. GM, as planned, “began the process of restarting production” Sat as part of a 2-week process to reopen its 15 assembly plants in the country, according to Jim Cain, a company spokesman. He said the company has not experienced any impact to its US truck production, which union officials last week said could be impacted due to parts shortages in the coming weeks. GM declined to comment on how many plants are beginning to restart production. TM, according to company spokesman Eric Booth, said 3 of its 4 plants in China are beginning to operate single shifts this week. “Our priority continues to be the safety and security of the workplace and we will resume normal operations as soon as is deemed safe and appropriate,” Booth wrote in an email. The restart of vehicle production comes as total confirmed cases of coronavirus exceed 73K, including at least 1874 deaths.
GM, Fiat Chrysler and Toyota resume auto production in China
Gold prices climbed to their highest levels since 2013, as continued worries over the COVID-19 epidemic in China put pressure on stocks & sparked demand for assets perceived as havens, including gold & Treasuries. Gold for Apr rose $17 (1.1%) to settle at $1603 an ounce after topping a high at $1608. That marked the highest settlement & intraday level for a most-active contract since Mar 2013. In economic news, the NY Federal Reserve's Empire State business conditions index rose 8.1 points to 12.9 in Feb, the highest level since last May. Gold prices moved up in the immediate wake of the data early today, after a dip lower just ahead of the data.
Gold tops $1,600 for first time since 2013 as coronavirus fears spur haven demand
This year will present “a more challenging environment” for US oil & gas production, & the watchword for the industry will be general “belt-tightening,” said Dallas Federal Reserve Pres Robert Kaplan. US production growth is expected to decline this year & there has been a “dramatic increase” in pressure from the financial sector to see “discipline” in capital allocation from energy & production firms, he said. Capital spending in the oil & gas sector is likely to be down by as much as 10%-15%, he forecast. “In light of this, we would expect that 2020 will be the year of restructurings, consolidation where possible, and general belt-tightening” for energy-services companies, Kaplan said, in an essay on the economic outlook for his district, which accounts for 36% of US crude oil production. Bond investors have priced in their concerns that oil price gains won't emerge to save the weakest US energy companies, where defaults have already been on the rise. Kaplan said that capital expenditures for drilling activity will have to be funded by internal cash flow versus debt issuance. “This is a fairly significant change from historical practice,” Kaplan continued. US shale oil has seen a slowdown in production growth since late 2018. Despite the challenges in the energy sector, Kaplan said he expects 2020 job growth in Texas to be about 2.1%. While the state's economy has grown more diversified over the past several decades, the energy sector still represents 9% of Texas GDP. Low oil prices is no longer a big win for the national economy as the benefit to US GDP from lower oil prices to consumers may be increasingly offset by the negative impact on domestic energy producers, Kaplan added. Economists at the Dallas Fed expect US GDP will grow 2-2.25% in 2020, in line with the average growth rate for the US economy since 2010. US manufacturing will remain sluggish but show some signs of stabilization, he said. Overall, the outlook remains clouded by the impact of the COVID-19 epidemic in China. “At this stage, it is still too soon to predict with confidence the ultimate impact of this virus on the U.S. and global economies,” Kaplan added.
Expect a year of ‘general belt-tightening’ for the energy sector, says Fed’s Kaplan
For home builders, the good times keep on rolling. The National Association of Home Builders' monthly confidence index dropped one point to 74 in Feb from 75 the month prior, the trade group said. That’s just 2 points below Dec's figure, which represented the highest index reading since 1999. Index readings above 50 are an indication that confidence is improving, while a figure below that threshold would signal the opposite. The 3 main indicators that guide the overall index all fell by one point this month. The index of expectations for future sales over the next 6 months fell to 79 points, from a revised 80 points. The gauge of current single-family home sales dipped to 80, while the index that measures sentiment regarding prospective buyer traffic dropped to 57. On a regional basis, builder sentiment improved 5 points in the Northeast to a reading of 67 & 2 points in the South to 79. Sentiment declined by 5 points in the Midwest to 62 & 4 points in the West to 82. While builders' confidence may have declined in some parts of the country, nationwide it is elevated when compared to a year ago. In Feb 2019, the monthly confidence index was at 62, & in some parts of the country it had dropped below 50. Mortgage rates have hit a 3-year low, propping up the country’s housing market. The lower cost of home financing has kept demand among potential buyers elevated. With few options on the market for buyers looking to lock in a low mortgage rate, more Americans are turning to newly-built homes, which should keep builders' business booming for some time to come.
Home-builder confidence remains near all-time highs, despite concerns about first-time buyers
The NY Federal Reserve's Empire State business conditions index rose 8.1 points to 12.9 in Feb, the bank said, the highest level since last May. The forecast called for a reading of 4.0. Any reading above zero indicates improving conditions. The new orders index rose 15.5 points to 22.1 in Feb, the highest level in over a year. The shipments index also had a strong gain, rising 10.3 points to 18.9. Labor market indicators remained soft. Delivery times lengthened & inventories increased sharply. Optimism remained somewhat subdued. The index for future business conditions was little-changed at 22.9. Many regional manufacturing indexes & the national ISM manufacturing index registered surprising gains in Jan, raising hopes of a turnaround in a sector of the economy which has been hit hard by the US- China trade war & a weak global economy. There appears to be no disruption, at least not yet, from the deadly viral outbreak in China.
Empire State manufacturing index hits highest level in nine months
This was a tough day for stocks but some buyers returned later in the day to trim early losses. The Volatility Index (VIX) continued in the high 14s, not far above the lowest prices in the last year. Investers remain bullish with the Dow 300 below its record highs last week. However, safe haven gold continues in strong demand, being bid up above 1600. A lot is riding on getting coronavirus under control & that looks iffy presently.
Dow Jones Industrials
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