Dow rose 143 (but well off AM highs), advancers over decliners about 2-1 & NAZ advanced 142. The MLP index was off 2 to the 201s & the REIT index went up 2 to the 412s. Junk bond funds edged higher & Treasuries were sold. Oil fell 1+ to near 50 (a more than 1 year low) & gold dropped 7 to 1580 (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)
Oil prices tumbled into bear market territory today as the spreading of the coronavirus cast a dark spell over global demand. The move was the 2nd-fastest plunge from recent highs over the past 7 years. Brent crude oil, the intl benchmark, fell 4% to $54.36 a barrel while West Texas Intermediate crude oil, the US benchmark, slid 2.8% to $50.11 a barrel. Both energy components finished down more than 20% from their Jan 6 peaks, officially placing them in bear-market territory. Brent crude oil fell by as much as 31.4% after the World Health Organization issued a global alert regarding SARS in 2003. West Texas Intermediate crude oil lost as much as 33.3% in the wake of the SARS outbreak. Last week, the US declared coronavirus a public health emergency, following the stance from the WHO issued earlier. There is already some evidence the virus’s outbreak is weighing on global growth. Last week, US crude oil inventories posted a larger than expected build of 3.5M barrels, according to the Energy Information Administration. Analysts surveyed were anticipating inventories to increase by 300K barrels. The possibility of the coronavirus, which has now sickened more than 17K & killed 362, having a prolonged impact on the global economy has set off alarm bells among OPEC & its allies. Both Saudi Arabia & Russia have expressed interest in moving the Mar meeting up to Feb. “We have discussed it with the Saudi (energy) minister several times already ... Yesterday, we spoke for an hour, today, for half an hour,” said Russian oil minister Alexander Novak. “We are discussing it very seriously." The OPEC+ group is considering deepening the cuts it made in Dec by another 500K barrels per day. The group has removed a total of 1.7M bpd since Jan 2017.
Gold futures posted their first loss in 4 sessions, with haven demand for the metal taking a hit as US equities partially bounced back from a coronavirus-triggered selloff & the $ & gov bond yields rose. A rise in the $, gains in the Dow & the S&P 500 as gold futures settled, as well as a climb in rates for the 10-year Treasury note yield to as high as 1.574% today helped to weigh on bullion prices, which tend to weaken when the buck strengthens & stocks rally. Gold also competes with bond rates for haven buyers, with rising yields tending to attract investors in Treasuries & away from precious metals. Gold for Apr delivery fell $5.50 (0.4%) to settle at $1582 an ounce, following gains in the last 3 consecutive sessions. Prices had drifted up to an intraday peak touching $1598, the highest intraday level since 2013. Price losses for the metal had worsened in the wake of data released today that US manufacturers grew their businesses in Jan for the first time in 6 months. The survey by the Institute for Supply Management rose to 50.9% last month to 47.8%. The moves for bullion come after the most-active Apr contract saw a 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. China's National Health Commission yesterday said cases of the novel coronavirus reached 17K, while the death toll was more than 360. Cases also have been reported outside the country, with the World Health Organization & Trump administration last week declaring public health emergencies. The Asian influenza has drawn comparisons to SARS, or severe acute respiratory syndrome, & is expected to hurt near-term economic expansion in China, which is considered one of the biggest buyers of precious & industrial metals. Still, gold mostly has been a beneficiary of the recent worries tied to the Asian outbreak & its potential to hurt the global economy, if only on a short-term basis. The People's Bank of China has injected $1.2T yuan ($173B) into local money markets, to soften the shock from the coronavirus, among several measures enacted to help curtail sharp declines in China’s main indices, including the Shanghai Composite Index Chinese markets had been closed since Jan 24 due to an extended Lunar New Year holiday. Chinese regulators also urged banks & other financial institutions to boost lending & avoid calling in debts in areas severely affected by the pandemic.
Oil fell to its lowest level in more than a year as the coronavirus outbreak & its potential impact on demand further hammered crude prices. US West Texas Intermediate fell 2.8% ($1.45) to settle at $50.11 per barrel. Earlier in the session, WTI fell more than 3% to $49.92, its lowest level since Jan 2019. Intl benchmark Brent crude dropped 3.9% ($2.21) to $54.41, hitting its lowest level since Jan 2019. China is the world's largest oil importer & the 2nd-largest oil consumer, so a demand slowdown could have a big impact on prices. WTI & Brent are trading in bear-market territory of at least 20% price declines from recent highs & are coming off 4 straight weeks of losses. The energy alliance's Joint Technical Committee, a nonministerial sub group that reviews the oil market, will reportedly hold meetings Tues & Wed in Vienna to discuss options to mitigate the impact from the coronavirus outbreak. The action could include additional production cuts. A full OPEC meeting could take place next week. Earlier in the session, WTI briefly turned positive after it was reported that Saudi Arabia was considering a 1M barrels per day cut in order to stimulate prices.
Oil drops 2.8% on coronavirus fears, dips below $50 per barrel
US construction spending unexpectedly fell in Dec, posting its first drop since Jun, as investment in both private & public projects declined. The Commerce Dept said construction spending decreased 0.2%. Data for Nov was revised up to show construction outlays rising 0.7% instead of increasing 0.6% as previously reported. The forecast called for construction spending gaining 0.5% in Dec. Construction spending increased 5.0% on a year-on-year basis in Dec. For all of 2019, construction spending fell 0.3%, the first annual decline since 2011, after rising 3.3% in 2018. In Dec, spending on private construction projects slipped 0.1% after increasing 0.6% in Nov. It was pulled down by a 1.8% tumble in spending on nonresidential structures, which includes manufacturing plant & mining exploration, shafts & wells, to the lowest level since Nov 2018. Spending on nonresidential structures fell 0.5% in Nov. The gov in its Q4 GDP report last week said spending on nonresidential structures contracted in 2019 by the most since 2016. Outlays on private nonresidential structures have been depressed by a manufacturing downturn due to trade tensions & cheaper energy products. Spending on homebuilding increased 1.4% after surging 1.5% in Nov. Residential construction is being supported by lower mortgage rates. Residential investment increased solidly in H2-2019, after contracting for 6 straight qtrs, the longest such stretch since the recession. Investment in public construction projects dropped 0.4% in Dec after rebounding 1.0% in Nov. Spending on state & local gov construction projects fell 0.6% after rising 0.9% in Nov. Outlays on federal gov construction projects surged 2.1% in Dec to the highest level since Dec 2012. That followed a 1.7% advance in Nov.
This was hardly a convincing rally. While finishing higher on the day, the Dow was more than 200 below sessions's highs in early trading. The coronavirus has created substantial problems & there seems to be no quick fix. The 1 year chart below shows the Dow has fallen 1000 from its Jan peak.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Oil prices tumbled into bear market territory today as the spreading of the coronavirus cast a dark spell over global demand. The move was the 2nd-fastest plunge from recent highs over the past 7 years. Brent crude oil, the intl benchmark, fell 4% to $54.36 a barrel while West Texas Intermediate crude oil, the US benchmark, slid 2.8% to $50.11 a barrel. Both energy components finished down more than 20% from their Jan 6 peaks, officially placing them in bear-market territory. Brent crude oil fell by as much as 31.4% after the World Health Organization issued a global alert regarding SARS in 2003. West Texas Intermediate crude oil lost as much as 33.3% in the wake of the SARS outbreak. Last week, the US declared coronavirus a public health emergency, following the stance from the WHO issued earlier. There is already some evidence the virus’s outbreak is weighing on global growth. Last week, US crude oil inventories posted a larger than expected build of 3.5M barrels, according to the Energy Information Administration. Analysts surveyed were anticipating inventories to increase by 300K barrels. The possibility of the coronavirus, which has now sickened more than 17K & killed 362, having a prolonged impact on the global economy has set off alarm bells among OPEC & its allies. Both Saudi Arabia & Russia have expressed interest in moving the Mar meeting up to Feb. “We have discussed it with the Saudi (energy) minister several times already ... Yesterday, we spoke for an hour, today, for half an hour,” said Russian oil minister Alexander Novak. “We are discussing it very seriously." The OPEC+ group is considering deepening the cuts it made in Dec by another 500K barrels per day. The group has removed a total of 1.7M bpd since Jan 2017.
Fears over deadly coronavirus outbreak sends oil into bear market
Gold futures posted their first loss in 4 sessions, with haven demand for the metal taking a hit as US equities partially bounced back from a coronavirus-triggered selloff & the $ & gov bond yields rose. A rise in the $, gains in the Dow & the S&P 500 as gold futures settled, as well as a climb in rates for the 10-year Treasury note yield to as high as 1.574% today helped to weigh on bullion prices, which tend to weaken when the buck strengthens & stocks rally. Gold also competes with bond rates for haven buyers, with rising yields tending to attract investors in Treasuries & away from precious metals. Gold for Apr delivery fell $5.50 (0.4%) to settle at $1582 an ounce, following gains in the last 3 consecutive sessions. Prices had drifted up to an intraday peak touching $1598, the highest intraday level since 2013. Price losses for the metal had worsened in the wake of data released today that US manufacturers grew their businesses in Jan for the first time in 6 months. The survey by the Institute for Supply Management rose to 50.9% last month to 47.8%. The moves for bullion come after the most-active Apr contract saw a 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. China's National Health Commission yesterday said cases of the novel coronavirus reached 17K, while the death toll was more than 360. Cases also have been reported outside the country, with the World Health Organization & Trump administration last week declaring public health emergencies. The Asian influenza has drawn comparisons to SARS, or severe acute respiratory syndrome, & is expected to hurt near-term economic expansion in China, which is considered one of the biggest buyers of precious & industrial metals. Still, gold mostly has been a beneficiary of the recent worries tied to the Asian outbreak & its potential to hurt the global economy, if only on a short-term basis. The People's Bank of China has injected $1.2T yuan ($173B) into local money markets, to soften the shock from the coronavirus, among several measures enacted to help curtail sharp declines in China’s main indices, including the Shanghai Composite Index Chinese markets had been closed since Jan 24 due to an extended Lunar New Year holiday. Chinese regulators also urged banks & other financial institutions to boost lending & avoid calling in debts in areas severely affected by the pandemic.
Gold logs first loss in 4 sessions as the U.S. stock market, dollar, bond yields climb
Oil fell to its lowest level in more than a year as the coronavirus outbreak & its potential impact on demand further hammered crude prices. US West Texas Intermediate fell 2.8% ($1.45) to settle at $50.11 per barrel. Earlier in the session, WTI fell more than 3% to $49.92, its lowest level since Jan 2019. Intl benchmark Brent crude dropped 3.9% ($2.21) to $54.41, hitting its lowest level since Jan 2019. China is the world's largest oil importer & the 2nd-largest oil consumer, so a demand slowdown could have a big impact on prices. WTI & Brent are trading in bear-market territory of at least 20% price declines from recent highs & are coming off 4 straight weeks of losses. The energy alliance's Joint Technical Committee, a nonministerial sub group that reviews the oil market, will reportedly hold meetings Tues & Wed in Vienna to discuss options to mitigate the impact from the coronavirus outbreak. The action could include additional production cuts. A full OPEC meeting could take place next week. Earlier in the session, WTI briefly turned positive after it was reported that Saudi Arabia was considering a 1M barrels per day cut in order to stimulate prices.
Oil drops 2.8% on coronavirus fears, dips below $50 per barrel
US construction spending unexpectedly fell in Dec, posting its first drop since Jun, as investment in both private & public projects declined. The Commerce Dept said construction spending decreased 0.2%. Data for Nov was revised up to show construction outlays rising 0.7% instead of increasing 0.6% as previously reported. The forecast called for construction spending gaining 0.5% in Dec. Construction spending increased 5.0% on a year-on-year basis in Dec. For all of 2019, construction spending fell 0.3%, the first annual decline since 2011, after rising 3.3% in 2018. In Dec, spending on private construction projects slipped 0.1% after increasing 0.6% in Nov. It was pulled down by a 1.8% tumble in spending on nonresidential structures, which includes manufacturing plant & mining exploration, shafts & wells, to the lowest level since Nov 2018. Spending on nonresidential structures fell 0.5% in Nov. The gov in its Q4 GDP report last week said spending on nonresidential structures contracted in 2019 by the most since 2016. Outlays on private nonresidential structures have been depressed by a manufacturing downturn due to trade tensions & cheaper energy products. Spending on homebuilding increased 1.4% after surging 1.5% in Nov. Residential construction is being supported by lower mortgage rates. Residential investment increased solidly in H2-2019, after contracting for 6 straight qtrs, the longest such stretch since the recession. Investment in public construction projects dropped 0.4% in Dec after rebounding 1.0% in Nov. Spending on state & local gov construction projects fell 0.6% after rising 0.9% in Nov. Outlays on federal gov construction projects surged 2.1% in Dec to the highest level since Dec 2012. That followed a 1.7% advance in Nov.
This was hardly a convincing rally. While finishing higher on the day, the Dow was more than 200 below sessions's highs in early trading. The coronavirus has created substantial problems & there seems to be no quick fix. The 1 year chart below shows the Dow has fallen 1000 from its Jan peak.
Dow Jones Industrials
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