Dow rose 91, advancers over decliners about 3-2 & NAZ gained 75 to another record. The MLP index fluctuated near 201 but the REIT index dropped a very big 5 to the 429s. Junk bond funds barely budged in price & Treasuries were hit with limited selling. Oil climbed to the high 52s & gold advanced 5 to 1509 as it tries for its 5th straight gain.
AMJ (Alerian MLP Index tracking fund)
Equities markets rallied after the number of new coronavirus cases reportedly slowed. Mainland China reported 1749 new cases of the virus as the death toll rose by 136. There are over 74K confirmed cases & 2K deaths, according to China's National Health Commission. All 3 of the major averages were holding modest gains at the open & NAZ hit a fresh record. West Texas Intermediate crude oil was up 1.4% at $53 a barrel & gold climbed 0.5% to $1611 an ounce, its highest in nearly 7 years. Treasuries were lower, pushing the yield on the 10-year note up by 1.2 basis points to 1.568%. In Europe, France's CAC & Germany’s DAX gained 0.6% & 0.5%, respectively, while Britain's FTSE was little changed. Asian markets were mixed with Japan's Nikkei up 0.9%, Hong Kong's Hang Seng higher by 0.5% & China's Shanghai Composite down 0.3% .
Construction of new homes edged back slightly in Jan after a Dec surge that had pushed home construction to the highest level in 13 years. The Commerce Dept reported that builders started construction on 1.57M homes at a seasonally adjusted annual rate, a decline of 3.6% from 1.63M units in Dec. That had been the highest point since 2006 at the peak of the housing boom of the last decade. Economists had expected a slight pullback from the Dec surge, which was attributed in part to unseasonably warm weather which had allowed builders to start more construction projects. Application for building permits, considered a good sign of future activity, jumped 9.2% in Jan to an annual rate of 1.56M units. Construction of single-family homes fell 5.9% to a seasonally adjusted annual rate of 1.01M homes while construction in the smaller apartment category edged up 0.7% to 557K units. After being a drag on economic activity for more than a year, home building rebounded last summer, spurred by rising demand as mortgage rates dropped in response to interest rate cuts by the Federal Reserve. Economists believe housing will remain strong this year, helped by low mortgage rates & unemployment that is near a ½-century low. The National Associated of Home Builders/Wells Fargo housing index came in at 74 this month, just one point lower than in Jan. The builders' confidence survey for the past 3 months has been at the highest levels since late 2017.
US producer prices climbed last month at the fastest pace since Oct 2018 as higher prices for services more than offset a drop in the cost of energy. The Labor Dept said that its producer price index, which measures inflationary pressures before they reach the consumer, jumped 0.5% in Jan after rising 0.2% in Dec. The monthly increase was much bigger than expected. Over the past year, wholesale prices are up 2.1%. Excluding volatile food & energy prices, the core producer inflation rose 0.5% in Jan from Dec & 1.7% from Jan 2019. The Labor Dept said much of the 0.7% Jan increase in services prices came from higher markups for clothes, jewelry, shoes & accessories. Energy prices dropped 0.7% last month, pulled down by a 1.5% decrease in gasoline prices. Food prices rose 0.2% in Jan. But the price of chicken eggs plummeted 42.4% last month, the most in records dating back to 1937. Last week, the Labor Dept reported that consumer prices blipped up 0.2% last month & rose 2.5% over the past year. The Federal Reserve aims to keep annual consumer inflation around 2%.
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China's extraordinary economic growth over the past 4 decades transformed the country into the world's 2nd-biggest economy. The key to this growth is global trade. China is not only the largest trading partner in the world, but it is also central to a myriad of supply chains. From raw materials to components used in electronics, Chinese companies work hard to provide Western brands with inexpensive building blocks for their next expensive product, be it a car, a smartphone or some other widget. Apple (AAPL), a Dow & NAZ stock, said Mon it won't meet its quarterly financial guidance. It generates about 15% of its revenue from China, & many of its products are manufactured there. The Wuhan coronavirus (COVID-19) has thrown a wrench into this well-oiled machine & the Chinese economy could grind to a halt, dragging down global growth with it. The first area to suffer is tourism. In Q3, 173M Chinese tourists went abroad. Some experts say the number of travelers has already fallen by 55% compared with 2019's Lunar New Year (Feb 5). Chinese tourists are big spenders, so the travel ban will hurt the bottom lines of their favorite tourist destinations — Cambodia, Thailand & Hong Kong. In 2017, the World Tourism Organization said China was the largest contributor to the global outbound tourism market, spending almost $258B in that year alone. Many companies all over the world do business with China & the disruption in supply chains will result in unavoidable delays in their endeavors to introduce new products to the market. This is especially true for the automotive industry because Hubei province, where the outbreak first occurred, is a big center of automotive supply manufacturers. According to DHL's supply chain risk assessment service, ½ of all manufacturing in Wuhan is related to the automotive industry.
The bulls are feeling good & taking stocks higher. Fears about the coronoavirus spreading are diminishing, although its future is still cloudy. Already it's having a substantial effect on the global economy. The Volatility Index (VIX) is bobbing around in the 14s. Investors remain interested in adding to their stock portfolios with the averages at or next to record highs.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 52.67 | +0.62 | +1.2% |
| GC=F | Gold | 1,607.30 | +3.70 | +0.2% |
Equities markets rallied after the number of new coronavirus cases reportedly slowed. Mainland China reported 1749 new cases of the virus as the death toll rose by 136. There are over 74K confirmed cases & 2K deaths, according to China's National Health Commission. All 3 of the major averages were holding modest gains at the open & NAZ hit a fresh record. West Texas Intermediate crude oil was up 1.4% at $53 a barrel & gold climbed 0.5% to $1611 an ounce, its highest in nearly 7 years. Treasuries were lower, pushing the yield on the 10-year note up by 1.2 basis points to 1.568%. In Europe, France's CAC & Germany’s DAX gained 0.6% & 0.5%, respectively, while Britain's FTSE was little changed. Asian markets were mixed with Japan's Nikkei up 0.9%, Hong Kong's Hang Seng higher by 0.5% & China's Shanghai Composite down 0.3% .
Stocks rally toward record highs as Tesla tops $900, coronavirus outbreak slows
Construction of new homes edged back slightly in Jan after a Dec surge that had pushed home construction to the highest level in 13 years. The Commerce Dept reported that builders started construction on 1.57M homes at a seasonally adjusted annual rate, a decline of 3.6% from 1.63M units in Dec. That had been the highest point since 2006 at the peak of the housing boom of the last decade. Economists had expected a slight pullback from the Dec surge, which was attributed in part to unseasonably warm weather which had allowed builders to start more construction projects. Application for building permits, considered a good sign of future activity, jumped 9.2% in Jan to an annual rate of 1.56M units. Construction of single-family homes fell 5.9% to a seasonally adjusted annual rate of 1.01M homes while construction in the smaller apartment category edged up 0.7% to 557K units. After being a drag on economic activity for more than a year, home building rebounded last summer, spurred by rising demand as mortgage rates dropped in response to interest rate cuts by the Federal Reserve. Economists believe housing will remain strong this year, helped by low mortgage rates & unemployment that is near a ½-century low. The National Associated of Home Builders/Wells Fargo housing index came in at 74 this month, just one point lower than in Jan. The builders' confidence survey for the past 3 months has been at the highest levels since late 2017.
US home construction dips 3.6% in January
US producer prices climbed last month at the fastest pace since Oct 2018 as higher prices for services more than offset a drop in the cost of energy. The Labor Dept said that its producer price index, which measures inflationary pressures before they reach the consumer, jumped 0.5% in Jan after rising 0.2% in Dec. The monthly increase was much bigger than expected. Over the past year, wholesale prices are up 2.1%. Excluding volatile food & energy prices, the core producer inflation rose 0.5% in Jan from Dec & 1.7% from Jan 2019. The Labor Dept said much of the 0.7% Jan increase in services prices came from higher markups for clothes, jewelry, shoes & accessories. Energy prices dropped 0.7% last month, pulled down by a 1.5% decrease in gasoline prices. Food prices rose 0.2% in Jan. But the price of chicken eggs plummeted 42.4% last month, the most in records dating back to 1937. Last week, the Labor Dept reported that consumer prices blipped up 0.2% last month & rose 2.5% over the past year. The Federal Reserve aims to keep annual consumer inflation around 2%.
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Wholesale prices climb most since 2018, catching economists off guard
China's extraordinary economic growth over the past 4 decades transformed the country into the world's 2nd-biggest economy. The key to this growth is global trade. China is not only the largest trading partner in the world, but it is also central to a myriad of supply chains. From raw materials to components used in electronics, Chinese companies work hard to provide Western brands with inexpensive building blocks for their next expensive product, be it a car, a smartphone or some other widget. Apple (AAPL), a Dow & NAZ stock, said Mon it won't meet its quarterly financial guidance. It generates about 15% of its revenue from China, & many of its products are manufactured there. The Wuhan coronavirus (COVID-19) has thrown a wrench into this well-oiled machine & the Chinese economy could grind to a halt, dragging down global growth with it. The first area to suffer is tourism. In Q3, 173M Chinese tourists went abroad. Some experts say the number of travelers has already fallen by 55% compared with 2019's Lunar New Year (Feb 5). Chinese tourists are big spenders, so the travel ban will hurt the bottom lines of their favorite tourist destinations — Cambodia, Thailand & Hong Kong. In 2017, the World Tourism Organization said China was the largest contributor to the global outbound tourism market, spending almost $258B in that year alone. Many companies all over the world do business with China & the disruption in supply chains will result in unavoidable delays in their endeavors to introduce new products to the market. This is especially true for the automotive industry because Hubei province, where the outbreak first occurred, is a big center of automotive supply manufacturers. According to DHL's supply chain risk assessment service, ½ of all manufacturing in Wuhan is related to the automotive industry.
China’s tourism, automotive industries sink amid COVID-19 outbreak
The bulls are feeling good & taking stocks higher. Fears about the coronoavirus spreading are diminishing, although its future is still cloudy. Already it's having a substantial effect on the global economy. The Volatility Index (VIX) is bobbing around in the 14s. Investors remain interested in adding to their stock portfolios with the averages at or next to record highs.
Dow Jones Industrials
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