Thursday, February 20, 2020

Mixed markets pause after increase in coronavirus death toll

Dow crawled up 1, advancers over decliners about 2-1 & NAZ was off 1.  The MLP index went up 1+ to the 201s & the REIT index rebounded 2+ to 430.  Junk bond funds fluctuated & Treasuries were purchased bringing higher prices.  Oil rose to the 54s & gold jumped up 11 to 1623 (another 7 year high).

AMJ (Alerian MLP Index tracking fund)

stock chart

CL=FCrude Oil54.00

GC=FGold   1,621.60

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Procter & Gamble (PG), a Dow stock, warned the coronavirus outbreak is curbing in-store sales & limiting the ability of its digital operations to meet demand.  “China is our second largest market -- sales and profit. Store traffic is down considerably, with many stores closed or operating with reduced hours,” Jon Moeller, CEO & CFO said in an SEC filing.   “Some of the demand has shifted online, but supply of delivery operators and labor is limited.”  The stock rose 62¢.
If you would like to learn more about PG, click on this link:

P&G warns coronavirus is disrupting China business

Federal Reserve Vice Chair Richard Clarida doused talk of a rate cut.  He doesn't think most market participants really expect one or that it is noted.  “Market pricing for rate cuts is a little tricky, because there’s market expectations for rates, there also can be term and liquidity premiums,” the central bank official said in interview.  Futures contracts are pointing to a rate reduction as soon as Jun or Jul & no later than Sep, according to various indicators.  However, Clarida said economists largely do not see the Fed easing this year, a view that he gives strong weight.  “I don’t think when you ask folks they’re pricing in that rate cut, even though market pricing might suggest that,” he added.  Clarida reiterated that the “fundamentals in the U.S. are strong” though he said Fed officials are monitoring risks, in particular the coronavirus.  “It’s obviously something that is probably going to have a noticeable impact on Chinese growth in the first quarter,” he said.  However, there's no indication at this point that it will impact policy.  “What are would be looking for is some body of evidence that suggests that we need to make a material reassessment of our outlook, and certainly we have not done that yet,” Clarida added. “But we are monitoring, because China is a huge part of our economy.”

Fed Vice Chair Clarida throws cold water on traders pricing in a rate cut

The economy showed some more sizzle at the start of 2020, pointing to steady growth in the next several months, according to an index that measures the nation's economic health.  The leading economic index jumped 0.8% in Jan, the Conference Board said, increasing twice as much as expected.  The leading index got the biggest boost from rising permits to build new homes.  They hit a 13-year high last month as builders move to step up construction as falling interest rates stoke more demand.  Declining applications for unemployment benefits, higher consumer confidence, record stock prices & cheaper credit also added to the surge in the index.  The leading index is composed of 10 economic indicators designed to signal the high points & low points in the business cycle.  The US economy is plowing ahead at a decent 2% pace of growth & a record expansion already 10+ year old looks likely to continue, but growing worries about COVID-19 could hurt the economy in the short run if China is unable to contain the novel coronavirus.  If it turns into a global pandemic, there's no telling how much it could hurt the US & world economies.

Leading indicators surge in January, point to steady economic expansion in early 2020

Coronavirus worries are nagging thoughts & traders are paying attention today.  Feb started out as a good month for stocks (see below), but they have been stuck in the mud for 2 weeks.  Meanwhile gold is up 5% in the last month.  Investors with negative thoughts about the stock market continue buying gold as a hedge against uncertainties about the uncertain future.

Dow Jones Industrials

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