Tuesday, March 31, 2020

Markets fall as oil posts record decline for the quarter

Dow sank 410 (closing below 22K). decliners over advancers 4-3 & NAZ dropped 74.  The MLP index went up 6+ to a depressed 90 & the REIT index dropped 7 to the 308s.  Junk bond funds rose in price.& Treasuries were sold to bring higher yields.  Oil slid lower, nearing $20 a barrel, & gold tumbled 48 to 1594 (more on both below).

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Live 24 hours gold chart [Kitco Inc.]

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Pres Trump said that federal lawmakers should pass a $2T bill that would renovate the nation's roads, bridges & airports as part of the next stimulus bill Congress seeks to pass amid the novel coronavirus pandemic. "With interest rates for the United States being at ZERO, this is the time to do our decades long awaited Infrastructure Bill. It should be VERY BIG & BOLD, Two Trillion Dollars, and be focused solely on jobs and rebuilding the once great infrastructure of our Country! Phase 4," Trump tweeted.  House Speaker Nancy Pelosi says she wants the House to be ready as soon as it returns to approve a 4th bill boosting the economy & strengthening the response to the virus.  Pelosi & 2 House committee chairmen told reporters they want the package to improve broadband & water infrastructure, bolster hospitals & state & local govs & extend direct payments to Americans.  They said it should also strengthen safety requirements for first responders & medical workers & broaden workers' leave for caring for relatives.  The House on Fri approved the $2.2T economic relief bill that Trump has signed & plans to return on Apr 20.

What Trump wants to see in next round of $2T coronavirus stimulus

Less than a week after Ford (F) said it would restart production at “key” plants in North America beginning in early-Apr, the company has postponed those plans as the coronavirus continues to spread throughout the US.  Ford is delaying the restart of a car plant in Mexico as well as 4 truck, SUV & van plants in the US ” to help protect its workers.”  The company declined to provide a new timeline for reopening the plants.  “The health and safety of our workforce, dealers, customers, partners and communities remains our highest priority,” said Kumar Galhotra, Ford pres of North America.  “We are working very closely with union leaders – especially at the UAW – to develop additional health and safety procedures aimed at helping keep our workforce safe and healthy.”  When Ford initially announced plans to reopen the plants last week, UAW Pres Rory Gamble said the union was reviewing the plans “with great caution and concern.”  Several UAW members with the automakers have died from COVID-19, including 2 Ford workers over the weekend.  Urged by the UAW, Ford, Fiat Chrysler (FCAU) & General Motors (GM) announced plans to temporarily shutter their plants due to the coronavirus on Mar 18.  Ford & FCAU last week announced plans to begin restarting production in Apr, while GM has suspended the restart indefinitely.  Ford's postponement comes 2 days after Pres Trump  extended national social-distancing guidelines to combat the spread of the coronavirus thru Apr.  A company spokeswoman said Ford will “continue to assess public health conditions, government guidelines and supplier readiness” to determine when the time is right to resume production.  Several automakers yesterday, including Ford, FCAU & Toyota (TM) said they would continue with plans to restart US production in Apr, but execs were actively monitoring & assessing the situation.

Ford postpones reopening ‘key’ plants due to coronavirus pandemic

Huawei's chairman warned that more US moves to increase pressure on the Chinese tech giant might trigger retaliation by Beijing that could damage its worldwide industry.  Huawei which makes smartphones & network equipment, reported that its 2019 sales rose by double digits despite curbs imposed in May on its access to US components & technology.  But the chairman, Eric Xu, said 2020 will be its “most difficult year” as Huawei struggles with the sanctions & the coronavirus pandemic.  Huawei is at the center of tensions with DC over China's technology ambitions & possible spying that helped to spark Trump's tariff war with Beijing in 2018.  Xu said he couldn't confirm news reports Pres Trump might try to extend controls to block access to foreign-made products that contain US technology.  He added that Huawei can find other sources but warned more pressure might trigger Chinese retaliation against American companies.  “I think the Chinese government will not just stand by and watch Huawei be slaughtered,” Xu said.  He said US pressure on foreign suppliers “will be destructive to the global technology ecosystem.”  “If the Chinese government followed through with countermeasures, the impact on the global industry would be astonishing,” Xu continued.  “It’s not only going to be one company, Huawei, that could be destroyed.”  Huawei, China's first global tech brand, denies US accusations the company is controlled by the ruling Communist Party or facilitates Chinese spying.  The company says it is owned by the 104K members of its 194K-member workforce who are Chinese citizens.  Chinese officials say the Trump administration is abusing national security claims to restrain a rival to US tech companies.  Last year's sales rose 19.1% over 2018 to 89B yuan ($123B), in line with the previous year's 19.5% gain.   Profit increased 5.6% to 62.7B yuan ($9B), decelerating from 2018's 25% jump.

China's Huawei warns more US pressure may spur retaliation

Gold futures ended sharply lower, pressured by better-than-expected US consumer confidence data & a rise in Chinese manufacturing activity, but prices for the metal posted gains for the month & qtr against the backdrop of concerns over the COVID-19 pandemic.  An index of consumer confidence fell to 120 in Mar, from a revised 132.6 in Feb, but some forecasts called for a fall to 115.  Meanwhile, data out of China showed signs of a modest economic rebound.  China's manufacturing gauge for the Mar official purchasing managers survey rose to 52, from a record low of 35.7 in the previous month as factories resumed work following monthslong shutdown.  Jun gold lost $46 (2.8%) to settle at $1596 an ounce—the lowest finish in just over a week.  The contract was up 1.6% from its finish at $1571 on Feb 28.  Based on the most-active contracts, gold futures rose 1.9% for the month & gained 4.8% for the qtr.  Overall, however, trading for precious metals has been marked by concerns about the rapidly moving infection, COVID-19, which was first identified in Wuhan, China in Dec, but has infected more than 800K people & claimed nearly 39K lives world-wide, according to data aggregated by Johns Hopkins University.

Gold ends sharply lower, but posts gains for the month and quarter

US oil futures settled slightly higher, finding some support after China reported strong manufacturing data & Pres Trump spoke with Russia about efforts to fight the spread of the coronavirus pandemic & stabilize the crude market.  But oil prices for the US & global crude benchmarks suffered the largest quarterly percentage declines on record & lost more than ½ their value for the month amid a demand slump caused by the coronavirus pandemic & a glut of supply thanks to a Russia-Saudi oil-price war.  Prices had settled yesterday at their lowest level since 2002.  China’s official manufacturing purchasing managers index rose to 52.0 in Mar from a record low of 35.7 in Feb, the National Bureau of Statistics said.  Trump spoke by phone with Russian Pres Vladimir Putin yesterday about the latest developments & efforts to combat the coronavirus.  They both agreed on the importance of stability in the global energy markets & to work together through the G-20 to defeat the virus.  May West Texas Intermediate crude tacked on 39¢ (1.9%) to settle at $20.48 a barrel.  Prices based on front-month WTI crude fell by 54.2% this month, the largest one-month decline since 2008.  For the qtr, prices lost 66.5% to post the largest qtr percentage loss based on records dating back to 1983.  Meanwhile, the global benchmark on ICE Futures Europe, May Brent crude fell 2¢ at $22.74 a barrel on the contract's expiration day.  For the month, prices fell 55%, tallying a loss of 65.6% for the qtr—the largest quarterly decline based on records dating to 1988. The new front month Jun Brent shed 7¢ to $26.35 today.  Yesterday, WTI marked its lowest finish since 2002, while Brent saw its lowest settlement also in 2002.  The slight rebound today came even as US benchmark stock indices moved lower.  Equities had seen an upbeat session on yesterday, driven by health-care stocks & hopes for a vaccine.

Crude-oil prices post the largest quarterly percentage drop on record

This has been an awful month & qtr for stocks.  The Dow dropped 3500 in Mar & an astounding 6600 in Q1.  Additionally, oil had a dreadful time.  Comments mean little.  Investors have to adjust to the new world everbody has to deal with.  A lot of healing is needed & hepefully that will come fairly soon.  

Dow Jones Industrials

Markets struggle while coronavirus worries persist

Dow went up 46, advancers over decliners 3-2 & NAZ gained 53.  The MLP index recovered 3+ to 87 & the REIT index sank 8 to the 307s.  Junk bond funds saw limited buying of these high yielding stocks & Treasuries slid lower in price.  Oil rose to almost 21 (more below) while gold dropped 21 to 1622.

AMJ (Alerian MLP Index tracking fund)

stock chart

CL=FCrude Oil20.69

GC=FGold   1,628.00

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A measure of US consumer confidence fell sharply in Mar as people grapple with the global coronavirus outbreak.  The Conference Board said its consumer confidence index dropped to 120 this month from 132.6 in Feb.  However, the print was better than the forecast for 110.  “Consumer confidence declined sharply in March due to a deterioration in the short-term outlook,” Lynn Franco, senior director of economic indicators at The Conference Board, said.  “The intensification of COVID-19 and extreme volatility in the financial markets have increased uncertainty about the outlook for the economy and jobs. March’s decline in confidence is more in line with a severe contraction – rather than a temporary shock – and further declines are sure to follow.”  More than 800K coronavirus cases have been confirmed globally, data from Johns Hopkins University shows.  Of those cases, more than 164K are in the US & Italy has over 100K confirmed cases.  Countries around the world — including the US — have taken measures to curb the spread of the virus.  However, those actions raise concern over a potential economic blow & have sparked massive market volatility.

Consumer confidence tumbles in March as coronavirus cases surge

Oil prices are on pace to register their worst quarterly performance on record, as the coronavirus pandemic continues to crush global demand for crude.  A public health crisis has meant countries around the world have effectively had to shut down, with many govs imposing draconian measures on the daily lives of hundreds of Ms of people.  The restrictions have created an unprecedented demand shock in energy markets, ramping up the pressure on companies & govs reliant on crude sales.  To date, more than 787K have contracted COVID-19 worldwide, with 38K deaths, according to data compiled by Johns Hopkins University.  Intl benchmark Brent crude is trading at $23.36 a barrel, up more than 2.6%, while US West Texas Intermediate (WTI) stood at $21.26, more than 5.8% higher.  Brent futures fell to their lowest level in 18 years yesterday & WTI ended the previous session below $20, before both benchmarks pared some of their losses on the final trading day of Q1.  To date, Brent futures have fallen more than 65% thru the first 3 months of 2020, putting the benchmark on track to register its worst qtr thru history to 1990.  Brent is also on pace to record its worst-ever monthly performance, down over 54% in Mar alone.  Meanwhile, WTI futures slumped more than 67% in Q1, putting it on track for its worst-ever quarterly performance back to when the contract began trading in 1983.  WTI is also down over 55% month-to-date, on pace for its worst-ever monthly performance, too.

Oil prices are on track for their worst ever quarter as coronavirus slashes demand

China's manufacturing rebounded in Mar as authorities relaxed anti-disease controls & allowed factories to reopen, an official survey showed, but an industry group warned the economy has yet to fully recover.  The ruling Communist Party is trying to revive the world's 2nd-largest economy after declaring victory over the coronavirus even as the US & other govs shut down businesses.  The purchasing managers' index issued by the Chinese statistics bureau & the official China Federation of Logistics & Purchasing rose to 52 from Feb's record low of 35.7 on a 100-point scale on which numbers above 50 show activity increasing.  The federation & private sector economists cautioned the economy still faces challenges as manufacturers rebuild supply chains & authorities try to prevent a spike in infections as employees stream back to work.  The shutdown of China's economy sent out global shockwaves, battering Asian countries that supply its factories with components & raw materials & disrupting shipping, airlines & other industries.  Authorities say state-dominated industries such as steel are close to normal production but automakers & other private sector manufacturers say they are operating below normal levels.  They say the pace of their recovery depends on how quickly their supply chains can be restored.  The latest data “do not indicate that economic activity has fully recovered,” the China Federation of Logistics & Purchasing said.  The country needs to “understand the unprecedented severity and complexity of the current domestic and international economic situation” & “return to work and production and expand domestic demand,” the group added.

China's manufacturing rebounds as coronavirus controls ease

Following selling at the opening, buyers returned.  However all is not well in the stock market.  Bulls will have to struggle to extend the recent rally.  Mar economic data will be reported in the next few days & that promises to be grim.  Worse, GDP forecasts look to be extremely gloomy.  Q1 will probably be positive (but not great) because the coronavirus only impacted the last few weeks.  Q2 economic data is all but guaranteed to be dreadful.  Quibbling about numbers is meaningless.  It will be dreadful!!  Q3 is iffy.  Bs are being thrown at the economy which could bring a modest level of growth.  But that represents a very long term forecast & nobody really understands what will happen then.  Next month begins tomorrow & that promises to be another extraordinarily wild month for stocks.

Dow Jones Industrials

Monday, March 30, 2020

Markets extends rally while oil sinks to 18 year low

Dow soared 690, advancers about 3-2 & NAZ advanced 271.  The MLP index fell 2+ to the 83s & the REIT index added 6 to the 315s.  Junk bond funds rose & Treasuries were aggressively purchased.  Oil dropped 1+ to about 20 (more below) & gold gave back 16 to 1637.

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

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Ms of Americans already have lost their jobs due to the coronavirus crisis & the worst of the damage is yet to come, according to a Federal Reserve estimate.  Economists at the Fed's St Louis district project total employment reductions of 47M, which would translate to a 32.1% unemployment rate, according to a recent analysis of how bad things could get.  The projections are even worse than St Louis Fed Pres James Bullard's much-publicized estimate of 30%. They reflect the high nature of at-risk jobs that ultimately could be lost to a gov-induced economic freeze aimed at halting the coronavirus spread. “These are very large numbers by historical standards, but this is a rather unique shock that is unlike any other experienced by the U.S. economy in the last 100 years,” St Louis Fed economist Miguel Faria-e-Castro wrote in a research paper posted last week.  There are a couple of important caveats to what Faria-e-Castro calls “back-of-the-envelope” calculations: They don't account for workers who may drop out of the labor force, thus bringing down the headline unemployment rate & they do not estimate the impact of recently passed gov stimulus, which will extend unemployment benefits & subsidize companies for not cutting staff.  However, the jobless picture already looks bleak.  A record 3.3M filed initial jobless claims last week.  Economists expect another 2.65M to join them this week.  Fri's nonfarm payrolls count for Mar is expected to show a decline of just 56K, but that’s largely due to a statistical distortion because of the sampling period for the count happening before the gov implemented social distancing practices.  The central part of Faria-e-Castro's compilations comes from previous Fed research showing 66.8M workers in “occupations with high risk of layoff.”  They are sales, production, food preparation & services.  Other research also identified 27.3M working in “high contact-intensive” jobs such as barbers & stylists, airline attendants, & food & beverage service.  The paper then took an average of those workers & estimated a loss of just over 47M positions.  That would bring the US unemployment rolls to 52.8M, more than 3 times worse than the peak of the last recession.  The 30% unemployment rate would top the Great Depression peak of 24.9%.  The one potential bright side is the likelihood that the downturn could be comparatively brief.  Last week, Bullard said the jobless number “will be unparalleled, but don’t get discouraged. This is a special quarter, and once the virus goes away and if we play our cards right and keep everything intact, then everyone will go back to work and everything will be fine.”

Coronavirus job losses could total 47 million, unemployment rate may hit 32%, Fed estimates

Pres Trump said US health officials should have a “good idea” whether an anti-malaria drug being tested as a treatment for COVID-19 is effective in fighting the coronavirus in “the next three days.”  “Hydroxychloroquine is something that I have been pushing very hard,” Trump said.  “I think we’re going to have a good idea over the next three days because it’s been used now in New York at my request -- 1,100 people. It’s been used. I think that’s better than testing it in a laboratory. But the doctors tell me no.”  There are no proven therapies for the treatment of COVID-19 & US health officials expect a vaccine could take 12-18 months.  New York state last week began the first large-scale clinical trial using a combination of chloroquine & Azithromycin to treat the coronavirus after the Food & Drug Administration (FDA) fast-tracked the approval process.  Trump has repeatedly touted chloroquine & hydroxychloroquine as a “game-changer” even though the drugs have not been put through rigorous clinical trials to fight CV-19, which has infected more than 730K worldwide in 3 months.  Trump earlier this month directed the FDA to examine whether the drugs can be used to prevent or treat the coronavirus.  Chloroquine has gained a lot of attention after a small study of 36 COVID-19 patients published Mar 17 in France found that most patients taking the drug cleared the coronavirus from their system a lot faster than the control group.  Adding Azithromycin, commonly known as a Z-Pak, to the mix “was significantly more efficient for virus elimination,” the researchers said.  A small study in China also found that combining chloroquine with Azithromycin was “found to be more potent than chloroquine.”  To pass the FDA’s muster & win approval for widespread use, chloroquine & Azithromycin will need to undergo rigorous clinical trials with thousands of participants — not a couple dozen, according to the agency's guidelines.  Early stage, or phase one trials, typically take several months, according to the FDA.

Trump says US officials should have ‘good idea’ if malaria drug works on coronavirus in three days

Pres Trump reversed himself yesterday, extending national social-distancing guidelines to Apr 30 in effort to keep the projected coronavirus death toll in the US from reaching a catastrophic, worst-case scenario.  Trump previously said he wanted the country to reopen for business by Easter.  Public health experts have warned that loosening restrictions by Easter (Apr 12) would result in unnecessary death & economic damage.  “Nothing would be worse than declaring victory before the victory has been won,” Trump said at an evening press briefing.  The pres claimed that Easter was just an “aspiration” & he hopes the country will “be well on our way to recovery” by Jun 1.  Trump said his administration was extending the guidelines to avoid a major death toll.  The pres pointed to modeling that forecast 2.2M deaths in the US if drastic measures weren't taken to mitigate the outbreak.  Trump said the administration is working to keep the projected death toll below 100K.  “So if we can hold that down, as we’re saying, to 100,000, it’s a horrible number, maybe even less, but to 100,000, so we have between 100 and 200,000, we all together have done a very good job,” Trump said.  Earlier in the day, White House health adviser Dr Anthony Fauci said the country could see up to 200K deaths & Ms of infections, though he cautioned that the numbers are based on models & nothing is certain.  There are about 140K confirmed cases in the US, including at least 2400 deaths, according to data from Johns Hopkins University.  While Trump can issue federal guidelines, the pres doesn't have the power to decide if the country can reopen, since those decisions are being made by governors.  The administration's guidance advises people to stay mostly at home & avoid groups of more than 10.  States across the country have strongly advised residents to stay indoors except for essential reasons, & schools, restaurants & other businesses have shuttered.  The Centers for Disease Control & Prevention has urged New York, New Jersey & Connecticut residents to avoid nonessential travel to other states for 14 days.

Trump extends distancing guidelines through April 30 to keep US death toll below 100,000

Oil futures posted their lowest settlement since 2002, with the US benchmark briefly dipping below the psychologically important $20-a-barrel level, as the global COVID-19 pandemic crushes demand & a price war between Saudi Arabia & Russia floods the world with crude.  West Texas Intermediate (WTI) crude for May fell $1.42 (6.6%) to settle at $20.09 a barrel after trading as low as $19.27.  The global benchmark, May Brent crude lost $2.17 (8.7%) at $22.76 a barrel, ahead of the front-month contract's expiration at tomorrow's settlement.  WTI marked its lowest finish since 2002, while Brent saw its lowest settlement since that year.  For the month to date, WTI & Brent crude are both off by about 55%, based on the front month contracts.  Saudi Arabia on Fri said it wasn't in talks with Russia on oil output levels, despite calls by the Trump administration for the 2 countries to end their spat, which has spawned an oil rout that is seen adding to financial market & global economic turmoil alongside the pandemic.  Moscow in early Mar rejected calls by OOEC for the cartel & its allies to increase existing production curbs.  The Saudis retaliated by slashing prices & moving to boost output as the 2 countries, & other major producers, jockey for market share.  Pres Trump spoke with Russian Pres Vladimir Putin by phone today & “agreed to work closely together through the G20 to drive the international campaign to defeat the virus and reinvigorate the global economy,” said a White House Deputy Press Secretary.

Oil ends at 18-year low after dipping below $20 a barrel

Buyers kept coming all day.  The Dow closed near its session high & was able to recover most for Fri's decline.  However, the advance/decline line was not impressive.  High yield stocks (junk bond funds & REITs) found buyers later in the session.  The ugly bear market for oil is another dark cloud for investors to digest.  They are optimistic about extending the economic shutdown thru Apr.  But economic data for Mar is coming later in the week, including the jobs repoprt on Fri.  Optimism will be tested.

Dow Jones Industrials