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.

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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