Markets drop as job losses top 30 million

Dow pulled back 288 (off earlier lows), decliners over advancers 3-1 & NAZ declined 25.  The MLP index fell 3+ to the 134s & the REIT index fell 4+ to the 334s.  Junk bond fujnds remained  mixed & Treasuries crawled higher in price.  Oil jumped 3+ to the 18s & gold fell 19 to 1594 (more on both below).

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US oil ompany ConocoPhillips (COP) said it would sharply reduce oil production in coming weeks, aiming to shut in 35% of its total output by Jun amid weak energy prices that led to a loss of $1.7B in Q1.  The world's largest independent oil & gas producer, which reduced its 2020 production forecast 2 weeks ago, plans to curtail output by a further 40K barrels per day (bpd) in May & bring its total cuts to 460K bpd by Jun, lopping off more than a 3rd of what it pumped last year.  The figure includes significant reductions in the company's Alaska oil & gas production.  Crude prices have crashed in the past 6 weeks as the coronavirus outbreak hit demand & a price war broke out between Russia & Saudi Arabia, prompting companies to slash spending & curb output.  The crash in crude prices led the company to report a Q1 loss as it took big hits from impairments and the falling value of its stake in Canadian producer (CVE).  Conoco is currently the biggest shareholder of Cenovus, with a 17% stake & its unrealized loss on the stake was $1.69B during the qtr.  Total realized price per barrel was $38.81 in the qtr compared with $50.59 a year earlier.  COP posted a net loss per share of $1.60 in Q1 compared with a profit $1.60 per share a year earlier.  Excluding items, EPS was 45¢ compared to the 23¢ estimate.  Production, excluding Libya was 1.28M barrels of oil equivalent (BOE) per day, a drop of 40K BOE per day from the same period a year ago.  The stock lost 8¢.
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ConocoPhillips to sharply cut oil production as low prices hit earnings

Amidst all of the uncertainty that the coronavirus pandemic has raised, Macy's CEO Jeff Gennette is sure of one thing: The retailer’s sales will be more “modest” for some time as it emerges from this crisis.  “We are going to emerge out of this as a smaller company,” Gennette said.  “We don’t really know what the ramp back looks like.”  Macy's is, meantime, already planning to see lower volume this holiday season, in part because millions of Americans are now unemployed & without paychecks.  Gennette also expects its hundreds of department stores & specialty shops, including Bloomingdale's & Bluemercury, to reopen in phases.  It will open 68 locations Mon, in states including South Carolina & Georgia, where local lockdown restrictions have been loosened.  It plans to have all of its locations reopened over the next 6-8 weeks, provided Covid-19 infection rates continue to taper off.  It will be putting precautions in place such as limiting the number of open fitting rooms & mandating store workers wear cloth masks.  “Social distancing will be the norm in all locations for the foreseeable future,” it said.  Still, shoppers likely will not be back in droves.  Gennette said Macy's is forecasting a “gradual sales recovery” at its stores.  Ahead of the virus slamming the US economy & drastically changing the retail landscape, Macy's in Feb announced it planned to shut 125 locations over the next 3 years.   The stock fell 20¢.
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Macy’s CEO says the retailer will emerge from the pandemic as a smaller company; shares fall

Gold futures settled lower in volatile trading, but posted a gain for the month with prices supported partly by growing physical demand & expectations that global central banks will be compelled to keep stimulus measures in place to dampen the impact of the COVID-19 pandemic.  US inflation pressures eased in Mar.  The closely watched personal consumption expenditure price gauge fell 0.3% in the month led by energy prices, pushing down the increase over the past year to 1.3% from 1.8%.  Gold for Jun lost $19.20 (1.1%) to settle at $1694 an ounce.  Prices for metals did get a bump after the Fed's policy actions on yesterday, which came about a ½-hour after the metal's settlement   For the month, based on the most-active contracts, prices were up 6.1%, which was the largest monthly percentage rise since Aug 2019.  Meanwhile, the ECB, which has taken a number of emergency measures since their last meeting in early Mar, including a €750B ($813B) Pandemic Emergency Purchase Program, left its interest rates unchanged today.  ECB Pres Christine Lagarde said the eurozone economy could fall 5-12% this year.  The meeting of eurozone monetary-policy makers came a day after the Federal Reserve held federal-funds rates at 0-0.25% & vowed to use its policy tools to limit the economic damage from the viral outbreak that has infected millions & claimed hundreds of thousands of lives globally.  Total gold investment demand, which includes bars & coins & gold-backed exchange-traded fund investments, climbed 80% year-over-year to a 4-year high of 539 metric tons in Q1, the WGC said.  That figure included inflows of 298 metric tons for gold-backed ETFs to record-high holdings of 3185 metric tons for the qtr.  Total global Q1 demand, however, edged up by just 1% from the same period last year to 1084 metric tons.  The GFMS team at Refinitiv reported that physical gold demand, including jewelry, industrial fabrication & bars & coins, fell 26% year-on-year in Q1 to 753 metric tons—the lowest level since 2009.  Including exchange-traded fund flows, total global gold demand was up 2% at roughly 1070 metric tons for the qtr.

Gold ends lower in volatile trading, posts a monthly gain of 6%

Oil futures finished 25% higher, paring their loss for the month as traders eyed the outlook for global crude supply, demand & storage capacity.  The market found support for the session on the back of news that major oil companies have announced voluntary crude production cuts & amid signs that storage space for crude won’t run out as quickly as feared.  Norway announced its first cut with production in 18 years, he said.  News reports said the country would reduce output by 250K barrels per day in Jun & 134K barrels per day during H2.  Royal Dutch Shell (RDS.A) said that it's cutting its Q1 div for the first time in 80 years, citing the collapse in oil & gas demand & prices.   ConocoPhillips (COP) reported a loss for Q1 & announced a voluntary reduction of crude production by 420K barrels per day in Jun.  West Texas Intermediate crude for Jun rose $3.78 (25%) to settle at $18.84 a barrel after a 22% surge yesterday.  For the month, prices still lost 8%, from the front-month contract settlement on Mar 31.  Global benchmark Jun Brent crude, which expired at the end of the session, added $2.73 (12%) at $25.27 a barrel with front-month contract prices ending the month 11.1% higher.  The most-active Jul contract gained $2.25 (9.3%) to end the session at $26.48 a barrel.  Oil has been hit by worries about oversupply by major producers amid the worst viral pandemic in more than century which has wrecked crude demand, while a dearth of places to store the commodity has served to further fuel its descent.  Hope of treatments for COVID-19, with the anticipation that seized up economies will eventually restart, have helped to stabilize expectations for greater appetite for crude in the future.  Pledged aid by central bank, including the Federal Reserve & the ECB, may also provide some support for oil bulls.  However, a report from the International Energy Agency released offered a more sober picture of the oil outlook, describing the COVID-19 pandemic as the “biggest shock to the global energy system in more than seven decades.”

U.S. oil prices climb 25% to pare monthly loss to 8%

The Dow rose 2400 in Apr as investors are warming up to the economy & global markets reopening.  However, the Dow is still down 4200 YTD.  Oil finally sound some support this week as the supply-demand imbaance is showing some sign of improvement.  However the rebound this month for stocks & commodities is still tentative.  Economic improvement will come one step at a time.  On the other side of the coin, demand for gold remains strong & it's not far from tis record highs around 1900 in 2011.

Dow Jones Industrials

Markets drop after dismal economic data

Dow sank 250, decliners over advancers 5-2 & NAZ dropped 26.  The MLP index added 2+ to the 141s & the REIT index fell 6+ to 332.  Junk bond funds slid lower & Treasuries were in demand.  Oil shot up 3+ to the 18s (still depressed) & gold went up 3 to 1716.

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CL=F

Crude Oil

17.66

+2.60

+17.3%

GC=F

Gold

1,717.90

+4.50

+0.3%

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Consumer spending, the engine of the US economy, plunged by 7.5% in Mar as the coronavirus pandemic forced businesses to close and triggered a massive surge of job losses.  The Commerce Dept's report said the biggest monthly decline recorded came as “consumers canceled, restricted or redirected their spending.”  Consumer spending accounts for nearly 2/3 of GDP & has been a key driver of the economy in recent years.  A steep decline in spending dragged down GDP the broadest measure of goods and services produced across the economy, at a seasonally adjusted annual rate of 4.8% in Q1, the dept said.  The severity of the coronavirus-induced downturn will be reflected more accurately in Q2, when the nation's economy came to a near standstill to mitigate the spread of the virus.  Estimates vary widely but economists agree it'll be bleak.  In the past 6 weeks, more than 30M Americans have lost their jobs, curtailing their willingness to spend money.  Even when the economy reopens, Federal Reserve Chairman Jerome Powell said Americans may still be hesitant.  "You would think behavior will change as people gain confidence, so the sooner we get the virus under control, the sooner people can regain that confidence and regain our economic activity,” he said.

Spending plummets in biggest drop on record as virus crushes businesses

First-time filings for unemployment insurance hit 3.84M last week as the wave of economic pain continues, though the worst appears to be in the past, according to Labor Dept figures.  The forecast called for 3.5M.  Jobless claims last week came in at the lowest level since Mar 21 but bring the rolling 6-week total to 30.3M as part of the worst employment crisis in US history.  Claims hit a record 6.87M  for the week of Mar 28 & have declined each week since then.  Last week's initially reported figure was revised up by 15K to 4.4M, meaning that the most recent total is a decrease of 603K.  Continuing claims rose to just shy of 18M, a rise of 2.2M from the previous week.  The 4-week moving average, which smooths volatility, jumped to 13.3M, an increase of 3.7M from the previous week’s average.  The surge in unemployment has come amid efforts to contain the coronavirus spread.  While some states & municipalities have begun bringing their respective economies back online, much of the key US infrastructure remains on lockdown.  Filings continue at a high pace as the gov has expanded the list of those eligible for benefits & amid continued difficulties at state offices for claims filers.  The Economic Policy Institute earlier this week estimated that the current claims level probably undercounts by as much as 12M those who are eligible for benefits but not getting them due to the inability to file or other roadblocks.

US weekly jobless claims hit 3.84 million, topping 30 million over the last 6 weeks

McDonald’s (MCD), a Dow stock & Dividend Aristocrat, is expecting steeper same-store sales declines in Q2 as intl restaurant closures due to the coronavirus pandemic continue to weigh down sales.  Global same-store sales shrank 3.4% in the first 3 months of the year after plunging 22% in Mar.  “Looking at comparable sales, we expect the second quarter as a whole to be significantly worse than what we experienced for the full month of March,” CEO Chris Kempczinski said.  More than ½ of restaurants in the intl operated markets segment, which includes France & Australia, are closed.  4 countries in the segment — the UK, Spain, Italy & France  — have closed down restaurants entirely to slow the spread of the virus.  In Apr, the segment's same-store sales are down about 70%.  Kempczinski said that it is difficult to generalize how the company is recovering as countries in Europe & Asia allow restaurants to reopen.  In the US, same-store sales are showing signs of improvement.  From mid-Mar to mid-Apr, sales at locations open at least a year tumbled 25%, but MCD's estimates that Apr's same-store sales only fell 20%.  The stock fell 3.94.
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McDonald’s says this quarter’s same-store sales will be worse. Here’s why

As dreary as the numbers are, there is some consolation.  Filings for unemployment claims continred to increase as expected, but the number is decreasing every week.  Consumer spending data was pretty much expected.  MCD's data is a reminder that the road to recovery will be very rocky around the globe.  So far, investors are taking the negative news with relative clam.  The bulls like to see that.  Meanwhile there is strong demand for gold.

Dow Jones Industrials

Higher markets climb higher on hopes for new cornovavirus treatment

Dow surged 532 to near session highs, advancers over decliners 8-1 & NAZ jumped 306.  The MLP index rose 10+ to the 138s & the REIT index advanced 6+ to 341.  Junk bond funds were bid higher & Treasuries drifted lower.  Oil rose almost 3 to the 15s while gold fell 1 to 1720 (more on both below).

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The Federal Reserve pledged to continue taking aggressive action to support an economy devastated by the coronavirus pandemic, including holding interest rates near zero until policymakers are confident the US has weathered the crisis & continuing to buy bonds.  "The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term," the rate-setting FOMC said.  In a unanimous statement after their 2-day virtual gathering -- the first since the crisis began --policymakers vowed to use their "tools and act as appropriate to support the economy.”  The central bank reiterated previous guidance that the benchmark federal fund rate will remain at 0-0.25% "until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”  The Fed has already taken a range of extraordinary actions to support the economy, including slashing interest rates to near-zero, purchasing an unlimited amount of Treasuries (quantitative easing) & launching crisis-era lending facilities to ensure that credit flows to households and businesses.  It has also said it will buy corp bonds & lend to states & cities.  In the past 6 weeks, the Fed has pumped $2.3T into the economy, an unprecedented amount.  The Fed/s meetings come against a bleak backdrop: Hours earlier, the Commerce Dept revealed the US economy shrank by 4.8% in the first 3 months of the year, the sharpest decline since the financial crisis more than a decade ago.

Fed pledges sweeping action to support coronavirus-battered economy

Pres Trump's chief economic adviser Larry Kudlow predicted the US economy will experience a big "snapback" from the coronavirus pandemic in the latter ½ of 2020.  "I think the second half of this year is going to grow, big snapback," Kudlow said, suggesting growth could be as high as 20%.  The American economy shrank by 4.8% in Q1, the sharpest decline since the financial crisis more than a decade ago, the Commerce Dept reported.  It was the first drop recorded since 2014 & the worst since the Q1-2009, when the economy contracted by 4.4% in the midst of the financial crisis.  Still, the severity of the coronavirus-induced downturn will be reflected more accurately in Q2, when the nation's economy came to a near standstill to mitigate the spread of the virus.  While estimates vary widely, economists agree it'll be grim, possibly surpassing the worst of the Great Depression.

Kudlow reveals when he expects to see 'big snapback' for virus-hit economy

Boeing (BA)., a Dow stock, posted a loss Q1 as the COVID-19 pandemic & the grounding of the 737 MAX hammered sales.  The aerospace giant lost $641M ($1.11 per share) as revenue fell 26% to $16.9B.  The adjusted loss per share was $1.70, compared to the $1.61 loss expected.  “The COVID-19 pandemic is affecting every aspect of our business, including airline customer demand, production continuity and supply-chain stability,” CEO David Calhoun said.  He added BA is “progressing toward the safe return to service of the 737 MAX.”  Operating cash flow fell by $4.3B during the qtr.  Total cash increased by $15.5B, mostly due to total debt rising to $38.9B from $27.3B.  Commercial airplane revenue totaled $6.2B, down 48% year-over-year, as the number of aircraft delivered fell to 50 from 149 due to the grounding of the 737 MAX.  COVID-19 has adversely affected the planned production ramp for the aircraft.  BA expects production of the 737 Max to begin at low rates in 2020 & gradually increase to 31 per month during 2021.  The company reduced production rates for its 787 & 777 aircraft.  The company has a backlog of $439B & more than 5K for commercial aircraft.  The stock rose 7.82, helped by a rising market.
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Boeing posts massive loss as pandemic whacks 'every aspect of our business'

Oil prices jumped more than 20% after data showed a smaller-than-expected build in US inventories, as well as on the hope that economies will reopen sooner than expected.West Teaxas Intermedite (WTI) for Jun surged 22% ($2.72) to settle at $15.06 per barrel, after earlier trading as high as $16.78.  Intl benchmark Brent crude gained $2.08 (10%) to settle at $22.54 per barrel.  Optimism that economies will be able to re-open ahead of schedule rose after Gilead (GILD) said early results of its coronavirus drug trial showed that at least 50% of patients treated with a 5-day dosage of antiviral drug remdesivir improved & more than ½ were discharged from the hospital within 2 weeks.  Oil prices also got a boost on a smaller-than-expected build in US inventories.  According to the Energy Information Administration, crude stockpiles rose 9M barrels for last week ending Apr 24.  This was lower than the 11.7M barrel expected.  The data also showed that US production fell by 100K barrels per day last week to 12.1M bpd.  This is 1M bpd below the record 13.1M bpd production set during the week ending Mar 13.  Oil prices swayed wildly yesterday between gains & losses as investors continue to keep an eye on depleting crude storage space amid a dearth in demand.  The coronavirus pandemic, which has forced countries around the world to shut their economies temporarily as people are told to stay home, has reduced global demand for crude by as much as a 3rd, according to some estimates.  WTI for Jun delivery fell 44¢ (3.4%) to settle at $12.34 per barrel yesterday.  Intl benchmark Brent crude, on the other hand, gained 47¢ (2.4)%, to settle at $20.46.  In a note dated Apr 28, Moody's Investors Service said it was reducing its near-term oil price assumptions for WTI as well as Brent.  Data from the American Petroleum Institute released yesterday night showed that US crude inventories jumped by 10M barrels in the week to Apr 24, bringing the total to 510M barrels, lower than expectations for a build of 10.6M barrels.

Oil jumps 22% on smaller-than-expected inventory build, optimism around reopening economies

Gold futures finished lower for a 4th straight session, with possible progress on an experimental treatment for COVID-19 dulling haven demand for the precious metal.  Prices then edged higher after the official settlement when the Federal Reserve pledged to help the economy fight the devastating impact of the coronavirus pandemic.  Gold for Jun was at $1716 in trading shortly after the FOMC kept its benchmark interest rate in a range of 0-0.25% & said it will commit to using a full range of tools as the economy continues to face a public-health crisis.  The central bank has already exceeded its rescue effort in the 2008 financial crisis to soften the blow of the pandemic, pushing its balance sheet to a record $6.6T as of last week's count.  Prices for Jun gold contract were up from the settlement at $1713 (down $8 or 0.5%) from yesterday.  Commodity experts have been watching for a treatment or a vaccine for the deadly contagion which could undercut appetite for havens & support hopes of mitigating the impact of the virus.  A report indicating that the GILD  experimental treatment for the illness derived from the novel strain of coronavirus achieved some success in a gov-run clinical trial evaluating remdesivir in certain COVID-19 patients.  A first reading of the official scorecard of US economic activity, GDP, fell 4.8% in Q1 on an annualized basis, highlighting the effects of the coronavirus pandemic so far.  Gold has been mostly trading in a range recently, with gold bulls expecting it to possibly break out of that trend as data underlines the hard slog ahead for economies attempting to re-emerge from coronavirus-induced shutdowns.

Gold prices post a fourth straight decline, then edge higher after Fed policy statement

Investors have become very enthusiastic about the sock market in Apr.  The Dow has risen nearly 3K in Apr & that was pretty much a straight up advance (shown below).  Now more gloomy news is coming, between dreary economic data & earnings.  Of little notice, the FOMC had a routine meeting today.  Obviously nothing new was decided.  Stockholders are feeling good.  Tomorrow will begin with another dismal report on jobless claims.  The bulls are feeling good & will try to extend the Apr rally.

Dow Jones Industrials