Dow sank 168, decliners over advancers 2-1 & NAZ eased back only 3. The MLP index fell 4 to 140 & the REIT index fell 4 to the 339s. Junk bond funds just fluctuated & Treasuries were in demand. Oil was flattish in the 33s (concluding its best month in history) & gold rose 19 to 1748.
AMJ (Alerian MLP Index tracking fund)
US consumer spending plunged by a record-shattering 13.6% in Apr as the viral pandemic shuttered businesses, forced Ms of layoffs & sent the economy into a deep recession. Last month's spending decline was far worse than the revised 6.9% drop in Mar, which itself had set a record for the steepest one-month fall in records dating to 1959. Commerce Dept figures reinforced evidence that the economy is gripped by the worst downturn in decades, with consumers unable or too anxious to spend much. Even with employers cutting millions of jobs during the month, personal incomes soared 10.5% in Apr, reflecting Bs of $s in support thru gov payments in the form of unemployment benefits & stimulus checks. The depth of the spending drop is particularly damaging because consumer spending is the primary driver of the economy, accounting for about 70% of economic activity. Last month’s figure signaled that Q2 will be especially grim, with the economy thought to be shrinking at an annual rate near 40%. That would be, by far, the worst quarterly contraction on record. The report showed sharp declines in consumer spending across the board — from durable goods like cars to non-durable items such as clothing & services ranging from doctor visits to haircuts. In Apr, the nation's jobless rate was 14.7%, the highest since the depression, & many economists think it will top 20% for May. States are gradually restarting their economies by letting some businesses reopen with certain restrictions & some laid-off employees are being recalled to work. Still, the job market remains severely depressed & the outlook for the rest of the year remains bleak. Some financial support for the tens of Ms of consumers who have been laid off over the past 2 months is coming from weekly unemployment benefits. Besides whatever unemployment aid states are providing to laid-off workers, the federal gov is providing $600 a week in additional benefits.
Pres Trump said he would hold a news conference “on China,” but he offered no details as to what he would say. Even without any details, his announcement yesterday was enough to send markets tumbling. White House declined to comment on the content of the presidential announcement, & advisers said they didn't want to get ahead of the pres by discussing it in advance. Even Trump was cryptic about the expected news, tweeting one word, “CHINA!” today. For weeks, the administration has been ratcheting up pressure on Beijing over its alleged cover-up of early coronavirus cases. Trump has publicly blamed China for the virus itself & for its outsized severity in the US. Beijing, in turn, has suggested the virus originated in US service members, a claim widely rejected by intl health experts. In the past week, however, the pressure from the US has taken a more serious turn in response to a proposed Chinese security law that threatens the long-standing independence of Hong Kong. The law, formally approved yesterday by China's People's Congress, is expected to criminalize most forms of political protest under blanket bans on “sedition” & “subversion.” Wed, Secretary of State Mike Pompeo delivered a report to Congress declaring that Hong Kong was no longer autonomous from China. “No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground,” Pompeo said. The shift in Hong Kong's status immediately jeopardizes the former British colony's favorable trade relationship with the US, which has so far meant that Hong Kong has been spared punishing tariffs that are a hallmark of Trump's trade war with Beijing. The State Dept was required to issue a determination on Hong Kong’s autonomy under pro-democracy legislation passed by Congress late last year. The law also requires Trump to impose sanctions on foreigners who undermine “fundamental freedoms and autonomy in Hong Kong.” For investors, a revocation of Hong Kong’s favored status is a worst-case outcome of Fri's news conference. But it’s far from guaranteed.
U.S. savings rate hits record 33% as coronavirus causes Americans to stockpile cash, curb spending
While the consumer spending data was grim, it represents the past. May is expected to show some economic improvement indicating the recovery is beginning. Trump's comments on China & US-China relations will move markets later & traders are already betting they will be negative.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 33.16 | -0.55 | -1.6% |
| GC=F | Gold | 1,742.70 | +14.40 | +0.8% |
US consumer spending plunged by a record-shattering 13.6% in Apr as the viral pandemic shuttered businesses, forced Ms of layoffs & sent the economy into a deep recession. Last month's spending decline was far worse than the revised 6.9% drop in Mar, which itself had set a record for the steepest one-month fall in records dating to 1959. Commerce Dept figures reinforced evidence that the economy is gripped by the worst downturn in decades, with consumers unable or too anxious to spend much. Even with employers cutting millions of jobs during the month, personal incomes soared 10.5% in Apr, reflecting Bs of $s in support thru gov payments in the form of unemployment benefits & stimulus checks. The depth of the spending drop is particularly damaging because consumer spending is the primary driver of the economy, accounting for about 70% of economic activity. Last month’s figure signaled that Q2 will be especially grim, with the economy thought to be shrinking at an annual rate near 40%. That would be, by far, the worst quarterly contraction on record. The report showed sharp declines in consumer spending across the board — from durable goods like cars to non-durable items such as clothing & services ranging from doctor visits to haircuts. In Apr, the nation's jobless rate was 14.7%, the highest since the depression, & many economists think it will top 20% for May. States are gradually restarting their economies by letting some businesses reopen with certain restrictions & some laid-off employees are being recalled to work. Still, the job market remains severely depressed & the outlook for the rest of the year remains bleak. Some financial support for the tens of Ms of consumers who have been laid off over the past 2 months is coming from weekly unemployment benefits. Besides whatever unemployment aid states are providing to laid-off workers, the federal gov is providing $600 a week in additional benefits.
Consumer spending sinks by record 13.6%
Pres Trump said he would hold a news conference “on China,” but he offered no details as to what he would say. Even without any details, his announcement yesterday was enough to send markets tumbling. White House declined to comment on the content of the presidential announcement, & advisers said they didn't want to get ahead of the pres by discussing it in advance. Even Trump was cryptic about the expected news, tweeting one word, “CHINA!” today. For weeks, the administration has been ratcheting up pressure on Beijing over its alleged cover-up of early coronavirus cases. Trump has publicly blamed China for the virus itself & for its outsized severity in the US. Beijing, in turn, has suggested the virus originated in US service members, a claim widely rejected by intl health experts. In the past week, however, the pressure from the US has taken a more serious turn in response to a proposed Chinese security law that threatens the long-standing independence of Hong Kong. The law, formally approved yesterday by China's People's Congress, is expected to criminalize most forms of political protest under blanket bans on “sedition” & “subversion.” Wed, Secretary of State Mike Pompeo delivered a report to Congress declaring that Hong Kong was no longer autonomous from China. “No reasonable person can assert today that Hong Kong maintains a high degree of autonomy from China, given facts on the ground,” Pompeo said. The shift in Hong Kong's status immediately jeopardizes the former British colony's favorable trade relationship with the US, which has so far meant that Hong Kong has been spared punishing tariffs that are a hallmark of Trump's trade war with Beijing. The State Dept was required to issue a determination on Hong Kong’s autonomy under pro-democracy legislation passed by Congress late last year. The law also requires Trump to impose sanctions on foreigners who undermine “fundamental freedoms and autonomy in Hong Kong.” For investors, a revocation of Hong Kong’s favored status is a worst-case outcome of Fri's news conference. But it’s far from guaranteed.
Trump’s China press conference could mark the end of his cautious approach to Beijing
The coronavirus crisis has Americans hoarding more money than ever as widespread fear paralyzes consumer spending habits. The
personal savings rate hit a historic 33% in Apr, the Bureau of
Economic Analysis said. This rate — how much people save as a
percentage of their disposable income — is by far the highest since the
department started tracking in the 1960s. Apr's mark is up from 12.7%
in Mar. The swiftness & severity of a US economic recovery hinges on whether
consumers continue to stockpile cash or start to spend again. The previous record savings rate was 17.3% in 1975. The savings rate was elevated above 13% throughout most of the
early 1970s. The increase in savings came as spending declined by a
record 13.6% in Apr. US consumers have amassed savings as the deadly coronavirus causes unprecedented economic & societal disruption. The deadly
virus — which forced a gov mandated shutdown of the economy — has
caused more than 40M Americans to file for unemployment since the virus was declared a pandemic. With the US consumer accounting for more 2/3 of the economy, the speed & robustness of economic recovery
depends on whether the increase in savings is a result of the shutdown
or reflects a more structural change in consumer habits. Saving
during the Covid-19 pandemic is especially unique due to the shutdowns.
Hundreds of thousands of small & large businesses shuttered
U.S. savings rate hits record 33% as coronavirus causes Americans to stockpile cash, curb spending
While the consumer spending data was grim, it represents the past. May is expected to show some economic improvement indicating the recovery is beginning. Trump's comments on China & US-China relations will move markets later & traders are already betting they will be negative.
Dow Jones Industrials
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