Dow dropped 147 (session low) after being in the black all day, decliners ahead of advancers 3-2 & NAZ fell 43. The MLP index fell 2+ to the 143s & the REIT index crawled up 1+ to the 343s. Junk bond funds fluctuated & Treasuries dropped in price. Oil went up to the 33s & gold added 3 to 1729 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
China's legislature approved a resolution to impose national-security laws on Hong Kong, overriding the territory's partial autonomy in a bid to crush anti-Beijing protests that have challenged Chinese leader Xi Jinping. The vote, the end of a weeklong session of Beijing's rubber-stamp legislature, the National People's Congress, approved a decision to “establish and enhance the legal framework and enforcement mechanisms for national security” in Hong Kong, state broadcaster China Central Television said. 2878 lawmakers voted for the motion, with only one dissent. 6 voted to abstain, & one didn't cast a vote. Chinese officials have said the resolution is necessary for safeguarding national security, saying unrest in Hong Kong that started last summer has severely threatened China's sovereignty. They said Beijing had no choice but to step in to close legislative & enforcement gaps in Hong Kong after the city failed to enact its own legislation against separatist & subversive activities. Opposition politicians & rights activists in Hong Kong have decried the resolution as a move to undercut the territory's system of self-governance, known as the “one country, two systems” framework, under which Beijing had pledged to keep Hong Kong's “capitalist system and way of life” unchanged for 50 years after Britain returned the city to Chinese rule in 1997. The US & other countries have voiced concern over the move as well. Yesterday, the State Dept said it no longer regarded Hong Kong as enjoying a high degree of autonomy from mainland China. That declaration paves the way for US measures including ending trade privileges for Hong Kong & imposing sanctions on individuals seen as suppressing civil liberties in the territory. The resolution approved today authorizes senior lawmakers in Beijing to write legislation to prevent & punish separatist, subversive & terrorist activities in Hong Kong, as well as foreign interference in the city's affairs, according to the official Xinhua News Agency. The laws would then be promulgated by the city's leader. The resolution also allows mainland Chinese state-security agencies to operate officially in Hong Kong. The Basic Law, Hong Kong's mini-constitution, requires the city to enact its own legislation against secessionist, subversive & other activities that threaten state security. Hong Kong authorities attempted to do so in 2003 but abandoned the effort after ½ a M people took to the streets in protest. Local officials haven't put forward any similar bills since. The resolution approved allows Beijing to bypass Hong Kong's Legislative Council by tapping a provision in the Basic Law that allows China's legislature to apply national laws to Hong Kong through promulgation by the city's leader in matters of national unity or security.
Apr had a record collapse in Americans signing contracts to buy homes, a reflection of the broader shutdown of economic activity in response to the coronavirus outbreak. The National Association of Realtors said that its pending home sales index plunged 21.8% from the prior month to a level of 69, the largest decline registered in data going back to 2001. Pending home sales have fallen 33.8% from a year ago. The index is a barometer of sales over the next 2 months when the transactions are completed. There are signs that home sales have reached a trough & could rebound. Low mortgage rates have supported buyer demand, such that the gov's report of new-home sales showed a slight increase in purchases last month.
National Economic Council Director Larry Kudlow said that there are encouraging economic signs in states that have reopened businesses & that the Trump administration expects a strong rebound. “We’re seeing the economy gradually, in phases, reopen in May and June. These are the transition months. We’re actually seeing some glimmers of hope amidst all the hardship and heartbreak,” Kudlow said. Earlier, the Labor Dept reported that there were more than 2M initial jobless claims last week, bringing the total number of new claims since the coronavirus crisis began to more than 40M. Continuing jobless claims did decline slightly, however. Throughout the month of May, states & cities have been lifting economic restrictions that had been used to slow the spread of the virus. Many states have now allowed non-essential businesses to reopen with social-distancing measures. Kudlow pointed to the high percentage of unemployed workers in Apr who described their layoff as “temporary” as a reason to expect the economy to recover quickly. “If that is true, or if that is nearly true, then we may see folks coming back to work faster than we might have thought, let’s say, a month or six weeks ago,” Kudlow added. He also stressed that the health situation was part of the economic recovery, saying the reopening of states & businesses “has got to be done safely.” In response to the economic hit from the pandemic, federal leaders passed the CARES Act, which added an additional $600 per week to workers who filed for unemployment & provided support for businesses. The flat $600 addition to unemployment benefits has been criticized by some politicians because it effectively gives some low-wage workers a raise for not working. Rep Sen Rob Portman has proposed giving cash bonuses to encourage employees to return to work & Kudlow said the Trump administration was open to that idea. “It’s something we’re looking at very closely. We may go with something like that,” Kudlow said.
Kudlow says there are encouraging signs from reopening states, sees very strong economic rebound
Fed’s Williams says U.S. is not ‘anywhere near’ its limits to run up debt
Abercrombie & Fitch (ANF) sales tanked 34% during Q1 because of store closings during the coronavirus pandemic & people purchasing less apparel as they holed up at home. Net sales dropped to $485M from $734M a year earlier. Sales at its namesake Abercrombie brand were down 30% while Hollister sales were down 36%. Its net loss per share for the period widened to $3.90, from 29¢ a share, a year earlier. Excluding one-time charges, the loss was $3.29 per share. The retailer is not offering a Q2 or full-year outlook. The forecast was for an adjusted loss of $1.39 per share on revenue of $497M. However, it is difficult to compare reported earnings to estimates for Q1, as the coronavirus pandemic continues to hit global economies with earnings impacts that are difficult to assess. CEO Fran Horowitz said that currently roughly ½ of its global store base (409 shops) are back open for business. She said Q1 digital sales globally were up about 25% year over year & that they have accelerated further into May. As stores reopen during the Covid-19 crisis, productivity is returning to about 80% in the US & 60% in the Europe, Middle East & Africa region. In the US, “we are encouraged by recent results, with a customer returning to stores at an even quicker pace than in China,” she said. The company ended the qtr with $704M in cash & equivalents on hand & had inventories of $427M, down 1% from a year earlier. The stock fell 1.46 (11%).
If you would like to learn more about ANF, click on this link:
club.ino.com/trend/analysis/stock/ANF?a_aid=CD3289&a_bid=6ae5b6f7
Abercrombie & Fitch sales fall 34%, with stores forced shut due to the pandemic; shares fall
Gold futures finished slightly higher as China-US tensions remained in focus, driving haven buying in stocks. Elevated animosities between Beijing & the US over China's human rights policies, including its relationship with Hong Kong & the treatment of a Muslim minority, have underpinned buying in safe-haven assets. China hardened its stance, forging ahead with a resolution to impose national-security laws on Hong Kong in a bid to suppress protests there. That action comes after the House of Representatives yesterday passed a bill that would sanction Chinese officials involved in the suppression of Uighurs. The proposal follows the State Dept's determination that Hong Kong no longer was autonomous from China, opening the way for Pres Trump to take a range of steps including revoking special arrangements on trade. Investors also pointed to further talk about US monetary policy, including negative interest rates & increased appetite for gold-focused exchange-traded funds as part of the driver for gains for gold despite a climb for global stocks. Aug gold, which is now the most-active contract, ended $1 higher at $1728 an ounce, well off its intraday high at $1743. A string of US economic reports that highlight the toll of the COVID-19 pandemic did little to sway gold momentum on the session.
Oil futures reversed early losses to end strongly higher, with traders looking past a sharp rise in overall crude inventories to focus on a further decline in stocks at the futures delivery hub in Cushing, Oklahoma, & a drop in gasoline inventories. West Texas Intermediate crude for Jul rose 90¢ (2.7%) to finish at $33.71 a barrel. The Energy Information Administration reported a rise in crude inventories of 7.9M barrels last week, but supplies at Cushing dropped by 3.4M barrels. Gasoline inventories, meanwhile, declined by 700K barrels.
There was selling in the closing hour when markets digested a report that Pres Trump was set to hold a news conference on China tomorrow. Word of an event comes as tensions between China & the US have ratcheted higher, particularly as Beijing was seen threatening the autonomy of Hong Kong. Previsouly investors took negative reports on the economy with a sense of calm. They were more interested in prospects for opening the US economy.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
China's legislature approved a resolution to impose national-security laws on Hong Kong, overriding the territory's partial autonomy in a bid to crush anti-Beijing protests that have challenged Chinese leader Xi Jinping. The vote, the end of a weeklong session of Beijing's rubber-stamp legislature, the National People's Congress, approved a decision to “establish and enhance the legal framework and enforcement mechanisms for national security” in Hong Kong, state broadcaster China Central Television said. 2878 lawmakers voted for the motion, with only one dissent. 6 voted to abstain, & one didn't cast a vote. Chinese officials have said the resolution is necessary for safeguarding national security, saying unrest in Hong Kong that started last summer has severely threatened China's sovereignty. They said Beijing had no choice but to step in to close legislative & enforcement gaps in Hong Kong after the city failed to enact its own legislation against separatist & subversive activities. Opposition politicians & rights activists in Hong Kong have decried the resolution as a move to undercut the territory's system of self-governance, known as the “one country, two systems” framework, under which Beijing had pledged to keep Hong Kong's “capitalist system and way of life” unchanged for 50 years after Britain returned the city to Chinese rule in 1997. The US & other countries have voiced concern over the move as well. Yesterday, the State Dept said it no longer regarded Hong Kong as enjoying a high degree of autonomy from mainland China. That declaration paves the way for US measures including ending trade privileges for Hong Kong & imposing sanctions on individuals seen as suppressing civil liberties in the territory. The resolution approved today authorizes senior lawmakers in Beijing to write legislation to prevent & punish separatist, subversive & terrorist activities in Hong Kong, as well as foreign interference in the city's affairs, according to the official Xinhua News Agency. The laws would then be promulgated by the city's leader. The resolution also allows mainland Chinese state-security agencies to operate officially in Hong Kong. The Basic Law, Hong Kong's mini-constitution, requires the city to enact its own legislation against secessionist, subversive & other activities that threaten state security. Hong Kong authorities attempted to do so in 2003 but abandoned the effort after ½ a M people took to the streets in protest. Local officials haven't put forward any similar bills since. The resolution approved allows Beijing to bypass Hong Kong's Legislative Council by tapping a provision in the Basic Law that allows China's legislature to apply national laws to Hong Kong through promulgation by the city's leader in matters of national unity or security.
China parliament OKs controversial Hong Kong law in bid to crush protests
Apr had a record collapse in Americans signing contracts to buy homes, a reflection of the broader shutdown of economic activity in response to the coronavirus outbreak. The National Association of Realtors said that its pending home sales index plunged 21.8% from the prior month to a level of 69, the largest decline registered in data going back to 2001. Pending home sales have fallen 33.8% from a year ago. The index is a barometer of sales over the next 2 months when the transactions are completed. There are signs that home sales have reached a trough & could rebound. Low mortgage rates have supported buyer demand, such that the gov's report of new-home sales showed a slight increase in purchases last month.
Pending home sales plunged 21.8% in April on monthly basis
National Economic Council Director Larry Kudlow said that there are encouraging economic signs in states that have reopened businesses & that the Trump administration expects a strong rebound. “We’re seeing the economy gradually, in phases, reopen in May and June. These are the transition months. We’re actually seeing some glimmers of hope amidst all the hardship and heartbreak,” Kudlow said. Earlier, the Labor Dept reported that there were more than 2M initial jobless claims last week, bringing the total number of new claims since the coronavirus crisis began to more than 40M. Continuing jobless claims did decline slightly, however. Throughout the month of May, states & cities have been lifting economic restrictions that had been used to slow the spread of the virus. Many states have now allowed non-essential businesses to reopen with social-distancing measures. Kudlow pointed to the high percentage of unemployed workers in Apr who described their layoff as “temporary” as a reason to expect the economy to recover quickly. “If that is true, or if that is nearly true, then we may see folks coming back to work faster than we might have thought, let’s say, a month or six weeks ago,” Kudlow added. He also stressed that the health situation was part of the economic recovery, saying the reopening of states & businesses “has got to be done safely.” In response to the economic hit from the pandemic, federal leaders passed the CARES Act, which added an additional $600 per week to workers who filed for unemployment & provided support for businesses. The flat $600 addition to unemployment benefits has been criticized by some politicians because it effectively gives some low-wage workers a raise for not working. Rep Sen Rob Portman has proposed giving cash bonuses to encourage employees to return to work & Kudlow said the Trump administration was open to that idea. “It’s something we’re looking at very closely. We may go with something like that,” Kudlow said.
Kudlow says there are encouraging signs from reopening states, sees very strong economic rebound
Burgeoning levels of gov debt are not
posing a broader threat & have been necessary to battle the
coronavirus pandemic, New York Fed Pres John Williams said. Even with the federal IOU at $25.6T &
counting, the central bank official said there's still plenty of room to
spend more. “I
don’t think we’re anywhere near the limit to that,” Williams said.
“The U.S. government is issuing a lot of debt right now, and global
investors are gobbling it up.” Total gov debt has jumped
$2.2T since just before the crisis began, an increase of 9.4%,
thanks in good part to the CARES Act that provides more than $2T
in rescue funds for an economy that could contract more than 40% in Q2. Congress has been debating additional stimulus
that could run to $3T as states begin a tentative reopening of
their shuttered economies. The US already had been on its way to
a budget deficit in excess of $1T that now likely will be
closer to $3T, according to recent Congressional Budget Office
estimates. All of that has resulted in $310B in interest
payments in fiscal 2020, a total held in relative check by record-low
interest rates for gov debt as the Fed has sent its benchmark
borrowing rate to near zero. While central bank officials have expressed
a commitment to keep rates low for an extended period of time, Williams said he doesn't see the need for negative rates. He
added that he does not see the Ts in lending & liquidity
programs that the Fed has initiated will lead to troublesome inflation. “I
don’t see any problems right now in terms of deficits,” Williams added.
“Obviously, in the long run we have to make sure that the fiscal policy
in the federal government is on a sustainable path.” He said that
he's more concerned now with making sure money gets to the right
places, particularly the state & local govs that had to lay off
workers during the financial crisis.
Fed’s Williams says U.S. is not ‘anywhere near’ its limits to run up debt
Abercrombie & Fitch (ANF) sales tanked 34% during Q1 because of store closings during the coronavirus pandemic & people purchasing less apparel as they holed up at home. Net sales dropped to $485M from $734M a year earlier. Sales at its namesake Abercrombie brand were down 30% while Hollister sales were down 36%. Its net loss per share for the period widened to $3.90, from 29¢ a share, a year earlier. Excluding one-time charges, the loss was $3.29 per share. The retailer is not offering a Q2 or full-year outlook. The forecast was for an adjusted loss of $1.39 per share on revenue of $497M. However, it is difficult to compare reported earnings to estimates for Q1, as the coronavirus pandemic continues to hit global economies with earnings impacts that are difficult to assess. CEO Fran Horowitz said that currently roughly ½ of its global store base (409 shops) are back open for business. She said Q1 digital sales globally were up about 25% year over year & that they have accelerated further into May. As stores reopen during the Covid-19 crisis, productivity is returning to about 80% in the US & 60% in the Europe, Middle East & Africa region. In the US, “we are encouraged by recent results, with a customer returning to stores at an even quicker pace than in China,” she said. The company ended the qtr with $704M in cash & equivalents on hand & had inventories of $427M, down 1% from a year earlier. The stock fell 1.46 (11%).
If you would like to learn more about ANF, click on this link:
club.ino.com/trend/analysis/stock/ANF?a_aid=CD3289&a_bid=6ae5b6f7
Abercrombie & Fitch sales fall 34%, with stores forced shut due to the pandemic; shares fall
Gold futures finished slightly higher as China-US tensions remained in focus, driving haven buying in stocks. Elevated animosities between Beijing & the US over China's human rights policies, including its relationship with Hong Kong & the treatment of a Muslim minority, have underpinned buying in safe-haven assets. China hardened its stance, forging ahead with a resolution to impose national-security laws on Hong Kong in a bid to suppress protests there. That action comes after the House of Representatives yesterday passed a bill that would sanction Chinese officials involved in the suppression of Uighurs. The proposal follows the State Dept's determination that Hong Kong no longer was autonomous from China, opening the way for Pres Trump to take a range of steps including revoking special arrangements on trade. Investors also pointed to further talk about US monetary policy, including negative interest rates & increased appetite for gold-focused exchange-traded funds as part of the driver for gains for gold despite a climb for global stocks. Aug gold, which is now the most-active contract, ended $1 higher at $1728 an ounce, well off its intraday high at $1743. A string of US economic reports that highlight the toll of the COVID-19 pandemic did little to sway gold momentum on the session.
Gold prices eke out a gain as China-U.S. tensions support haven buying
Oil futures reversed early losses to end strongly higher, with traders looking past a sharp rise in overall crude inventories to focus on a further decline in stocks at the futures delivery hub in Cushing, Oklahoma, & a drop in gasoline inventories. West Texas Intermediate crude for Jul rose 90¢ (2.7%) to finish at $33.71 a barrel. The Energy Information Administration reported a rise in crude inventories of 7.9M barrels last week, but supplies at Cushing dropped by 3.4M barrels. Gasoline inventories, meanwhile, declined by 700K barrels.
Oil ends with strong gains as traders focus on fall in gasoline inventories, Cushing stocks
There was selling in the closing hour when markets digested a report that Pres Trump was set to hold a news conference on China tomorrow. Word of an event comes as tensions between China & the US have ratcheted higher, particularly as Beijing was seen threatening the autonomy of Hong Kong. Previsouly investors took negative reports on the economy with a sense of calm. They were more interested in prospects for opening the US economy.
Dow Jones Industrials
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