Dow plunged 516 near session lows, decliners over advancers a huge 11-1 & NAZ sank 139. The MLP index dropped 3+ to the 123s & the REIT index plummeted 6+ to the 303s (a 7 week low). Junk bond funds remained weak & Treasuries were bid higher. Oil drifted lower in the 25s & gold added 11 to 1718 (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)
Official figures show that the British economy shrank 2% in Q1 of the year from the previous 3-month period as restrictions on economic activity were ramped up ahead of the coronavirus lockdown towards the end of Mar. The decline is the biggest since the global financial crisis in 2008 & is the first indication of the coronavirus' growing impact on the economy ahead of the British lockdown on Mar 23. In Mar alone, the British economy shrank by 5.8%. That monthly fall is an indicator of what has occurred since, with many economists predicting that Q2 could see British economic output shrink by a ¼, or even more. Last week, the Bank of England warned that the British economy could fall by around 30% in H1, before a strong recovery in H2, leaving it 14% smaller by the end of 2020. Still, even with that predicted recovery, the annual fall would be the biggest since 1706.
Japanese electronics & entertainment company Sony (SNE). reported that its quarterly profit tumbled as the coronavirus pandemic delayed music & movie releases & disrupted product supply chains. Profit in Jan-Mar crashed 86% to ¥12.6B ($118M), a fraction of the ¥87.9B earned a year ago. The spread of COVID-19 has crimped consumer spending, shut movie theaters, canceled events & sent share prices falling — all damaging for a company with sprawling businesses. Quarterly sales & operating revenue fell a combined 18% to ¥1.7T ($16B). The company did not give forecasts for the fiscal year thru Mar 2021, citing uncertainties due to the pandemic. It said projections will be released as soon as possible. Its electronics & financial services businesses especially suffered. Consumer demand declined, especially in regions where lockdowns closed retailers. Shutdowns of factories in China & Malaysia also hurt the electronics operations. In financial services, the value of its securities holdings slipped as market conditions worsened, & insurance policy sales dropped. Demand for video games was helped by people staying home, but SNE was hurt by the decrease in the use of its music for advertising & at restaurants, as events were canceled. In the fiscal year that ended in Mar, profits dropped 36% to ¥582B ($5.4B ), as sales & operating revenue sank 5% to nearly ¥8.3T ($77B). The company estimated the damage to its annual operating profit from the outbreak at ¥68B ($636M). SNE expects the spread & damage from the virus to peak by the end of Jun, with business returning to normal later in the year. Since people are staying at home more, SNE is looking into the growth potential for online businesses, including movies & other entertainment. Production of TV shows & movies are encountering delays, while digital sales for its movies are going well. Image sensors are in demand but smartphone sales are falling, it added. The stock fell 2.76.
If you would like to learn more about SNE, cllick on this link:
club.ino.com/trend/analysis/stock/SNE?a_aid=CD3289&a_bid=6ae5b6f7
Pres Trump said any benefits from the US China trade deal he signed in Jan pale in comparison to the damage that has been caused by what Trump called “the plague from China.” It was unclear whom Trump was referring to when he said “dealing with China is a very expensive thing to do.” But after months of Trump resisting pressure to explicitly tie US-China trade relations to the bilateral coronavirus blame game, the tweet was one of several signs in recent days that Trump may be changing tack. On Mon, Trump & Labor Secretary Eugene Scalia directed the Federal Retirement Thrift Investment Board (FRTIB) to halt plans to invest in Chinese companies. In a letter, Scalia wrote that the current plan to invest federal savings would place “billions of dollars in retirement savings in risky companies that pose a threat to U.S. national security.” An accompanying letter from administration officials warned that Chinese companies could face sanctions related to what the White House claimed were “culpable actions of the Chinese government with respect to the global spread of the [coronavirus]”. Yesterday, the FRTIB announced it would delay its plan to invest what would have amounted to about $4.5B in Chinese equities. The delay represents a significant ratcheting up of financial pressure on Beijing, which is already under immense strain from the collapse in demand for Chinese goods caused by global pandemic. While the White House is quick to use words like “liable” & “culpable” to imply that China can somehow be held legally responsible for the deadly pandemic, experts say there is no provision in intl law which allows culpability to be assigned to a particular country for a pandemic. Yesterday, the US put further pressure on China when the FBI, in a joint statement with the Cybersecurity & Infrastructure Security Agency, said it is investigating “the targeting and compromise of U.S. organizations conducting COVID-19-related research by [China] affiliated cyber actors and non-traditional collectors.” The hackers have been caught attempting to “identify and illicitly obtain valuable intellectual property” & public-health data related to coronavirus research, said the FBI. “The potential theft of this information jeopardizes the delivery of secure, effective, and efficient treatment options.” Yet while actions like these certainly serve to deepen the mutual distrust between the US & Beijing, it's difficult to ascertain what impact they're having on the nuts & bolts of the trade deal itself. According to the Dept of Agriculture, which tracks implementation of the deal on agricultural products, China & the US are continuing to make progress on opening market access for American export & easing tariffs on both sides. This week, China took another step forward in the deal by issuing a new list of 79 US products eligible for tariff waivers. The list, released Tues, includes high-value items like the ores of rare earth metals, gold ores, silver ores & concentrates. Another reason the trade deal still appears to be holding is that Trump is under pressure from US producers not to do anything that might spark retaliatory tariffs from China, & thereby limit their ability to export products to a market where demand is slowly recovering after coronavirus shutdowns.
Trump on China: ’100 Trade Deals’ wouldn’t make up for coronavirus
Gold futures climbed to register a 2nd straight finish above the $1700-an-ounce mark, as traders weighed the outlook for economic growth & the prospects for negative US interest rates to gauge the precious metal's next big move after the Federal Reserve Chair Jerome Powell said the US economic outlook was “both highly uncertain and subject to significant downside risks.” However, he also said the Fed was not looking at negative interest rates as part of the monetary policy toolkit, arguing that its track record was mixed. Pres Trump had tweeted Tues that he favored a fall in US interest rates into negative territory. Gold for Jun rose $9 (0.6%) to settle at $1716 an ounce. Prices for gold got a boost in the wake of the release of data today showing that the wholesale cost of US goods & services sank 1.3% in Apr, the largest decline on record, as the coronavirus pandemic cratered demand.
Oil prices settled with a loss, failing to find support even after gov data showed an unexpected weekly decline in domestic crude supplies, along with a fall in stocks at a key storage hub in Cushing, OK. West Texas Intermediate (WTI) crude for Jun fell 49¢ (1.9%) to settle at $25.29 a barrel. It had briefly turned higher immediately after the EIA supply data. The global benchmark, Jul Brent fell 79¢ (2.6%) at $29.19 a barrel. The Energy Information Administration (EIA) reported that US crude inventories fell by 700K barrels for last week. That marked the first weekly decline in 16 weeks & defied a forecast for an increase of 4.8M barrels. The American Petroleum Institute on Tues reported a climb of 7.6M barrels. The EIA data also showed crude stocks at the Cushing, OK, storage hub declined by 3M barrels last week to 62.4M barrels. Working storage capacity at Cushing stands at around 76M barrels. Dwindling storage capacity in Cushing was blamed in large part for driving the expiring May WTI contract into negative territory for the first time in history last month. The COVID-19 pandemic has destroyed demand for crude, contributing to a global glut. Total US oil production fell by 300K barrels a day to 11.6M barrels a day, EIA data showed. In a monthly report yesterday, the EIA forecast US crude production at an average 11.7M barrels a day this year. That would be down 500K barrels a day from 2019.
Cleveland Federal Reserve Pres Loretta Mester echoed Chair Jerome Powell's mostly pessimistic view on the economy, saying that while growth is likely to return by the end of the year, it could be slow. The central bank official said that unemployment is still likely to be near or above 10% as the US struggles to regain momentum lost during the national coronavirus-induced shutdown. “We could see the economy start to reopen activity picks up some improvement over the second half of the year. But at the end of year, we are still going to have output below the level it was at the end of last year,” Mester said. That would entail an unemployment rate either in “double digits or high single digits” compared to the current 14.7%. “So I agree that’s a reasonable outlook, but a number of things would have to fall in place for that happen. An almost equally probabilistic outcome is much more dire than that,” she added. Earlier in the day, Powell had said the road ahead is “subject to significant downside risks” that likely will necessitate further policy response, primarily from Congress but perhaps from the Fed as well. The Fed already has cut its benchmark lending rate to near zero & instituted a slew of liquidity & lending programs. Congress has passed more than $2 T in rescue funding & is deliberating a $3T bill presented by Dem House leaders. Mester said getting policy correct is vital for a crisis that is hitting the most vulnerable Americans the hardest. “So right now we’re in a situation where we really want to make sure that we’re doing all we can certainly at the Fed with our tools to make sure the economy is in as best a position as it can possible be in when the recovery starts and we see an increase in activity,” she said. Also like Powell, Mester mostly dismissed the likelihood of the Fed using negative interest rates as a policy tool. Markets have been pricing in a slightly negative for the federal funds benchmark, even though officials have continually said that they don't envision that happening. Both Mester & Powell cited a discussion at the Oct FOMC at which all members said they don’t envision below-zero rates. Though she noted that “I don’t like to ever rule anything out,” Mester added that, “At his point, there’s no active discussion about. It’s not something I support at this time.”
Fed’s Mester sees a recovery or a ‘much more dire’ scenario as equally possible
In these difficuolt times, the US-China trade picture is on a rocky road & blurry. Boeing (BA) suggested that one major airline would close later this year. Tomorrow, the jobless claims report will be released before the market opens & has become routine recently, will not be pretty. Ughh!!!
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Official figures show that the British economy shrank 2% in Q1 of the year from the previous 3-month period as restrictions on economic activity were ramped up ahead of the coronavirus lockdown towards the end of Mar. The decline is the biggest since the global financial crisis in 2008 & is the first indication of the coronavirus' growing impact on the economy ahead of the British lockdown on Mar 23. In Mar alone, the British economy shrank by 5.8%. That monthly fall is an indicator of what has occurred since, with many economists predicting that Q2 could see British economic output shrink by a ¼, or even more. Last week, the Bank of England warned that the British economy could fall by around 30% in H1, before a strong recovery in H2, leaving it 14% smaller by the end of 2020. Still, even with that predicted recovery, the annual fall would be the biggest since 1706.
UK economy shrinks 5.8% in March
Japanese electronics & entertainment company Sony (SNE). reported that its quarterly profit tumbled as the coronavirus pandemic delayed music & movie releases & disrupted product supply chains. Profit in Jan-Mar crashed 86% to ¥12.6B ($118M), a fraction of the ¥87.9B earned a year ago. The spread of COVID-19 has crimped consumer spending, shut movie theaters, canceled events & sent share prices falling — all damaging for a company with sprawling businesses. Quarterly sales & operating revenue fell a combined 18% to ¥1.7T ($16B). The company did not give forecasts for the fiscal year thru Mar 2021, citing uncertainties due to the pandemic. It said projections will be released as soon as possible. Its electronics & financial services businesses especially suffered. Consumer demand declined, especially in regions where lockdowns closed retailers. Shutdowns of factories in China & Malaysia also hurt the electronics operations. In financial services, the value of its securities holdings slipped as market conditions worsened, & insurance policy sales dropped. Demand for video games was helped by people staying home, but SNE was hurt by the decrease in the use of its music for advertising & at restaurants, as events were canceled. In the fiscal year that ended in Mar, profits dropped 36% to ¥582B ($5.4B ), as sales & operating revenue sank 5% to nearly ¥8.3T ($77B). The company estimated the damage to its annual operating profit from the outbreak at ¥68B ($636M). SNE expects the spread & damage from the virus to peak by the end of Jun, with business returning to normal later in the year. Since people are staying at home more, SNE is looking into the growth potential for online businesses, including movies & other entertainment. Production of TV shows & movies are encountering delays, while digital sales for its movies are going well. Image sensors are in demand but smartphone sales are falling, it added. The stock fell 2.76.
If you would like to learn more about SNE, cllick on this link:
club.ino.com/trend/analysis/stock/SNE?a_aid=CD3289&a_bid=6ae5b6f7
Sony's profits dive as stores, cinemas close during pandemic
Pres Trump said any benefits from the US China trade deal he signed in Jan pale in comparison to the damage that has been caused by what Trump called “the plague from China.” It was unclear whom Trump was referring to when he said “dealing with China is a very expensive thing to do.” But after months of Trump resisting pressure to explicitly tie US-China trade relations to the bilateral coronavirus blame game, the tweet was one of several signs in recent days that Trump may be changing tack. On Mon, Trump & Labor Secretary Eugene Scalia directed the Federal Retirement Thrift Investment Board (FRTIB) to halt plans to invest in Chinese companies. In a letter, Scalia wrote that the current plan to invest federal savings would place “billions of dollars in retirement savings in risky companies that pose a threat to U.S. national security.” An accompanying letter from administration officials warned that Chinese companies could face sanctions related to what the White House claimed were “culpable actions of the Chinese government with respect to the global spread of the [coronavirus]”. Yesterday, the FRTIB announced it would delay its plan to invest what would have amounted to about $4.5B in Chinese equities. The delay represents a significant ratcheting up of financial pressure on Beijing, which is already under immense strain from the collapse in demand for Chinese goods caused by global pandemic. While the White House is quick to use words like “liable” & “culpable” to imply that China can somehow be held legally responsible for the deadly pandemic, experts say there is no provision in intl law which allows culpability to be assigned to a particular country for a pandemic. Yesterday, the US put further pressure on China when the FBI, in a joint statement with the Cybersecurity & Infrastructure Security Agency, said it is investigating “the targeting and compromise of U.S. organizations conducting COVID-19-related research by [China] affiliated cyber actors and non-traditional collectors.” The hackers have been caught attempting to “identify and illicitly obtain valuable intellectual property” & public-health data related to coronavirus research, said the FBI. “The potential theft of this information jeopardizes the delivery of secure, effective, and efficient treatment options.” Yet while actions like these certainly serve to deepen the mutual distrust between the US & Beijing, it's difficult to ascertain what impact they're having on the nuts & bolts of the trade deal itself. According to the Dept of Agriculture, which tracks implementation of the deal on agricultural products, China & the US are continuing to make progress on opening market access for American export & easing tariffs on both sides. This week, China took another step forward in the deal by issuing a new list of 79 US products eligible for tariff waivers. The list, released Tues, includes high-value items like the ores of rare earth metals, gold ores, silver ores & concentrates. Another reason the trade deal still appears to be holding is that Trump is under pressure from US producers not to do anything that might spark retaliatory tariffs from China, & thereby limit their ability to export products to a market where demand is slowly recovering after coronavirus shutdowns.
Trump on China: ’100 Trade Deals’ wouldn’t make up for coronavirus
Gold futures climbed to register a 2nd straight finish above the $1700-an-ounce mark, as traders weighed the outlook for economic growth & the prospects for negative US interest rates to gauge the precious metal's next big move after the Federal Reserve Chair Jerome Powell said the US economic outlook was “both highly uncertain and subject to significant downside risks.” However, he also said the Fed was not looking at negative interest rates as part of the monetary policy toolkit, arguing that its track record was mixed. Pres Trump had tweeted Tues that he favored a fall in US interest rates into negative territory. Gold for Jun rose $9 (0.6%) to settle at $1716 an ounce. Prices for gold got a boost in the wake of the release of data today showing that the wholesale cost of US goods & services sank 1.3% in Apr, the largest decline on record, as the coronavirus pandemic cratered demand.
Gold climbs to log second straight finish above $1,700 an ounce
Oil prices settled with a loss, failing to find support even after gov data showed an unexpected weekly decline in domestic crude supplies, along with a fall in stocks at a key storage hub in Cushing, OK. West Texas Intermediate (WTI) crude for Jun fell 49¢ (1.9%) to settle at $25.29 a barrel. It had briefly turned higher immediately after the EIA supply data. The global benchmark, Jul Brent fell 79¢ (2.6%) at $29.19 a barrel. The Energy Information Administration (EIA) reported that US crude inventories fell by 700K barrels for last week. That marked the first weekly decline in 16 weeks & defied a forecast for an increase of 4.8M barrels. The American Petroleum Institute on Tues reported a climb of 7.6M barrels. The EIA data also showed crude stocks at the Cushing, OK, storage hub declined by 3M barrels last week to 62.4M barrels. Working storage capacity at Cushing stands at around 76M barrels. Dwindling storage capacity in Cushing was blamed in large part for driving the expiring May WTI contract into negative territory for the first time in history last month. The COVID-19 pandemic has destroyed demand for crude, contributing to a global glut. Total US oil production fell by 300K barrels a day to 11.6M barrels a day, EIA data showed. In a monthly report yesterday, the EIA forecast US crude production at an average 11.7M barrels a day this year. That would be down 500K barrels a day from 2019.
Oil prices post a loss even as weekly U.S. crude supplies and stocks at the Cushing storage hub decline
Cleveland Federal Reserve Pres Loretta Mester echoed Chair Jerome Powell's mostly pessimistic view on the economy, saying that while growth is likely to return by the end of the year, it could be slow. The central bank official said that unemployment is still likely to be near or above 10% as the US struggles to regain momentum lost during the national coronavirus-induced shutdown. “We could see the economy start to reopen activity picks up some improvement over the second half of the year. But at the end of year, we are still going to have output below the level it was at the end of last year,” Mester said. That would entail an unemployment rate either in “double digits or high single digits” compared to the current 14.7%. “So I agree that’s a reasonable outlook, but a number of things would have to fall in place for that happen. An almost equally probabilistic outcome is much more dire than that,” she added. Earlier in the day, Powell had said the road ahead is “subject to significant downside risks” that likely will necessitate further policy response, primarily from Congress but perhaps from the Fed as well. The Fed already has cut its benchmark lending rate to near zero & instituted a slew of liquidity & lending programs. Congress has passed more than $2 T in rescue funding & is deliberating a $3T bill presented by Dem House leaders. Mester said getting policy correct is vital for a crisis that is hitting the most vulnerable Americans the hardest. “So right now we’re in a situation where we really want to make sure that we’re doing all we can certainly at the Fed with our tools to make sure the economy is in as best a position as it can possible be in when the recovery starts and we see an increase in activity,” she said. Also like Powell, Mester mostly dismissed the likelihood of the Fed using negative interest rates as a policy tool. Markets have been pricing in a slightly negative for the federal funds benchmark, even though officials have continually said that they don't envision that happening. Both Mester & Powell cited a discussion at the Oct FOMC at which all members said they don’t envision below-zero rates. Though she noted that “I don’t like to ever rule anything out,” Mester added that, “At his point, there’s no active discussion about. It’s not something I support at this time.”
Fed’s Mester sees a recovery or a ‘much more dire’ scenario as equally possible
In these difficuolt times, the US-China trade picture is on a rocky road & blurry. Boeing (BA) suggested that one major airline would close later this year. Tomorrow, the jobless claims report will be released before the market opens & has become routine recently, will not be pretty. Ughh!!!
Dow Jones Industrials
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