This blog gives investors more financial information for very smart investing!
Monday, May 18, 2020
Markets zoom ahead on vaccine trials & Powell's comments
Dow rocketed ahead 911 near session highs (with a little selling into the close), advancers over decliners 8-1 & NAZ shot up 220. The MLP index rose 7+ to the 135s & the REIT index jumped 18+ to the 321s. Junk bond funds (stocks with high yields) went up along with stocks & Treasuries sank in price while stocks were being purchased. Oil gained 2+ to the 32s & gold dropped 20 to 1736 ending a 4 day winning streak (more on both below).
Federal Reserve Chair Jerome Powell issued a grim warning about theUS econony's recovery from the coronavirus pandemic: The process could stretch through the end of 2021 — & may hinge on the completion of a successful vaccine. "This
economy will recover...We'll get through this. It may take a while. It
may take a period of time. It could stretch through the end of next
year," Powell said. "We really don't know. We hope that it will be
shorter than that, but no one really knows." Although the economy
may begin to recover in the 2nd ½ of 2020 so long as there is not a 2nd wave of the novel coronavirus, Powell added that it may not return to
pre-crisis levels until a vaccine is delivered as certain sectors like
sporting events & theaters struggle to adapt to strict social
distancing guidelines. He appeared to push back against the possibility of a
"V-shaped" rebound, noting it was "unlikely" the US will bounce back
to pre-crisis levels by the end of the year. "I would say though
we're not going to get back to where we were quickly. We won't get back
to where we were by the end of the year. That's unlikely to happen," the
central bank chief said, adding: "For the economy to fully
recover, people will have to be fully confident. And that may have to
await the arrival of a vaccine." In the 2 months since the economy came to a near standstill to limit virus spread, more than 36 million Americans have lost their jobs<,
a rate unseen since the depression. Just 3 months ago,
unemployment sat at a ½-century low. The outbreak also has been a
catalyst for bankruptcies among small & big businesses alike &
economists have warned of an unprecedented contraction in the nation's
GDP in Q2, with Powell acknowledging it could
"easily" shrink by 30%. The Fed responded to the pandemic by taking a range of extraordinary actions to support the economy, including slashing interest rates to near-zero & it's
purchasing an unlimited number 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 8 weeks, the Fed has pumped nearly $2.9T into the
economy & its balance sheet has expanded to $7T, a record.
But Powell said Fed policymakers may need to take additional action to
continue supporting the economy, like enlarging existing lending
programs; starting new lending programs "if need be," make policy "even
more accommodative," & change their asset purchase strategy via
forward guidance. "We're not out of ammunition by a long shot," he
said. "There’s really no limit to what we can do with these lending
programs that we have. So there's a lot more we can do to support the
economy, and we're committed to doing everything we can as long as we
need to." But Congress may need to take additional action, as well, to avoid long-term damage to the economy, Powell added.
Ford (F), General Motors (GM) & Fiat Chrysler (FCAU) partially resumed US production today with safety procedures designed o prevent the spread of the new coronavirus. GM & FCAU partially resumed US production today with safety procedures designed o prevent the spread of the new coronavirus. Ford will use the lessons it learned from reopening its factories & offices in China when it reopens US plants during the coronavirus pandemic, the automaker has said. Ford began reopening Chinese factories in Feb. The company expects big losses in Q2 after posting a $2B loss in Q1 because of the pandemic. Ford,
GM & FCAU shut down US operations in Mar,
although some facilities pivoted to making personal protective equipment & ventilators. Ford said it had shipped 1M face shields to protect health care workers by early Apr, while GM is making 30K ventilators for the Strategic National Stockpile by the end of Aug after Pres Trump invoked the Defense Production Act.
Gold prices ended lower, giving up earlier gains that had
lifted prices toward their highest levels since 2012, as early positive
results from a COVID-19 vaccine prompted a rally in the US stock
market, dulling haven demand for the precious metal. Gold for Jun fell by $21 (1.3%) to settle at $1734 an ounce,
marking its first loss in 5 sessions. It had touched an intraday high
of $1775, which put the metal near its highest settlement since
2012. Last week, gold gained 2.5% based on the most-active contract at
Fri's close. Gold bullion has marked mostly rangebound moves from a high of $1788
to a low of $1676 an ounce in recent weeks but has been underpinned by
worries about the harm to the global economy from the COVID-19 pandemic & the monetary-policy response by central banks to limit the impact
of business closures, which were only recently being undone. Federal Reserve Chairman Jerome Powell said yesterday that the central bank was still able to deliver more stimulus as needed to help alleviate problems for the economy.
Oil futures rallied, with US benchmark prices settling at their highest in more than 2 months, supported in large part by
efforts to rebalance a supply-demand dynamic that has been blown out of
whack due to the debilitating effects of the COVID-19 pandemic. West Texas Intermediate crude for Jun was up $3.21 (11%) at $32.64 a barrel. Prices, based on the
front-month contracts, were on track to mark their highest finish since
Mar 11. On Fri, prices logged a weekly gain of 19%. The Jun contract expires tomorrow's settlement & investors
have been attuned to volatility in crude prices after the May contract
marked a historic traverse into subzero territory on Apr 20. The Jul contract,
which is the most-actively traded & is soon to be the front-month contract climbed $2.88 (9.8%) at $32.40 a barrel. On the eve of the expiration of the May WTI contract, futures prices on Apr 20 settled at a negative price, implying that investors would need to pay buyers to take delivery of crude oil amid dwindling storage space. Actions taken by OPEC & their allies to cut 9.7M barrels a day in oil
thru the end of Jun have helped to stem a flood of crude that had
failed to attract buyers as economies came to a screeching halt to
curtail the spread of the worst pandemic in more than a century. Bullish oil investors have also become more optimistic as Saudi Arabia
said it would cut an extra 1M barrels a day in Jun, with the
UAE & Kuwait also contributing more than their
targeted reductions. Global benchmark Jul Brent crude gained $2.64 (8.1%) at $35.14 a barrel, after putting in a 4.9% weekly rise on Fri. Data from Baker Hughes on Fri showed that the number of active US rigs drilling for oil
dropped by 34 to 258 last week. That decline represents a nearly 60%
tumble in active rigs since a recent peak count back in Mar, which
could be the biggest drop in history.
Even with the many problems in the economic recovery, stocks had one stellar day. While the new vaccine looks promising, it remains a long way from getting FDA approval. And the economic recoveries are stumbling along as different states try various ways to reopen their economies. The sharp rebound for oil is impressive & another reminder that the law of supply-demand is still in effect. Reduced supply can raise depressed prices. Back to the stock rally. The bulls will be challenged to extend this rally when stocks are in an overbought condition & selling in the final minutes of trading..
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
No comments:
Post a Comment