Markets climb higher to close the quarter on a winning note

Dow rose 217 (finishing near session highs), advancers over decliners almost 2-1 & NAZ jumped 184 to close the qtr above 10K. The MLP index added 2+ to the 132s & the REIT index gained 4+ to the 345s.  Junk bond funds crawled higher & Treasuries were sold today.  Oil slid lower in the 39s & gold shot up 16 to 1798 (more on both below).

AMJ (Alerian MLP Index tracking fund)

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The US is “not in total control” of the coronavirus pandemic & daily new cases could surpass 100K new infections per day if the outbreak continues at its current pace, White House health advisor Dr Anthony Fauci said.  The country is now reporting nearly 40K new coronavirus cases every day — almost double from about 22.8K in mid-May — driven largely by outbreaks in a number of states across the South & West.  Fauci said about 50% of all new cases are coming from 4 states: Florida, California, Texas & Arizona.  “I can’t make an accurate prediction but it’s going to be very disturbing,” Fauci told senators in a hearing today.  “We are now having 40-plus-thousand new cases a day. I would not be surprised if we go up to 100,000 a day if this does not turn around, and so I am very concerned.”  The number of new cases reported each day in the US is now outpacing Apr, when the virus rocked Washington state & parts of the Northeast, especially the New York City metropolitan area.  The US averaged 40K new cases per day over the past 7 days as of yesterday.  That average has risen by more than 40% compared with a week ago.  As of today, the 7-day average of daily new cases reported rose by more than 5% week over week in 40 states, according to the data.  Fauci's comments came in response to a question from Sen Elizabeth Warren who asked whether the US is heading in the right direction in terms of controlling the outbreak.  “Well I think the numbers speak for themselves,” Fauci said.  “I’m very concerned and I’m not satisfied with what’s going on because we’re going in the wrong direction if you look at the curves of the new cases, so we really have got to do something about that and we need to do it quickly.”  Outbreaks in states like Florida & Texas also threaten to disrupt the progress states like New York & New Jersey have so far made in driving down the outbreak in the Northeast, Fauci added.  New York, New Jersey & Connecticut last week announced they would mandate 14-day quarantines for any travelers coming from a states with rapidly expanding outbreaks.  Nonetheless, Fauci said increased infection anywhere in the country threatens to spread everywhere.  “I guarantee you that because when you have an outbreak in one part of the country, even though in other parts of the country they’re doing well, they are vulnerable,” Fauci said.  “I made that point very clearly last week at a press conference. We can’t just focus on those areas that are having a surge, it puts the entire country at risk.”  The outbreaks might be partly driven by states that reopened too soon & might have disregarded some of the federal guidance meant to help states restart safely, Fauci added.

Fauci says U.S. coronavirus outbreak is ‘going to be very disturbing,’ could top 100,000 cases a day

China said manufacturing activity expanded in Jun with the official Purchasing Manager's Index coming in at 50.9.  The forecast had expected the official manufacturing PMI number to come in at 50.4.  PMI readings above 50 indicate expansion, while those below that level signal contraction.  In May, official manufacturing PMI came in at 50.6, according to the National Bureau of Statistics.  PMI readings are sequential.  The bureau said in its announcement of the PMI reading that supply & demand are starting to pick up, with the index for new orders rising for 2 straight months.  Better readings in both the import & export indices are also helping, as major economies reopen.  However, uncertainties remain, the bureau cautioned, adding that the pandemic has not been effectively controlled overseas.  Data showed the index for new export orders was still in contractionary territory, even though the reading improved, coming in at 42.6 for the month of Jun from 35.3 in May.  China's manufacturing activity has been hit by shocks on both the supply & demand fronts due to large-scale lockdowns in many parts of the world aimed at containing the coronavirus pandemic.  While Chinese factories faced problems fulfilling orders early in the pandemic, they are now faced with a demand slump globally as the number of infected people passed the 10M threshold, according to Johns Hopkins University.  China's official services PMI meanwhile came in at 54.4 in Jun as compared to 53.6 in May.

China says its factory activity expanded in June but headwinds remain

Gold futures posted a gain of nearly 13% for the 3-month period ended today, the largest quarterly percentage climb since 2016, with analysts renewing talk of record prices by year end.  The Aug gold contract settled at $1800 an ounce, the highest finish since 2011.  Based on the most-active futures contracts, prices ended Q2 with a gain of 12.8%, the largest quarter percentage rise since 2016.  YTD, prices were up 18.2%.  Gold futures saw a record settlement of $1891 on Aug 22, 2011, according to  records dating back to 1984.

Gold posts largest quarterly gain in 4 years; talk of record prices by year end grows

Oil futures settled with a loss today, down nearly 36% in H1, as the spread of COVID-19 continued to feed expectations for weaker energy demand.  US benchmark prices, however, ended Q2 up 92%, rebounding from a record dip to a negative settlement in Apr as a group of major oil producers moved to reduce oil production & amid signs of some recovery in demand for oil.  Aug West Texas Intermediate oil fell 43¢ (1.1%) to settle at $39.27 a barrel.

Oil futures end down for the session, but post a more than 90% gain for the quarter

Stocks had a spectacular gain in Q2.  But that does not really tell the story well.  The Dow rebounded sharply from the Mar 31 low,  While the Apr advance was substantial, the May rise was smaller & it had only a small gain in Jun.  Meanwhile gold had risen into the 1700s until the last couple of weeks when it climbed to 1800.  The stock rally looks tired presently while nervous investors keep buying gold. 

Dow Jones Industrials

Mixed markets in final day of trading in the quarter

Dow went up 62, advancers slightly ahead of decliners & NAZ gained 87 (but under 10K).  The MLP index was off a fraction to the 129s & the REIT index added 3+ to the 345s.  Junk bond funds inched higher & Treasuries saw modest purchasing.  Oil  slid lower in the 39s & gold  jumped 15 to 1796, a new multi year high.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

39.40

-0.30

-0.8%

GC=F

Gold

1,788.70

+7.50

+0.4%

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Federal Reserve Chair Jerome Powell said big questions remain over the outlook for the economy, particularly in light of ongoing efforts to contain the coronavirus pandemic.
In remarks he will deliver today to the House Financial Services Committee, the central bank leader turned up concerns he had expressed earlier this month about growth as the US remains mired in a  recession that began in Feb.  “Output and employment remain far below their pre-pandemic levels. The path forward for the economy is extraordinarily uncertain and will depend in large part on our success in containing the virus,” Powell said.  “A full recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities,” he added.  “The path forward will also depend on the policy actions taken at all levels of government to provide relief and to support the recovery for as long as needed.”  His remarks come amid a national spike in coronavirus cases rooted in states that have more aggressively relaxed restrictions implemented to contain the pandemic.  Powell stressed the importance of building on recent momentum, which he said will be predicated on the path of the virus.  “Many businesses are opening their doors, hiring is picking up, and spending is increasing. Employment moved higher, and consumer spending rebounded strongly in May,” he said.  “We have entered an important new phase and have done so sooner than expected. While this bounceback in economic activity is welcome, it also presents new challenges — notably, the need to keep the virus in check.”  In response to the pandemic, the Fed has implemented a variety of programs aimed at keeping markets functioning & directly lending where it is needed.  The Fed also has cut its benchmark short-term lending rate to near zero, where Powell pledged to keep it until the economy recovers.  “In March, we lowered our policy interest rate to near zero, and we expect to maintain interest rates at this level until we are confident that the economy has weathered recent events and is on track to achieve our maximum-employment and price-stability goals,” he said.  “We will closely monitor developments and are prepared to adjust our plans as appropriate to support our goals.”

Powell says path is ‘extraordinarily uncertain’ amid efforts to control virus

Consumer confidence rose more than expected in Jun as the US loosened stay-at-home & quarantine restrictions, raising hope for an economic recovery, according to data released Tues.  The Conference Board's consumer confidence index rose to 98.1 for the month.  The forecast called for consumer confidence to rise to 91 from a May reading of 85.9.  “The re-opening of the economy and relative improvement in unemployment claims helped improve consumers’ assessment of current conditions,” said Lynn Franco, senior director of economic indicators at The Conference Board. Franco noted, however, “the Present Situation Index suggests that economic conditions remain weak. Looking ahead, consumers are less pessimistic about the short-term outlook, but do not foresee a significant pickup in economic activity.”  “Faced with an uncertain and uneven path to recovery, and a potential COVID-19 resurgence, it’s too soon to say that consumers have turned the corner and are ready to begin spending at pre-pandemic levels,” said Franco.  The Board’s present situation index rose to 86.2 from 68.4 while the short-term outlook among consumers also improved.  States across the country have ramped up efforts to reopen the economy by easing social distancing measures aimed at curbing the coronavirus pandemic.  This not only increased confidence among consumers, but sent stock prices flying.  However, some states have had to roll back reopening efforts as coronavirus cases increased once again.

U.S. consumer confidence for June jumps more than expected

The US is ending its special treatment of Hong Kong as separate from mainland China, with both the State & Commerce depts announcing actions that will pare back its special status.  This comes after Beijing ushered a sweeping national security law thru its rubber-stamp parliament last month that will drastically increase mainland China's control of Hong Kong.  Commerce Secretary Wilbur Ross said the US is taking back some trade benefits it affords Hong Kong by suspending the availability of export license exceptions.  He said further actions are also being evaluated.  “With the Chinese Communist Party’s imposition of new security measures on Hong Kong, the risk that sensitive U.S. technology will be diverted to the People’s Liberation Army or Ministry of State Security has increased, all while undermining the territory’s autonomy,” Ross said.  “Those are risks the U.S. refuses to accept and have resulted in the revocation of Hong Kong’s special status.”  Secretary of State Mike Pompeo separately announced that the US is ending exports of US-origin defense equipment & will impose new restrictions on dual-use technologies.  “The United States Government has taken action to ensure that the Chinese Communist Party’s decision to enact new draconian 'national security' legislation for Hong Kong does not result in diversion of munitions and sensitive dual-use items to the People’s Republic of China," the State Dept said.  When the British handed control of Hong Kong back to mainland China in 1997, it did so with a “One country, two systems”  arrangement in place that makes Hong Kong semi-autonomous.  America's special treatment of Hong Kong has always depended on Beijing abiding by this system, but the massive pro-democracy protests in Hong Kong for the past year roiled Chinese Pres Xi Jinping's communist gov.  Now the US is ending that special treatment after Beijing ushered a sweeping anti-sedition law thru its National People's Congress last month that critics say will essentially put an end to Hong Kong's autonomy.  “Hong Kong as we know it is finally dead,” Claudia Mo, an opposition lawmaker in Hong Kong, said.  “This is the start of a new but sad chapter for Hong Kong.”

US ending special treatment of Hong Kong amid tensions with Beijing

Tech stocks are seeing some buying, but the rest of the market is drifting.  The coronavirus is spreading around the US & that is dampening desire for investors to buy stocks.  Trade issues with Hong Kong are not well understood in America, but this is a very big story!   A lot of Chinese trade goes thru Hong Kong.  Gold remains in demand & investors are getting ready to take it to new records, about 100 away.

Dow Jones Industrials

Markets rise despite states slow reopening plans as visrus cases climb

Dow soared 580, advancers over decliners 5-2 & NAZ shot up 116.  The MLP index was off a fraction to 130 & the REIT index rose 5+ to the 341s.  Junk bond funds slid lower & Treasuries showed little movement.  Oil went up 1 to the 39s & gold added 2 to 1782 (more on both below).

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Nearly ½ of the population is still out of a job showing just how far the US labor market has to heal in the wake of the coronavirus.   The employment-population ratio — the number of employed people as a percentage of the US adult population — plunged to 52.8% in May, meaning 47.2% of Americans are jobless, according to Bureau of Labor Statistics.  As the coronavirus-induced shutdowns tore thru the labor market, the share of population employed dropped sharply from a recent high of 61.2% in Jan, farther away from a post-war record of 64.7% in 2000.  This ratio is a broader look at the employment picture.  It takes into account adults not in the labor force & captures those who were discouraged about the prospects of finding a job, whereas the unemployment rate looks at people actively looking for a job.  Investors will look to this week's Jun jobs report for an update on the pace of the labor market recovery.  The forecast calls for nonfarm payroll to increase 3.15M in Jun, after a shocking surge of 2.5M in May, the biggest jobs increase ever in a single month.  Meanwhile, the jobless rate is expected to decline to 12.4% this month from 13.3% in May.  The unemployment rate doesn't capture those who stopped looking for a job.  The labor force is about 60% of the US adult population.  After the unexpected snap-back in May, there have been signs of a slowdown in the labor-market improvement as fears of a coronavirus resurgence deepened in recent weeks.  The number of Americans filing for unemployment claims came in higher than expevcted for the past 2 weeks straight.  States including Texas & Florida have paused plans for further reopening amid a record spike in coronavirus cases.  The number of new daily Covid-19 cases across the nation jumped 42% over the past week to an average of 38K yesterday, according to data from Johns Hopkins University.

Nearly half the U.S. population is without a job, showing how far the labor recovery has to go

Governors in Washington, California, Florida & Texas are walking back some of their reopening plans as coronavirus cases rise in more than 30 states across the US, according analysis of Johns Hopkins University data.   Yesterday, new Covid-19 cases jumped by at least 5% over the previous week in 37 states across the country, based on a 7-day moving average, according to the Johns Hopkins data.  Those states include California, Florida, Louisiana, Texas & Nevada.  The number of new daily Covid-19 cases across the nation jumped 42% over the past week to an average of 38K yesterday, based on a 7-day moving average.  The number of global Covid-19 cases topped 10M on Sun, with the US reporting roughly ¼ of the cases.  The coronavirus has now killed more than ½M across the globe.  Public health officials are also closely watching hospitalizations, which can indicate how severe an outbreak is in an area.  This data generally lags new cases because it can take weeks before a patient is sick enough to require hospitalization.  Covid-19 hospitalizations were growing in 20 states yesterday.  On Sun, California Gov Gavin Newsom ordered the state's bars to close in several counties as the coronavirus shows signs of accelerating, including in Los Angeles.  The state's 7-day average of new Covid-19 cases increased by more than 40% compared with a week ago, according to Johns Hopkins data.  “COVID-19 is still circulating in California, and in some parts of the state, growing stronger,” Newsom said.  “That’s why it is critical we take this step to limit the spread of the virus in the counties that are seeing the biggest increases.”  Newsom has left it to municipalities within the state to decide whether they’re prepared to reopen certain parts of their economy after more rural counties reported few Covid-19 cases.  On Sat, Washington state Gov Jay Inslee also postponed reopening in 8 of the state’s 39 counties that were planning to move forward.  “Rising cases across the state and concerns about continued spread of the COVID virus have made Phase 4, which would essentially mean no restrictions, impossible at this time,” according to the state's order from Inslee & John Wiesman, Washington's secretary of health.  On Fri, Texas Gov Greg Abbott announced he would roll back some of the state's reopening plans, closing bars & reducing the capacity for indoor dining, among other modifications and closures.  The Florida Dept of Business & Professional Regulation, also announced Fri that the state is ending onsite consumption at bars.  Gov Ron DeSantis allowed bars to reopen with modifications in early Jun after keeping them closed for 2 months.

More states reverse or slow reopening plans as coronavirus cases climb

Gold futures ended higher as evidence of a rapid spread in coronavirus cases supported buying the haven metal to start the week, but investor worries over industrial demand.  The death toll from the coronavirus pandemic surpassed 500K & infections topped 10M over the weekend, according to data compiled by Johns Hopkins University researchers. Health & Human Services Secretary Alex Azar warned yesterday that “the window is closing” for the US to take action to curb the virus, as he predicted rising deaths & hospitalizations in the next couple of weeks.  Against the backdrop, Aug gold rose 1 to settle at $1781 an ounce.  Early last week, gold touched its highest level since 2012 as infections of COVID-19 accelerated.  YYD, prices based on the most-active contracts traded about 17% higher.

Gold futures end higher, but silver declines as investors eye impact of COVID-19’s rapid spread

Oil futures finished higher, buoyed by some recovery in energy demand, even with that recovery threatened by the possibility of another round of shutdowns as global cases of COVID-19 top 10M.  The market saw upbeat economic data over the weekend from China, the world's biggest importer of crude.  Industrial profits in China for May were up 6% from a year earlier, representing the first increase in 2020, official statistics released over the weekend showed.  West Texas Intermediate crude for Aug rose $1.21 (3.1%) to settle at $39.70 a barrel following a 3.4% weekly decline for WTI put on Fri.  Global benchmark Brent oil for Aug climbed 69¢ (1.7%) at $41.71 a barrel after notching a weekly decline of 2.8% on Fri, based on the most-active contract settlements (the Aug contract expires tomorrow).  Worries about the need to re-implement efforts to prevent the pandemic’s spread & the likelihood that the moves would slow the recovery in oil demand, have climbed along with cases of the illness.

Oil prices end higher as hope for increased demand overshadows coronavirus-induced uncertainty

Buyers were out in force today, bringing the Dow back into the black for Jun.  However the news about increasing cases for the virus must be disturbing for investors.  Gold continues rising & may be heading for a new record shortly, not a healthy sign for the stock market.

Dow Jones Industrials