Dow was off 282 (slightly below 27K), decliners over advancers 5-2 but NAZ soared 66 to a new record above 10K. The MLP index fell 3 to 159 & the REIT index dropped 8+ to 365. Junk bond funds fluctuated & Treasuries remained in demand. Oil was steady at 39 & gold added 14 to 1736 (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)
The Federal Reserve kept interest rates near zero & indicated that’s where they'll stay as the economy recovers from the coronavirus pandemic. Along with the rate decision, central bankers projected that the economy will shrink 6.5% in 2020, a year that saw an unprecedented halting of business activity in an effort to combat the coronavirus pandemic. However, 2021 is expected to show a 5% gain followed by 3.5% in 2022. The central bank repeated its commitment from the Apr meeting that it “expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.” The Fed also will continue to increase its bond holdings, targeting Treasury purchases at $80B a month & mortgage-backed securities at $40B. The FOMC met this week as states begin to reopen & after unemployment saw its worst monthly drop in history followed by its biggest gain. In addition, the meeting comes the same week the National Bureau of Economic Research declared that a recession started in Feb, ending the longest expansion in US history. Fed officials skipped releasing their quarterly economic projections at Mar meetings as uncertainty permeated over how long the US would remain in stay-at-home mode & how deep the damage would be. They released their forecasts this week. Here are the key numbers for 2020, followed by the next 2 years & the long-run projection:
Fed funds rate: 0%-0.25% thru 2022, with the long-run rate at 2.5%
GDP: -6.5% in 2020, 5%, 3.5%, 1.8%
Unemployment: 9.3%, 6.5%, 5.5%, 4.1%.
Headline inflation: 0.8%, 1.6%, 1.7%, 2%.
Core inflation: 1%, 1.5%, 1.7%.
In a separate statement, the Fed said it would maintain purchases “at least at the current pace to sustain the smooth functioning of markets for these securities, thereby fostering effective transmission of monetary policy to broader financial conditions.” Even with the deceleration, though, the Fed's balance sheet where it keeps its asset holdings has exploded to more than $7.2T.
Texas reports a third straight day of record coronavirus hospitalizations
Trump advisor Larry Kudlow: ‘Looks like we’ve hit a turning point’ in the economy
Gold futures gave up earlier gains to finish lower, marking their first loss in 3 sessions, but prices moved up in electronic trading after the Federal Reserve indicated that it does not plan to raise current interest rates, which stand near zero, through at least 2022. Aug gold was at $1735 an ounce shortly after the Fed announcement. It had settled at $1720, down $1. For the week thus far, gold prices have climbed 0.9%. Last week, prices for gold were slammed after a report from the US Labor Dept showed that 2.5M jobs were created in May, rather than estimates for a decline in payrolls of as many as 9M jobs on the month. Hopes that the labor market data point to a bottoming in the recession as businesses restart with the coronavirus pandemic receding in most developed countries has juiced equity values, but depressed safe-haven investments like bullion last week.
Oil futures finished higher, buoyed by weakness in the $ that followed the Federal Reserve's announcement that it plans to keep interest rates at near zero thru 2022. The Fed said that it would do what it takes to support the economy—easing worries about energy demand. The news from the central bank helped to offset earlier pressure from gov data that showed a weekly climb of nearly 6 million barrels for US crude inventories & a grim forecast from the OECD on the global economic outlook. West Texas Intermediate crude for Jul, the US benchmark, rose 66¢ 1.7%, at $39.60 a barrel, after touching an earlier low of $37.73. The settlement was the highest since Mar 6. Global benchmark Brent oil for Aug delivery added 55¢ (1.3%) to reach $41.73 a barrel. The Energy Information Administration reported that US crude inventories rose by 5.7M barrels last week ended Jun 5. That defied a forecast for an average decline of 3.2M barrels. The American Petroleum Institute yesterday had reported a climb of 8.4M barrels (according to sources).
Oil prices finish higher, with the U.S. dollar weaker on Fed plan to keep interest rates near zero
The Dow stayed in the red for most of the day with selling into the close. However NAZ continued on its winning way to close over 10K. Although nothing new, the Fed's statement got a sigh of relief from investors. Before the markets open tomorrow, the jobless claims report will be released & hopes are that it will show more improvement. Meanwhile demand from nervous investors is keeping gold prices elevated.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
The Federal Reserve kept interest rates near zero & indicated that’s where they'll stay as the economy recovers from the coronavirus pandemic. Along with the rate decision, central bankers projected that the economy will shrink 6.5% in 2020, a year that saw an unprecedented halting of business activity in an effort to combat the coronavirus pandemic. However, 2021 is expected to show a 5% gain followed by 3.5% in 2022. The central bank repeated its commitment from the Apr meeting that it “expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.” The Fed also will continue to increase its bond holdings, targeting Treasury purchases at $80B a month & mortgage-backed securities at $40B. The FOMC met this week as states begin to reopen & after unemployment saw its worst monthly drop in history followed by its biggest gain. In addition, the meeting comes the same week the National Bureau of Economic Research declared that a recession started in Feb, ending the longest expansion in US history. Fed officials skipped releasing their quarterly economic projections at Mar meetings as uncertainty permeated over how long the US would remain in stay-at-home mode & how deep the damage would be. They released their forecasts this week. Here are the key numbers for 2020, followed by the next 2 years & the long-run projection:
Fed funds rate: 0%-0.25% thru 2022, with the long-run rate at 2.5%
GDP: -6.5% in 2020, 5%, 3.5%, 1.8%
Unemployment: 9.3%, 6.5%, 5.5%, 4.1%.
Headline inflation: 0.8%, 1.6%, 1.7%, 2%.
Core inflation: 1%, 1.5%, 1.7%.
In a separate statement, the Fed said it would maintain purchases “at least at the current pace to sustain the smooth functioning of markets for these securities, thereby fostering effective transmission of monetary policy to broader financial conditions.” Even with the deceleration, though, the Fed's balance sheet where it keeps its asset holdings has exploded to more than $7.2T.
Fed sees interest rates staying near zero through 2022, GDP bouncing to 5% next year
Texas health authorities said there are currently
2153 patients sickened with Covid-19 across its hospitals, making Today the 3rd-straight day of record-breaking coronavirus
hospitalizations in the state. The new total is up from 2056 patients yesterday & 1935 patients Mon, according to updated data from the Texas Dept of State Health Services. The
steady rise in coronavirus hospitalizations in Texas will likely add to
scrutiny from some lawmakers & infectious disease experts that
some states opened businesses too early as the virus continues to spread
throughout parts of the country.
Texas reports a third straight day of record coronavirus hospitalizations
Larry Kudlow, director of the National Economic
Council, said that the US economy appears to have
reached its lowest point due to the coronavirus. “We still have a
lot of hardship, and we have a lot of heartbreak in many areas. The
numbers are still way too high on the unemployment and so forth,” Kudlow
said. “But it looks like we’ve hit a turning point.” Kudlow's comments came after last week's May jobs report showed a surprising gain in employment, when many economists had expected another dramatic decrease. The US unemployment rate declined to 13.3%, from Apr's 14.7%. Kudlow
said the small-business-focused Paycheck Protection Program “led
directly” to May's improved job landscape & argued additional people
will be added back to payrolls in Jun as states further ease
coronavirus-related restrictions on businesses. “Let’s hope that
this thing bottomed way in April and we’re headed towards a terrific
recovery in the second half of the year,” said Kudlow, while also
pointing to a recovery in the housing market & increased Apple mobility data. “We are turning a corner. We are transitioning.” Texas, among the first states to relax its statewide stay-at-home order, has seen 3 consecutive days of record-breaking coronavirus hospitalizations. Kudlow, who in late Feb said the US had contained the spread of Covid-19 “pretty close to airtight” before
the disease killed 110K Americans, acknowledged it is true that
Covid-19 cases are rising more significantly in “certain areas.” Even
so, he maintained that the US economy would be able to continue its
recovery without sizable virus-induced setbacks. “Our health
experts have told me repeatedly, ‘We have much more experience at
dealing with hot spots. We have much better equipment, PPE, testing and
... ventilators, and we will be able to fight some fires without closing
down the economy,’” Kudlow said.
Trump advisor Larry Kudlow: ‘Looks like we’ve hit a turning point’ in the economy
Gold futures gave up earlier gains to finish lower, marking their first loss in 3 sessions, but prices moved up in electronic trading after the Federal Reserve indicated that it does not plan to raise current interest rates, which stand near zero, through at least 2022. Aug gold was at $1735 an ounce shortly after the Fed announcement. It had settled at $1720, down $1. For the week thus far, gold prices have climbed 0.9%. Last week, prices for gold were slammed after a report from the US Labor Dept showed that 2.5M jobs were created in May, rather than estimates for a decline in payrolls of as many as 9M jobs on the month. Hopes that the labor market data point to a bottoming in the recession as businesses restart with the coronavirus pandemic receding in most developed countries has juiced equity values, but depressed safe-haven investments like bullion last week.
Gold prices end lower, then move up as Fed signals no interest-rate hikes through 2022
Oil futures finished higher, buoyed by weakness in the $ that followed the Federal Reserve's announcement that it plans to keep interest rates at near zero thru 2022. The Fed said that it would do what it takes to support the economy—easing worries about energy demand. The news from the central bank helped to offset earlier pressure from gov data that showed a weekly climb of nearly 6 million barrels for US crude inventories & a grim forecast from the OECD on the global economic outlook. West Texas Intermediate crude for Jul, the US benchmark, rose 66¢ 1.7%, at $39.60 a barrel, after touching an earlier low of $37.73. The settlement was the highest since Mar 6. Global benchmark Brent oil for Aug delivery added 55¢ (1.3%) to reach $41.73 a barrel. The Energy Information Administration reported that US crude inventories rose by 5.7M barrels last week ended Jun 5. That defied a forecast for an average decline of 3.2M barrels. The American Petroleum Institute yesterday had reported a climb of 8.4M barrels (according to sources).
Oil prices finish higher, with the U.S. dollar weaker on Fed plan to keep interest rates near zero
The Dow stayed in the red for most of the day with selling into the close. However NAZ continued on its winning way to close over 10K. Although nothing new, the Fed's statement got a sigh of relief from investors. Before the markets open tomorrow, the jobless claims report will be released & hopes are that it will show more improvement. Meanwhile demand from nervous investors is keeping gold prices elevated.
Dow Jones Industrials
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