Dow shot up 526, advancers over decliners 5-1 & NAZ jumped 169. The MLP index edged higher to the 153s & the REIT index added 6+ to the 364s. Junk bond funds (stocks with high yields) went up along with stocks & Treasuries were sold as stocks were purchased. Oil rose to 38 & gold added 6 to 1733 (more on both below).
AMJ (Alerian MLP Index tracking fund)
Federal Reserve Chair Jerome Powell warned Congress that the U.S. budget deficit, which is expected to hit $3.7T this year, is on an "unsustainable path." The US federal budget has been on an unsustainable path for years now," Powell said. "And that just means the debt is growing faster than the economy, so debt-to-GDP is rising. That is, by definition, unsustainable." The US deficit soared to $1.9T for the first 8 months of the fiscal year, the Congressional Budget Office said. In May, the gap between what the gov spent & what it collected hit $424B, more than twice the level it was at one year ago. The nonpartisan agency estimated that revenue in May totaled $175B — down $58B from last year, the result of a decline in wages & overall economic activity. The deficit for fiscal 2020 is expected to soar to $3.7T, a record. The current record for a fiscal year deficit is $1.41T, set in 2009. Over time, if the federal gov does not curtail spending, the tax dollars of future generations will go toward servicing debt, Powell said. "Every generation is entitled to spend what it wants to spend on the things it thinks it needs, but it really ought to pay for them, in some sense, rather than passing the bills onto the kids," he added. In Feb, before the virus gained a foothold in the US, Powell told Congress that it would be a good time to start trimming the budget deficit. But today, he suggested lawmakers should not prioritize reducing the deficit, saying the unprecedented amount of spending has been necessary to protect the US economy from the coronavirus pandemic & related shutdown. "The time to work on that hard is when the economy is strong, unemployment is low, there’s growth," he said. "That’s when you want to work on it. Those concerns are always going to be there, but I wouldn't prioritize them at a time like this, when the spending is giving us a better economy moving forward, which will really help service the debt." Congress has already approved 3 massive stimulus packages totaling nearly $3T to offset the economic pain triggered by the virus outbreak. That includes the $2.2T CARES Act signed into law at the end of Mar. In 3 months, US unemployment surged from a 50-year low to an 80-year high, as more than 44M Americans lost their jobs.
Chairman: Full US economic recovery 'unlikely' until this happens
Chinese authorities locked down a 3rd neighborhood in Beijing as they rushed to prevent the spread of a new coronavirus outbreak that has infected more than 100 in a country that appeared to have largely contained the virus. The resurgence in China highlighted public health expert calls for vigilance as many nations move forward with easing virus restrictions to revive their economies. New Zealand, which hadn't seen a new case in three weeks, said it is investigating a case in which 2 women who flew in from London to see a dying parent were allowed to leave quarantine & drive halfway across the country before they were tested & found to be positive. And the Philippines reimposed a strict lockdown on the city of Cebu after a rise in cases. China reported 40 more coronavirus infections nationwide thru the end of Mon, including 27 in Beijing, bringing the total to 106 in the nation's capital since Thurs. At least one patient was in critical condition & 2 were in serious condition. 4 cases were also reported in neighboring Hebei province, with 3 linked to the Beijing outbreak. Most of the cases have been linked to the Xinfadi wholesale food market & people lined up around the city for massive testing campaigns of anyone who had visited the market in the past 2 weeks or come in contact with them. About 9K workers at the market were tested previously. The initial spread happened among market workers, Wu Zunyou, the chief epidemiologist at the Chinese Center for Disease Control & Prevention, told state broadcaster CCTV. He said that authorities detected the outbreak early enough to be confident they can contain it.
As retail sales pick up again, National Retail Federation CEO Matthew Shay said he wants to make sure small & midsized stores & restaurants can make a comeback, too. “They get hit harder and they get hit first and so we need to bring them back quickly,” he said. Retail sales jumped by 17.7% in May, according to a gov report today. That includes customers’ online purchases, as well as those at brick-&-mortar restaurants, bars & stores. It's the sharpest one-month jump on record. Excluding food services, May retail sales were only down by 1.4% compared with a year ago, according to an analysis by Moody's Investors Service. Mickey Chadha, VP at Moody's, said that’s “an astonishing feat considering most of the non-essential retailers were still shut for a good part of May.” During the height of the pandemic, stay-at-home orders forced many stores & restaurants to temporarily shut their doors to slow the spread of the coronavirus. Grocery stores, pharmacies & some big-box retailers were deemed essential retailers and allowed to stay open. The rest had to switch to nearly all online operations or give up all of their sales. Pushed to the brink by the pandemic, a growing list of retailers have filed for bankruptcy. In recent weeks, shopping malls have reopened & more restaurants have offered curbside pickup or allowed limited dining — but it’s hard to predict Americans' shopping habits as Ms are still unemployed, furloughed or living on tighter budgets because of pay cuts. Shay said he’s encouraged to see consumers spending again as stay-at-home orders lift. After sheltering in place during the coronavirus pandemic, he said, “there was significant pent-up demand” among Americans, including many who had more money in their pockets because of the gov stimulus checks. He said that federal relief and unemployment benefits “provided a big jolt that we needed.”
Retail is on the rebound, but small businesses are at risk, National Retail Federation CEO says
A group of influential conservative leaders urged Pres Trump to rein in federal spending as the US borrows aggressively to rescue the nation's economy rom the worst downturn since the depression. In a letter addressed to Trump & Senate Majority Leader Mitch McConnell, 15 co-authors called for a suspension of the “multi-trillions of dollars” in coronavirus spending. The conservative leaders argued that further spending could derail the US economy’s recovery from the virus outbreak & subsequent shutdown. “Runaway government spending is the new virus afflicting our economy,” they wrote, calling for Republicans to repeal the 7.5% payroll tax that's paid by both workers & their employers. Trump has repeatedly said he would like to cut payroll taxes, though critics have suggested it would not help the individuals who need the most assistance. It would cost an estimated $800B to temporarily eliminate the payroll tax, according to a recent analysis. “The best way to supercharge a jobs recovery would be to repeal the payroll tax so that every working American would receive a 7.5 percent raise in the paycheck immediately, and every small business would see a reduction in their payroll costs of 7.5 percent,” the authors wrote. “This incentivizes hiring and work. The economy desperately needs more of both of these and less debt spending.”
Gold futures settled higher, finding support after Federal Reserve Chair Jerome Powell said that despite some upbeat US economic data, uncertainty continues to surround the timing of a recovery. In testimony prepared for the Senate Banking Committee Tuesday, Powell acknowledged that some economic indicators have pointed to a stabilization in activity & other have suggested “a modest rebound,” but “significant uncertainty remains about the timing and strength of the recovery.” He added that the Fed was committed to using its full range of tools to assure the recovery from the recession will be as robust as possible. US retail sales data for May showed that sales activity jumped by 17.7%. Economists had forecast an 8.5% increase. The report indicates that US retailers began to recover as the economy started to reopen following record sales declines in the prior 2 months triggered by the coronavirus pandemic. Data on industrial production revealed a rise of 1.4% in May. Meanwhile, a report that North Korea blew up an inter-Korean liaison office in the western border town of Kaesong, suggesting rising tensions in the region between South & North Korea. That provided support for haven gold, particularly given that the metal has posted declines in each of the last 2 trading sessions. Aug gold rose $9 (0.5%) to settle at $1736 an ounce, posting a gain for the first time in 3 sessions. Gold futures have been trading in a $1670-1770 range for about 2 months despite a sharp fall in the $ against major currencies in that time.
Oil futures finished with a more than 3% gain as a monthly report from the Intl Energy Agency forecast a record rise in demand for crude & its byproducts next year, but only after first dropping significantly in the current year. The International Energy Agency (IEA) said that while the world’s demand for crude will drop by 8.1M barrels a day in 2020, “the largest in history,” demand in 2021 will bounce back by 5.7M barrels a day, the “largest one-year jump ever recorded.” “Demand destruction in the early part of the year was slightly less than expected, although still unprecedented,” the IEA said. The agency also warned that the impact of the COVID-19 pandemic on global economies should not be underestimated. “We acknowledge that there are places where the number of new Covid-19 cases reported each day remains high and economic activity, and thus oil demand, could remain subdued for longer than elsewhere,” it added. Against the backdrop, West Texas Intermediate crude for Jul, the US benchmark, rose $1.26 (3.4%) to settle at $38.38 a barrel, after hitting highs above $39 during the session. Prices rose 2.4% on yesterday. Global benchmark Brent oil for Aug picked up $1.24 (3.1%) at $40.96 a barrel after gaining 2.6% in the previous session. A monthly report from OPEC is due tomorrow, after the cartel and its allies (OPEC+) agreed earlier this month to extend production cuts of nearly 10M barrels per day thru Jul & to review the status of adherence to those reductions monthly. However, output in the US, which isn't a signatory to the OPEC+ agreement, has shown signs of further declines, with the Energy Information Administration yesterday forecast a Jul decline of 93K barrels per day in oil production from 7 major US shale plays.
Oil prices gain more than 3% as IEA report points to record rise in crude appetite next year
Another wild day for stock trading. The Dow surged at the opening, sank to break even at midday & the buyers returned in the PM. The bulls ended winning today. Maybe the volatility in the last few days was needed for the market to take a breather from its recent advance. Meanwhile the virus is not giving up its fight & opening the economy involves a lot of stumbling. Let's see what tomorrow brings.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 37.72 | -0.47 | -1.2% |
| GC=F | Gold | 1,725.80 | +20.70 | +1.2% |
Federal Reserve Chair Jerome Powell warned Congress that the U.S. budget deficit, which is expected to hit $3.7T this year, is on an "unsustainable path." The US federal budget has been on an unsustainable path for years now," Powell said. "And that just means the debt is growing faster than the economy, so debt-to-GDP is rising. That is, by definition, unsustainable." The US deficit soared to $1.9T for the first 8 months of the fiscal year, the Congressional Budget Office said. In May, the gap between what the gov spent & what it collected hit $424B, more than twice the level it was at one year ago. The nonpartisan agency estimated that revenue in May totaled $175B — down $58B from last year, the result of a decline in wages & overall economic activity. The deficit for fiscal 2020 is expected to soar to $3.7T, a record. The current record for a fiscal year deficit is $1.41T, set in 2009. Over time, if the federal gov does not curtail spending, the tax dollars of future generations will go toward servicing debt, Powell said. "Every generation is entitled to spend what it wants to spend on the things it thinks it needs, but it really ought to pay for them, in some sense, rather than passing the bills onto the kids," he added. In Feb, before the virus gained a foothold in the US, Powell told Congress that it would be a good time to start trimming the budget deficit. But today, he suggested lawmakers should not prioritize reducing the deficit, saying the unprecedented amount of spending has been necessary to protect the US economy from the coronavirus pandemic & related shutdown. "The time to work on that hard is when the economy is strong, unemployment is low, there’s growth," he said. "That’s when you want to work on it. Those concerns are always going to be there, but I wouldn't prioritize them at a time like this, when the spending is giving us a better economy moving forward, which will really help service the debt." Congress has already approved 3 massive stimulus packages totaling nearly $3T to offset the economic pain triggered by the virus outbreak. That includes the $2.2T CARES Act signed into law at the end of Mar. In 3 months, US unemployment surged from a 50-year low to an 80-year high, as more than 44M Americans lost their jobs.
Chairman: Full US economic recovery 'unlikely' until this happens
Chinese authorities locked down a 3rd neighborhood in Beijing as they rushed to prevent the spread of a new coronavirus outbreak that has infected more than 100 in a country that appeared to have largely contained the virus. The resurgence in China highlighted public health expert calls for vigilance as many nations move forward with easing virus restrictions to revive their economies. New Zealand, which hadn't seen a new case in three weeks, said it is investigating a case in which 2 women who flew in from London to see a dying parent were allowed to leave quarantine & drive halfway across the country before they were tested & found to be positive. And the Philippines reimposed a strict lockdown on the city of Cebu after a rise in cases. China reported 40 more coronavirus infections nationwide thru the end of Mon, including 27 in Beijing, bringing the total to 106 in the nation's capital since Thurs. At least one patient was in critical condition & 2 were in serious condition. 4 cases were also reported in neighboring Hebei province, with 3 linked to the Beijing outbreak. Most of the cases have been linked to the Xinfadi wholesale food market & people lined up around the city for massive testing campaigns of anyone who had visited the market in the past 2 weeks or come in contact with them. About 9K workers at the market were tested previously. The initial spread happened among market workers, Wu Zunyou, the chief epidemiologist at the Chinese Center for Disease Control & Prevention, told state broadcaster CCTV. He said that authorities detected the outbreak early enough to be confident they can contain it.
China expands lockdowns as coronavirus cases top 100 in new outbreak
As retail sales pick up again, National Retail Federation CEO Matthew Shay said he wants to make sure small & midsized stores & restaurants can make a comeback, too. “They get hit harder and they get hit first and so we need to bring them back quickly,” he said. Retail sales jumped by 17.7% in May, according to a gov report today. That includes customers’ online purchases, as well as those at brick-&-mortar restaurants, bars & stores. It's the sharpest one-month jump on record. Excluding food services, May retail sales were only down by 1.4% compared with a year ago, according to an analysis by Moody's Investors Service. Mickey Chadha, VP at Moody's, said that’s “an astonishing feat considering most of the non-essential retailers were still shut for a good part of May.” During the height of the pandemic, stay-at-home orders forced many stores & restaurants to temporarily shut their doors to slow the spread of the coronavirus. Grocery stores, pharmacies & some big-box retailers were deemed essential retailers and allowed to stay open. The rest had to switch to nearly all online operations or give up all of their sales. Pushed to the brink by the pandemic, a growing list of retailers have filed for bankruptcy. In recent weeks, shopping malls have reopened & more restaurants have offered curbside pickup or allowed limited dining — but it’s hard to predict Americans' shopping habits as Ms are still unemployed, furloughed or living on tighter budgets because of pay cuts. Shay said he’s encouraged to see consumers spending again as stay-at-home orders lift. After sheltering in place during the coronavirus pandemic, he said, “there was significant pent-up demand” among Americans, including many who had more money in their pockets because of the gov stimulus checks. He said that federal relief and unemployment benefits “provided a big jolt that we needed.”
Retail is on the rebound, but small businesses are at risk, National Retail Federation CEO says
A group of influential conservative leaders urged Pres Trump to rein in federal spending as the US borrows aggressively to rescue the nation's economy rom the worst downturn since the depression. In a letter addressed to Trump & Senate Majority Leader Mitch McConnell, 15 co-authors called for a suspension of the “multi-trillions of dollars” in coronavirus spending. The conservative leaders argued that further spending could derail the US economy’s recovery from the virus outbreak & subsequent shutdown. “Runaway government spending is the new virus afflicting our economy,” they wrote, calling for Republicans to repeal the 7.5% payroll tax that's paid by both workers & their employers. Trump has repeatedly said he would like to cut payroll taxes, though critics have suggested it would not help the individuals who need the most assistance. It would cost an estimated $800B to temporarily eliminate the payroll tax, according to a recent analysis. “The best way to supercharge a jobs recovery would be to repeal the payroll tax so that every working American would receive a 7.5 percent raise in the paycheck immediately, and every small business would see a reduction in their payroll costs of 7.5 percent,” the authors wrote. “This incentivizes hiring and work. The economy desperately needs more of both of these and less debt spending.”
Conservative leaders urge Trump to rein in coronavirus spending as US deficit swells
Gold futures settled higher, finding support after Federal Reserve Chair Jerome Powell said that despite some upbeat US economic data, uncertainty continues to surround the timing of a recovery. In testimony prepared for the Senate Banking Committee Tuesday, Powell acknowledged that some economic indicators have pointed to a stabilization in activity & other have suggested “a modest rebound,” but “significant uncertainty remains about the timing and strength of the recovery.” He added that the Fed was committed to using its full range of tools to assure the recovery from the recession will be as robust as possible. US retail sales data for May showed that sales activity jumped by 17.7%. Economists had forecast an 8.5% increase. The report indicates that US retailers began to recover as the economy started to reopen following record sales declines in the prior 2 months triggered by the coronavirus pandemic. Data on industrial production revealed a rise of 1.4% in May. Meanwhile, a report that North Korea blew up an inter-Korean liaison office in the western border town of Kaesong, suggesting rising tensions in the region between South & North Korea. That provided support for haven gold, particularly given that the metal has posted declines in each of the last 2 trading sessions. Aug gold rose $9 (0.5%) to settle at $1736 an ounce, posting a gain for the first time in 3 sessions. Gold futures have been trading in a $1670-1770 range for about 2 months despite a sharp fall in the $ against major currencies in that time.
Gold prices settle higher as Fed Chair Powell says uncertainty surrounds economic recovery
Oil futures finished with a more than 3% gain as a monthly report from the Intl Energy Agency forecast a record rise in demand for crude & its byproducts next year, but only after first dropping significantly in the current year. The International Energy Agency (IEA) said that while the world’s demand for crude will drop by 8.1M barrels a day in 2020, “the largest in history,” demand in 2021 will bounce back by 5.7M barrels a day, the “largest one-year jump ever recorded.” “Demand destruction in the early part of the year was slightly less than expected, although still unprecedented,” the IEA said. The agency also warned that the impact of the COVID-19 pandemic on global economies should not be underestimated. “We acknowledge that there are places where the number of new Covid-19 cases reported each day remains high and economic activity, and thus oil demand, could remain subdued for longer than elsewhere,” it added. Against the backdrop, West Texas Intermediate crude for Jul, the US benchmark, rose $1.26 (3.4%) to settle at $38.38 a barrel, after hitting highs above $39 during the session. Prices rose 2.4% on yesterday. Global benchmark Brent oil for Aug picked up $1.24 (3.1%) at $40.96 a barrel after gaining 2.6% in the previous session. A monthly report from OPEC is due tomorrow, after the cartel and its allies (OPEC+) agreed earlier this month to extend production cuts of nearly 10M barrels per day thru Jul & to review the status of adherence to those reductions monthly. However, output in the US, which isn't a signatory to the OPEC+ agreement, has shown signs of further declines, with the Energy Information Administration yesterday forecast a Jul decline of 93K barrels per day in oil production from 7 major US shale plays.
Oil prices gain more than 3% as IEA report points to record rise in crude appetite next year
Another wild day for stock trading. The Dow surged at the opening, sank to break even at midday & the buyers returned in the PM. The bulls ended winning today. Maybe the volatility in the last few days was needed for the market to take a breather from its recent advance. Meanwhile the virus is not giving up its fight & opening the economy involves a lot of stumbling. Let's see what tomorrow brings.
Dow Jones Industrials
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