Dow rose 157 (well above session lows deep in the red), advancers over decliners about 3-2 & NAZ gained 137. The MLP index shot up 8+ to 152 & the REIT index went up 4+ to the 357s. Junk bond funds slid lower & Treasuries were slightly lower. Oil jumped up to 37 in the PM, & gold was off 3 to 1733 (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 is expanding its foray into corp credit to now buy individual corp bonds, on top of the exchange-traded funds it already is buying. As part of a continuing effort to support market functioning & ease credit conditions, the Fed added functions to its Secondary Market Corporate Credit Facility. The program has the ability to buy up to $750B worth of corporate credit. Its Mar 23 initial announcement is largely considered a watershed announcement for the financial markets, reeling from the coronavirus threat spread. Under the latest guidelines, the Fed will buy, on the secondary market, individual bonds that have remaining maturities of 5 years or less. Those purchases will go along with the ETFs the Fed already has been buying, which are balanced towards investment-grade indices but also include some junk bond funds that track debt which had been investment grade prior to the crisis but had been downgraded after. The intent of the individual debt purchases will be “to create a corporate bond portfolio that is based on a broad, diversified market index of U.S. corporate bonds,” the Fed said. “This index is made up of all the bonds in the secondary market that have been issued by U.S. companies that satisfy the facility’s minimum rating, maximum maturity, and other criteria. This indexing approach will complement the facility’s current purchases of exchange-traded funds,” the statement added. Issuers must have been rated BBB- or /Baa3, depending on the agency, as of Mar 22, just before the Fed announced its credit facilities. The Fed has yet to launch its Primary Market Corporate Credit Facility. As the name implies, that program will entail purchases in the primary market, or the direct issuers, with the Fed being the sole investor. In addition, the primary facility will target syndicated loans & bonds at issuance.
The Fed says it is going to start buying individual corporate bonds
The Trump administration wants to end enhanced unemployment benefits & replace them with a different policy, according to a senior aide. Federal coronavirus relief legislation enacted in Mar authorized jobless Americans to receive an extra $600 a week in unemployment benefits. Those payments are scheduled to end after Jul 31, which may lead to a sharp decrease in cash flow for the roughly 30M currently receiving the benefit. The unemployment rate in Apr & May was higher than at any time since the depression. The Trump administration, in line with many congressional Reps, wants the $600 payments to end. The administration believes they provide a disincentive to find work or return to a job, according to Larry Kudlow, the White House economic advisor. The administration supports replacing the enhanced benefits, which are paid on top of traditional state-level benefits, with a cash bonus encouraging people to rejoin the workforce. “The president is looking at a reform measure that would still provide some kind of bonus for returning to work, but it will not be as large and it will create an incentive to work,” Kudlow, director of the National Economic Council, said.
White House wants a back-to-work bonus instead of the $600 unemployment benefit
Dallas Fed Pres Robert Kaplan said that he is skeptical of the central banking using “yield-curve control” as a new tool to help the economy recover from the recession. Kaplan said he hadn't completely made up his mind, but didn't seem eager for any swift decision to use the tool. “I wouldn’t rule it out, but right now Treasury yields are relatively muted,” Kaplan added. Advocates of yield-curve control argue that it would be a useful tool to help the central bank keep interest rates low while the economy recovers. Rising rates can choke off growth in a recovering economy because they make borrowing unaffordable. The Fed has signaled it intends to hold its benchmark, overnight, federal-funds rate at zero until 2023. Some economists worry that using yield-curve control would remove important market signals, leaving the Fed and investors in the dark about the economy’s health. Kaplan said he shared this concern. “I worry about creating more distortions in financial markets,” Kaplan said. “I’m not saying we shouldn’t do it, but I’d have to see evidence that there is a reason to do it,” he added. Kaplan added that he was worried about the high level of spending & the debt burden resulting from the response to the coronavirus pandemic. He said the central bank was running some version of Modern Monetary Theory (MMT), the controversial idea that a surge in spending & higher budget deficits won't necessarily result in higher inflation for major developed economies. Before the crisis, Kaplan said most economists believe that MMT wasn't well thought out & even dangerous. “Unfortunately because of the crisis, we have actually taken a number of steps which are heading into new territory — and so we’ve done some version of MMT to some extent to deal with this crisis,” Kaplan said. “The challenge is, I don’t think the implications of MMT were well understood before & I was concerned about them, & now that we've done some of these things, I continue to be concerned and we’re going to have to reckon with the implications,” he added. That means the gov should show some “restraint” & assess the implication of what has been done before we make additional moves, he explained.
Fed’s Kaplan says he’s skeptical of yield-curve control
Texas reports record-high coronavirus hospitalizations, 6th time in a week
Gold futures finished lower, failing to derive support from a decline in the $ or losses in global markets sparked by worries about growing evidence of rising cases of coronavirus. Aug gold lost $10 (0.6%) to settle at $1727 an ounce. The yellow metal saw a gain of 3.2% last week, based on the most-active contract. Some market participants said the downturn in bullion may signal the momentary uneasiness by investors around the pandemic but the failure of the $ to rise as it did during the rout for financial markets in Mar may signal that the apparent deterioration in the appetite for risk in stocks may be a temporary one. Market participants have been attuned to coronavirus cases that have started to surge once again. The most worrying element is a considerable surge in numbers in China, where the disease was first identified & a rise in infections in a number of US states. Investors have been bullish on assets considered risky, like stocks, as reopenings continue to gradual open up an economy that has been stultified by the epidemic.
Gold ends with a loss as investors weigh signs of a re-emergence of coronavirus cases
Oil futures gave up earlier losses to settle higher, buoyed by declines in global crude production even as the potential for a fresh hit to energy demand climbed on the back of apparent global increases in new cases of coronavirus. West Texas Intermediate crude for Jul, the US benchmark, tacked on 86¢ (2.4%) to settle at $37.12 a barrel after trading as low as $34.36. WTI had marked a weekly slide of 8.3% on Fri. Global benchmark Brent oil for Aug delivery rose 99¢ (2.6%) at $39.72 a barrel. Prices reversed course after a drop to as low as $37.24 in today's session, which followed a 8.4% decline last week. Both Brent and WTI last week posted their first weekly loss in 7 weeks. Earlier declines in prices followed a warning from oil giant BP PLC that the COVID-19 pandemic will have a lasting economic impact, hurting demand for oil & weighing on energy prices. The energy giant also wrote down as much as $17.5B of its assets, noting that the public health crisis may force it to leave fallow some of its energy production assets. China shut down a produce market in Beijing after a number of new coronavirus infections, while US states, including Florida, California & Arizona, among others, were seeing infections increase, raising fresh doubts about reopenings & the path for recovery from countries that are facing a recession due to efforts to limit the spread of the deadly pathogen. Meanwhile, production in the US, which isn’t part of the OPEC+ output agreement, has shown signs of further declines, with the Energy Information Administration forecasting a Jul decline of 93K barrels per day in oil production from 7 major US shale plays.
Oil settles higher as global production declines outweigh pandemic-related demand concerns
The Dow began trading down 600 on fears about expansion of coronavirus cases. Buying in the PM brought it into the black. Difficult to follow all the whims of traders. The VIX, Volatility Index, had been below 30 recently & fell to 25 last week. But in the last 3 trading days, it jumped into the 40s & is 35 currently. For old timers, it was in the mid teens during the market's rally to record levels. High volatilty can be expected with all the uncertainy related to reopening the eonomy & healing from the virus. Best wishes for all!
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
The Federal Reserve is expanding its foray into corp credit to now buy individual corp bonds, on top of the exchange-traded funds it already is buying. As part of a continuing effort to support market functioning & ease credit conditions, the Fed added functions to its Secondary Market Corporate Credit Facility. The program has the ability to buy up to $750B worth of corporate credit. Its Mar 23 initial announcement is largely considered a watershed announcement for the financial markets, reeling from the coronavirus threat spread. Under the latest guidelines, the Fed will buy, on the secondary market, individual bonds that have remaining maturities of 5 years or less. Those purchases will go along with the ETFs the Fed already has been buying, which are balanced towards investment-grade indices but also include some junk bond funds that track debt which had been investment grade prior to the crisis but had been downgraded after. The intent of the individual debt purchases will be “to create a corporate bond portfolio that is based on a broad, diversified market index of U.S. corporate bonds,” the Fed said. “This index is made up of all the bonds in the secondary market that have been issued by U.S. companies that satisfy the facility’s minimum rating, maximum maturity, and other criteria. This indexing approach will complement the facility’s current purchases of exchange-traded funds,” the statement added. Issuers must have been rated BBB- or /Baa3, depending on the agency, as of Mar 22, just before the Fed announced its credit facilities. The Fed has yet to launch its Primary Market Corporate Credit Facility. As the name implies, that program will entail purchases in the primary market, or the direct issuers, with the Fed being the sole investor. In addition, the primary facility will target syndicated loans & bonds at issuance.
The Fed says it is going to start buying individual corporate bonds
The Trump administration wants to end enhanced unemployment benefits & replace them with a different policy, according to a senior aide. Federal coronavirus relief legislation enacted in Mar authorized jobless Americans to receive an extra $600 a week in unemployment benefits. Those payments are scheduled to end after Jul 31, which may lead to a sharp decrease in cash flow for the roughly 30M currently receiving the benefit. The unemployment rate in Apr & May was higher than at any time since the depression. The Trump administration, in line with many congressional Reps, wants the $600 payments to end. The administration believes they provide a disincentive to find work or return to a job, according to Larry Kudlow, the White House economic advisor. The administration supports replacing the enhanced benefits, which are paid on top of traditional state-level benefits, with a cash bonus encouraging people to rejoin the workforce. “The president is looking at a reform measure that would still provide some kind of bonus for returning to work, but it will not be as large and it will create an incentive to work,” Kudlow, director of the National Economic Council, said.
White House wants a back-to-work bonus instead of the $600 unemployment benefit
Dallas Fed Pres Robert Kaplan said that he is skeptical of the central banking using “yield-curve control” as a new tool to help the economy recover from the recession. Kaplan said he hadn't completely made up his mind, but didn't seem eager for any swift decision to use the tool. “I wouldn’t rule it out, but right now Treasury yields are relatively muted,” Kaplan added. Advocates of yield-curve control argue that it would be a useful tool to help the central bank keep interest rates low while the economy recovers. Rising rates can choke off growth in a recovering economy because they make borrowing unaffordable. The Fed has signaled it intends to hold its benchmark, overnight, federal-funds rate at zero until 2023. Some economists worry that using yield-curve control would remove important market signals, leaving the Fed and investors in the dark about the economy’s health. Kaplan said he shared this concern. “I worry about creating more distortions in financial markets,” Kaplan said. “I’m not saying we shouldn’t do it, but I’d have to see evidence that there is a reason to do it,” he added. Kaplan added that he was worried about the high level of spending & the debt burden resulting from the response to the coronavirus pandemic. He said the central bank was running some version of Modern Monetary Theory (MMT), the controversial idea that a surge in spending & higher budget deficits won't necessarily result in higher inflation for major developed economies. Before the crisis, Kaplan said most economists believe that MMT wasn't well thought out & even dangerous. “Unfortunately because of the crisis, we have actually taken a number of steps which are heading into new territory — and so we’ve done some version of MMT to some extent to deal with this crisis,” Kaplan said. “The challenge is, I don’t think the implications of MMT were well understood before & I was concerned about them, & now that we've done some of these things, I continue to be concerned and we’re going to have to reckon with the implications,” he added. That means the gov should show some “restraint” & assess the implication of what has been done before we make additional moves, he explained.
Fed’s Kaplan says he’s skeptical of yield-curve control
Texas health authorities said there were 2287
patients sickened with Covid-19 across its hospitals on Sun, the 6th new high for coronavirus hospitalizations in the state in less
than a week. The new total is up from 2242 patients on
Sat, according to updated data from the Texas Department of State
Health Services. In the past week, Wed was the only day that Texas
didn't set a new record for hospitalizations. Texas was among the first states to relax its statewide stay-at-home order, allowing it to expire Apr 30.
Infectious disease experts say the steady rise in Covid-19 cases &
hospitalizations in Texas & other states will likely add to scrutiny
from some US lawmakers that some states opened businesses too early. At least 23 states are seeing a rise in cases as of last week. Coronavirus hospitalizations, like new cases & deaths, are considered a key measure of the outbreak because
it helps scientists gauge how severe it may be. Research shows that it
can take anywhere from 5-12 days for people to show symptoms from
the virus. “Right now, communities are experiencing different levels of
transmission occurring, as they gradually ease up onto the community
mitigation efforts and gradually reopen,” the CDC's deputy director for
infectious diseases, Jay Butler, said. “If cases begin to go up again, particularly if they go
up dramatically, it’s important to recognize that more mitigation
efforts such as what were implemented back in March may be needed
again,” Butler added.
Texas reports record-high coronavirus hospitalizations, 6th time in a week
Gold futures finished lower, failing to derive support from a decline in the $ or losses in global markets sparked by worries about growing evidence of rising cases of coronavirus. Aug gold lost $10 (0.6%) to settle at $1727 an ounce. The yellow metal saw a gain of 3.2% last week, based on the most-active contract. Some market participants said the downturn in bullion may signal the momentary uneasiness by investors around the pandemic but the failure of the $ to rise as it did during the rout for financial markets in Mar may signal that the apparent deterioration in the appetite for risk in stocks may be a temporary one. Market participants have been attuned to coronavirus cases that have started to surge once again. The most worrying element is a considerable surge in numbers in China, where the disease was first identified & a rise in infections in a number of US states. Investors have been bullish on assets considered risky, like stocks, as reopenings continue to gradual open up an economy that has been stultified by the epidemic.
Gold ends with a loss as investors weigh signs of a re-emergence of coronavirus cases
Oil futures gave up earlier losses to settle higher, buoyed by declines in global crude production even as the potential for a fresh hit to energy demand climbed on the back of apparent global increases in new cases of coronavirus. West Texas Intermediate crude for Jul, the US benchmark, tacked on 86¢ (2.4%) to settle at $37.12 a barrel after trading as low as $34.36. WTI had marked a weekly slide of 8.3% on Fri. Global benchmark Brent oil for Aug delivery rose 99¢ (2.6%) at $39.72 a barrel. Prices reversed course after a drop to as low as $37.24 in today's session, which followed a 8.4% decline last week. Both Brent and WTI last week posted their first weekly loss in 7 weeks. Earlier declines in prices followed a warning from oil giant BP PLC that the COVID-19 pandemic will have a lasting economic impact, hurting demand for oil & weighing on energy prices. The energy giant also wrote down as much as $17.5B of its assets, noting that the public health crisis may force it to leave fallow some of its energy production assets. China shut down a produce market in Beijing after a number of new coronavirus infections, while US states, including Florida, California & Arizona, among others, were seeing infections increase, raising fresh doubts about reopenings & the path for recovery from countries that are facing a recession due to efforts to limit the spread of the deadly pathogen. Meanwhile, production in the US, which isn’t part of the OPEC+ output agreement, has shown signs of further declines, with the Energy Information Administration forecasting a Jul decline of 93K barrels per day in oil production from 7 major US shale plays.
Oil settles higher as global production declines outweigh pandemic-related demand concerns
The Dow began trading down 600 on fears about expansion of coronavirus cases. Buying in the PM brought it into the black. Difficult to follow all the whims of traders. The VIX, Volatility Index, had been below 30 recently & fell to 25 last week. But in the last 3 trading days, it jumped into the 40s & is 35 currently. For old timers, it was in the mid teens during the market's rally to record levels. High volatilty can be expected with all the uncertainy related to reopening the eonomy & healing from the virus. Best wishes for all!
Dow Jones Industrials
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