Dow advanced 269 (but 500 below early highs), advancers over decliners about 5-1 & NAZ went up 63. The MLP index added 1+ to the 144s & the REIT index bounced back 5+ to the 346s. Junk bond funds rebounded from yesterday's selling & Treasuries were weak, bringing higher yields. Oil slid back to the 35s & gold rose 8 to 1748, approaching recent highs,
AMJ (Alerian MLP Index tracking fund)
Beijing will honor its trade deal with the US & wants to see better ties with DC, senior Chinese officials said. Zhu Guangyao, a former finance minister & Cabinet adviser, said the 2 countries should “waste no time” in improving relations to help better coordinate a response to the coronavirus pandemic. He & other officials told reporters in Beijing that the two biggest economies are so closely entwined that they must find a way to work together because a lack of cooperation has come at a “high price.” “The close connection between the Chinese and U.S. economies is the result of four decades of hard work on both sides, and that is also the reflection of the wishes of consumers in China and the United States,” Zhu added. “Such interdependence will not disappear simply because some people clamor for ‘decoupling.'” Zhu said relations with the U.S. were “far from satisfactory” with communications at a “standstill.” “We hope through communications we can enhance our cooperation and mutual trust," he said. Tensions have flared over Beijing's handling of the new coronavirus that first surfaced in central China late last year & over the recent passage of legislation requiring the semi-autonomous territory of Hong Kong to implement a national security law. The law has added to worries that the former British colony is losing the special status Beijing promised it when it took control in 1997. Pres Trump's administration reacted to the move by announcing that Hong Kong is no longer autonomous & will be stripped of its preferential trade & commercial status. The officials insisted China is following thru on promises to by buy more US products & other commitments. Progress on an interim trade agreement that has helped smooth friction over trade & technology remains unclear, partly because of disruptions brought on by lockdowns to contain the pandemic. “Objectively speaking, the epidemic has had an impact on the implementation of this agreement, but in this kind of situation, China emphasizes that we should work hard together to ensure the implementation of the Phase 1 agreement,” Zhu said.
The Small Business Administration has approved 4.5M of loans averaging $113K in size for a total of $512B as of Wed. Some of the strength in the US payrolls report for May - which included a startling 225K manufacturing jobs added - was the result of companies taking part in this program. The problem now is that demand in many industrial sectors, from oil & gas to construction equipment, remains depressed, & that underscores the subdued response key policymakers such as Federal Reserve Chair Jerome Powell have shown over the big upsurge in hiring in May. “It is a long road. It is going to take some time,” Powell said after the Fed's latest meeting, cautioning that while encouraging, the surprise 2.5M jump in jobs in May remains a single data point for now. Data yesterday showed more than 20M remain on unemployment benefits even as new claims fell for a 10th straight week. To be sure, some factories are booming. The impact is most visible in some of America’s biggest industrial names. Both Caterpillar (CAT), a Dow stock & Deere (DE) are expected to see about a 30% drop in revenues in the current qtr, compared to a year ago. Both companies have curtailed work at US factories. This filters out through the economy as companies conserve cash by cutting costs & capital spending. Weaker demand for machinery means less demand for basic metals & electronic components. US Steel (X) has idled 4.5M net tons of flat-rolled & 1.9M net tons of tubular steel capacity. Similarly, miners have slashed their 2020 capex estimates by 20%.
American Airlines (AAL) joined Delta Airlines (DAL) in forecasting a 90% slump in Q2, but said it expects to cut its cash burn rate to about zero by the end of 2020 as travel demand returns. The US airlines have said that a modest recovery in demand was helping slow their daily cash burn rates in Jun, after the COVID-19 pandemic led to hundreds of flight cancellations. Many airlines are now adding back flights in Jul as demand modestly rebounds. AAL expects its daily cash burn rate to slow to about $40M in Jun & said it plans to fly 55% of its domestic schedule along with nearly 20% of its intl schedule in Jul. “The company has recently experienced improving demand conditions and has passed the peak in cash refund activity,” AAL added. However, as the duration & severity of the COVID-19 pandemic remain uncertain, the company said it expects its fiscal 2020 results to be materially impacted. The stock rose 1.88 (13%).
If you would like to learn more about AAL, click on this link:
club.ino.com/trend/analysis/stock/AAL?a_aid=CD3289&a_bid=6ae5b6f7
Already this is turning into another wild day for stock trading. Early enthusiasm by investors is fading fast after a rout yesterday. The news from China on the US-China trade relations was very encouraging, but that situation can turn on a dime. Trading in the PM should be interesting.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 36.72 | 10 | +0.38 | +1.1% |
| GC=F | Gold | 1,750.80 | +11.00 | +0.6% |
Beijing will honor its trade deal with the US & wants to see better ties with DC, senior Chinese officials said. Zhu Guangyao, a former finance minister & Cabinet adviser, said the 2 countries should “waste no time” in improving relations to help better coordinate a response to the coronavirus pandemic. He & other officials told reporters in Beijing that the two biggest economies are so closely entwined that they must find a way to work together because a lack of cooperation has come at a “high price.” “The close connection between the Chinese and U.S. economies is the result of four decades of hard work on both sides, and that is also the reflection of the wishes of consumers in China and the United States,” Zhu added. “Such interdependence will not disappear simply because some people clamor for ‘decoupling.'” Zhu said relations with the U.S. were “far from satisfactory” with communications at a “standstill.” “We hope through communications we can enhance our cooperation and mutual trust," he said. Tensions have flared over Beijing's handling of the new coronavirus that first surfaced in central China late last year & over the recent passage of legislation requiring the semi-autonomous territory of Hong Kong to implement a national security law. The law has added to worries that the former British colony is losing the special status Beijing promised it when it took control in 1997. Pres Trump's administration reacted to the move by announcing that Hong Kong is no longer autonomous & will be stripped of its preferential trade & commercial status. The officials insisted China is following thru on promises to by buy more US products & other commitments. Progress on an interim trade agreement that has helped smooth friction over trade & technology remains unclear, partly because of disruptions brought on by lockdowns to contain the pandemic. “Objectively speaking, the epidemic has had an impact on the implementation of this agreement, but in this kind of situation, China emphasizes that we should work hard together to ensure the implementation of the Phase 1 agreement,” Zhu said.
China will honor trade deal, wants better US ties
The Small Business Administration has approved 4.5M of loans averaging $113K in size for a total of $512B as of Wed. Some of the strength in the US payrolls report for May - which included a startling 225K manufacturing jobs added - was the result of companies taking part in this program. The problem now is that demand in many industrial sectors, from oil & gas to construction equipment, remains depressed, & that underscores the subdued response key policymakers such as Federal Reserve Chair Jerome Powell have shown over the big upsurge in hiring in May. “It is a long road. It is going to take some time,” Powell said after the Fed's latest meeting, cautioning that while encouraging, the surprise 2.5M jump in jobs in May remains a single data point for now. Data yesterday showed more than 20M remain on unemployment benefits even as new claims fell for a 10th straight week. To be sure, some factories are booming. The impact is most visible in some of America’s biggest industrial names. Both Caterpillar (CAT), a Dow stock & Deere (DE) are expected to see about a 30% drop in revenues in the current qtr, compared to a year ago. Both companies have curtailed work at US factories. This filters out through the economy as companies conserve cash by cutting costs & capital spending. Weaker demand for machinery means less demand for basic metals & electronic components. US Steel (X) has idled 4.5M net tons of flat-rolled & 1.9M net tons of tubular steel capacity. Similarly, miners have slashed their 2020 capex estimates by 20%.
US manufacturers struggle to keep workers in face of weak demand
American Airlines (AAL) joined Delta Airlines (DAL) in forecasting a 90% slump in Q2, but said it expects to cut its cash burn rate to about zero by the end of 2020 as travel demand returns. The US airlines have said that a modest recovery in demand was helping slow their daily cash burn rates in Jun, after the COVID-19 pandemic led to hundreds of flight cancellations. Many airlines are now adding back flights in Jul as demand modestly rebounds. AAL expects its daily cash burn rate to slow to about $40M in Jun & said it plans to fly 55% of its domestic schedule along with nearly 20% of its intl schedule in Jul. “The company has recently experienced improving demand conditions and has passed the peak in cash refund activity,” AAL added. However, as the duration & severity of the COVID-19 pandemic remain uncertain, the company said it expects its fiscal 2020 results to be materially impacted. The stock rose 1.88 (13%).
If you would like to learn more about AAL, click on this link:
club.ino.com/trend/analysis/stock/AAL?a_aid=CD3289&a_bid=6ae5b6f7
American Airlines revenue slumps 90%
Already this is turning into another wild day for stock trading. Early enthusiasm by investors is fading fast after a rout yesterday. The news from China on the US-China trade relations was very encouraging, but that situation can turn on a dime. Trading in the PM should be interesting.
Dow Jones Industrials
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