Dow rose 14 (well off early depressed lows), decliners over advancers better than 2-1 & NAZ shot up 157 on strong tech earnings. The MLP index gave back 1+ to 126 & the REIT index fell 2+ to the 356s. Junk bond funds slid a tad & Treasuries were a little weak. Oil went over 40 again & gold closed up 23 to 1990 (more on both below).
Consumers increased spending 5.6% in Jun but appear to have pulled back since then, restraining the economy's recovery from the
coronavirus outbreak. Americans' ability & willingness to spend will largely determine the economy's path in the coming weeks & months. Household
spending reflects 2/3 of economic demand in the US. A sharp
drop in spending -- tied to business closures & fears of the virus --
was the biggest reason the US economy contracted at a record rate in Q2. Americans reduced spending on things such as doctor visits, dining & vacations. Economists believe households boosted spending in Jun, at the end of Q2, which would mark the 2nd consecutive monthly
increase. But the growth almost certainly wasn't large enough to make up
for the sharp drop in spending earlier this spring caused by the
coronavirus pandemic. Household incomes also likely dipped last
month, as worker layoffs remained high & the effects of federal
stimulus payments faded. Extra unemployment benefits that have pumped Bs of $s a week into workers' pocketbooks will expire at the
end of Jul without action from Congress. A recent rise in virus infections in several big states led to a new round of business closures
with many people staying home, weighing on spending. One
hopeful sign: Households overall have built up savings. That
strengthens them financially & could lead to a burst in spending once a
vaccine emerges. The personal savings rate soared to 25.7% in Q2 from 9.5% in Q1, the Commerce Dept
said.
Americans grew more worried about the economy toward the end of Jul
after a fresh outbreak of coronavirus cases chipped away at the recovery & cast doubt on how quickly the US will rebound from the worst
health-care crisis in a century. The final reading of the consumer sentiment survey in July slipped to 72.5 from an initial 72.9, the Univ of Mich said. The index registered 73.2 in Jun. The level of sentiment is now barely above the pandemic low, erasing
most of the momentum gained in late May & Jun as large swaths of the
economy reopened. Consumers expressed less confidence in the current state of the
economy. An index that measures attitudes right now fell to 82.8 from
87.1. Americans also doubt the recession will end anytime soon. An
index that measures expectations for the next 6 months sank to 65.9
from 72.3 & matched a 6-year low recorded in May. Richard Curtin, the chief economist of the sentiment survey, said
massive federal aid has kept US from sinking into an even deeper
recession, but he fretted that the economy could suffer another dip
unless DC provides more financial relief. “The federal relief programs have prevented more substantial declines in
consumer finances, partially shielding consumers from the unprecedented
surge in job losses, reduced work hours, and salary cuts,” Curtin said. “The lapse of the special jobless benefits will directly hurt the most
vulnerable and spread even further by missed rent, mortgage, and other
debt payments.” The amount of confidence Americans have in the economy & their own
financial security has a good track record of predicting the future. Confidence has faltered after the recent outbreak of coronavirus cases & the reimposition of gov restrictions. High unemployment is another worry, especially with emergency federal jobless benefits on the cusp of expiring. The economy can't make big strides in recovering without more
gov aid & better success at getting the coronavirus under
control, analysts say.
Chevron (CVX), a Dow stock & Dividend Aristocrat, posted steep losses in Q2 as lower oil & gas prices sapped production gains & the decimation in global travel amid the Covid-19 pandemic crimped fuel demand. The oil giant posted Q2 loss of $8.3B ($4.44 a share) compared with a
profit of $4.3B ($2.27 a share) last year. Adjusted losses were $1.59 a share. Analysts were expecting adjusted losses of 93¢ a share. The company booked impairments & other charges of $1.8B
for the qtr to account for downward revisions in its
commodity-price outlook, severance charges of $780B & a gain of
$310M on the sale of Azerbaijan assets. CVX also impaired its $2.6B in investment in Venezuela due
to the operating environment's uncertainty. Revenue fell 65.3% to $13.5B from the year-ago period. Analysts were looking for $21.9B. "The
past few months have presented unique challenges," said CEO Michael
Wirth. "The economic impact of
the response to Covid-19 significantly reduced demand for our products
and lowered commodity prices." Production was 2.99M barrels of oil-equivalent a day, down from 3.08M a day a year earlier. Although
demand & commodity prices have shown signs of recovery, CVX said
they aren't back to pre-Covid levels. The company warned its results
could continue to be depressed thru Q3. The stock dropped 2.34.
Gold prices settled sharply higher, shaking off its first
losing day in 10 sessions yrsterday as investors, wary of growing
economic troubles around the globe, sought exposure to the perceived
safe-haven asset. Dec gold,
which is now the most-active contract, climbed $19 (1%) to
close at $1985 an ounce. For the week, bullion climbed 4.7%, while
the 10.3% gain in Jul marked the best monthly rise since Feb of
2016. Some analysts believe gold prices could be entering a period of
consolidation after a historic surge prompted at least in part by the
public-health crisis, alongside a recent bout of weakness in $ & the low yields being offered by gov debt.
Oil futures ended higher, logging a monthly gain, as
investors weighed an uncertain demand outlook and an expected rise in
supplies as major producers relax output curbs. West Texas Intermediate (WTI) crude for Sep rose 35¢ (0.9%) to close at $40.27 a barrel, while Oct Brent crude,
the global benchmark, added 27¢ (0.6%) to finish at $43.52
a barrel. WTI logged a monthly rise of
2.6%, while Brent rose more than 5% for Jul. Some analysts see scope for the rebound
in oil prices off recent lows to bring back sufficient production to cap
the potential for further price rises. Oil ends higher to log July gain, but traders brace for added supply
The Dow was up a little, but finished with a 600 gain in Jul. Meanwhile the NAZ, powered by tech & bio med stocks, is just under its recent record (with a gain of 700 in Jul). And gold bugs are having a great time, taking gold up to almost 2K. Aug could be a very wild time in the stock market. Get ready!!
Dow fell 132, decliners over advancers about 3-1 & NAZ went up 58. The MLP index was off 1+ to 126 & the REIT index fell 5+ to 354. Junk bond funds hardly budged & Treasuries were s little lower. Oil slid lower in the 39s & gold jumped 19 to 1989 as it closes in on 2K.
The Trump administration is reportedly open to cutting a coronavirus stimulus deal with Dems that leaves out Senate Reps legislation intended to protect businesses from pandemic-related lawsuits. Although the White House has maintained that liability protections for employers is a top
priority in the next round of virus aid, officials have signaled a
willingness to sign off on a deal that does not include those legal
protections, according to leakers. That
puts the White House at odds with Senate Majority Leader Mitch
McConnell, who has said repeatedly that no relief bill will be passed
without it. The liability shield would not just apply to private businesses, but
to schools, hospitals & nonprofits. The protection would make it so
that workers & consumers could only sue businesses for damages if they
can prove they were "grossly negligent" in actions that led them to
being infected by COVID-19. "No bill will be put on the Senate floor that does not have liability protections," McConnell told reporters. Dems
have opposed those measures. House Speaker Nancy Pelosi argued this
week that a liability shield would fail to make businesses & employers
responsible for the safety of their workplace while at the same time
removing any fear of repercussions if a worker got sick. "What they're saying to essential workers,
'You have to go to work because you're essential. We've placed no
responsibility on your employer to make that workplace safe,'" Pelosi
said. "'And if you get sick, you have
no recourse because we've given the employer protection.'"
Caterpillar (CAT), a Dow stock, profit fell 70% as the economic slowdown caused by
COVID-19 slashed demand. The heavy-equipment manufacturer had adjusted EPS of $1.03, as revenue slid 31% from
a year ago to $10B. The forecast called for EPS of 64¢ on revenue of
$9.69B. “In the second quarter, our employees and dealers remained dedicated
to providing the essential products and services the world needs under
very challenging conditions,” CEO Jim Umpleby said. "We
will adjust production as conditions warrant and are prepared to respond
quickly to any positive or negative changes in customer demand." CAT,
a bellwether of the global economy, saw sales in
all 3 of its main business segments decline. Construction
sales fell 37% from a year ago to $4.05B, a decline
exacerbated by stiffer competition in China. Mining revenue was off 35%, at $1.83B, while energy & transportation revenue slid
24% to $4.15B. CAT withdrew its guidance for the remainder of 2020 & has not yet provided an update due to the uncertainty caused by
COVID-19. The stock dropped 6.13 (4%).
If you would like to learn more about CAT, click on this link: club.ino.com/trend/analysis/stock/CAT?a_aid=CD3289&a_bid=6ae5b6f7
Exxon Mobil (XOM), a Dow stock & Dividend Aristocrat, recorded its 2nd consecutive quarterly losee as lower oil & gas prices sapped production gains & the decimation in global travel crimped fuel demand amid the a coronavirus pandemic. The oil producer a Q2 loss of per share of 26¢, compared with EPS
of 73¢ last year. On an adjusted
base, it recorded a loss of 70¢ a share. A loss in Q1 was its first in 3 decades. The forecast called for a loss of 41¢ a share, or 61¢ a share on an adjusted basis. Revenue fell 53% to $32.6B from $69.1B in the year-ago period. Analysts were looking for $38.2B. Downstream earnings, which represents much of the company's operations
after it pumps oil out of the ground, rose to $976M from $451M, driven by gains outside the US. Oil-equivalent production was 3.6M barrels a day, down 7% from
the year-ago period. Capital & exploration expenditures fell nearly $2B from Q1 to $5.3B as the company moved to cut costs. "The global pandemic and oversupply conditions significantly impacted
our second quarter financial results with lower prices, margins, and
sales volumes," CEO Darren Woods said. "We
responded decisively by reducing near-term spending and continuing work
to improve efficiency by leveraging recent reorganizations." He added that the company doesn't plan to take on additional debt. "We have increased debt to a level we feel is appropriate to provide
liquidity, given market uncertainties," Woods said. The stock was off 65¢.
If you would like to learn more about XOM, click on this link: club.ino.com/trend/analysis/stock/XOM?a_aid=CD3289&a_bid=6ae5b6f7
Strong earnings from tech stocks are driving NAZ higher. However the rest of the market is sliding lower on gloomy earnings reports & a failure for those guys in DC to pass a stimulus bill. The gold bugs are finding it easy to make their case for buying gold & they hope to take it over 2K by next week.
Dow dropped 225 (but well off session lows), decliners over advancers 2-1 & NAZ went up 44. The MLP index was off 4 to the 127s & the REIT index fell 2+ to 359. Junk bond funds were mixed & Treasuries continued in demand.. Oil fell 1+ to 40 & gold ended its winning streak, falling 8 to 1943 (more on both below).
A coronavirus relief agreement in Congress looked
illusory as new economic data showed a US economy buckling
under the pandemic's weight. Sen Ron Johnson tried to
unanimously pass an extension of the weekly enhanced federal
unemployment insurance yesterday that would slash the benefit
from $600 to $200 per week & Senate Minority Leader Chuck Schumer rejected it. Schumer
then attempted to unanimously approve the $3T rescue package
House Dems passed in May. That legislation also failed, leaving
Congress no closer to breaking an impasse over how best to boost a
health-care system & economy ravaged by the pandemic. Dem leaders & Trump administration officials left a meeting yesterday saying they had not come close to bridging a gulf in their priorities for an aid package. As House Speaker Nancy Pelosi is away today, it is unclear when the sides will resume
in-person discussions. Congress is struggling to find common ground on coronavirus relief as
statistics show an economy still experiencing damage from an outbreak spreading throughout the country. Congressional
leaders are now tossing blame for the inevitable expiration of the $600
per week enhanced federal unemployment insurance. The policy ends tomorrow, though states stopped paying out the extra benefit last week —
leaving Ms of Americans facing a sudden & sharp drop in income.
Secretary of State Mike Pompeo slammed US tech companies for their lack of transparency in regards to the breadth &
depth of intellectual property theft the Chinese gov conducts on
American industries. “The idea that anyone in the tech space
could not know of what the Chinese Communist Party is attempting to
steal and the cyberattacks they are making seems incredulous to me,”
Pompeo said before the Senate Committee on Foreign Relations. Pompeo's comments come a day after the CEOs of tech giants testified before the House Judiciary subcommittee on antitrust. When asked by lawmakers if China steals technology from US tech
firms, they largely downplayed the notion. “I can only speculate, it’s patently clear to
anyone who is watching that the Chinese are engaged in intense efforts
of intellectual property threat, including technology,” Pompeo
responded to questions. US officials have long complained that Chinese
intellectual property theft has threatens national security & has cost
the economy Bs of $s in revenue & thousands of jobs. Beijing maintains it does not engage in intellectual property theft.
Kellogg (K) raised its full-year sales & profit forecast on, buoyed by rising demand for its Corn Flakes, Fruit Loops &
waffle mixes among consumers stuck at home due to the COVID-19 pandemic. The
company reported net sales of $3.47B in the 3 months ended
Jun 27, roughly flat from a year ago, due to the sale of its Keebler
cookie business last year. The forecast called for net sales of $3.3B. The company forecast full-year organic net sales to rise about 5%, ahead
of a prior forecast for a 1-2% increase& its adjusted EPS to fall about 1%, compared with previous outlook of a 3% to 4%
fall. The stock fell 31¢.
If you would like to learn more about Kellogg, click on this link: club.ino.com/trend/analysis/stock/K?a_aid=CD3289&a_bid=6ae5b6f7
Gold prices ended lower, with bullion retreating from a
record rally that had seen the precious metal notch 9 consecutive
days of gains. The precious metal found support yesterday following the
Federal Reserve signaling it planned to keep the low interest rate
environment in place for the foreseeable future as the US economy
recovers from COVID-19. Benchmark federal-funds futures rates stand at a of 0-0.25%. However, some analysts make the case that gold prices may be entering a
period of consolidation following a historic run-up that has been at
least partly prompted by the public-health crisis, but also exacerbated
by a recent bout of weakness in $ & the low yields being
offered by gov debt. Aug gold fell $11 (0.6%) to settle at $1942 an ounce, after settling at a record yesterday, marking its 9th straight advance, which is its longest
win streak since a 10-session climb ended in Jan. Dec gold,
which is now the most-active contract, settled at $1966 an ounce, down $10 (0.5%).
Oil futures were sharply lower, with US prices settling
below $40 a barrel for the first time in 3 weeks, pressured by
worries a resurgence in coronavirus cases around the world will cause
demand to falter as major oil producers begin relaxing output curbs. West Texas Intermediate (WTI) crude for Sep dropped $1.35 (3.3%) to
settle at $39.92 a barrel. That was the first settlement below $40 &
lowest front-month contract finish in 3 weeks. Sep Brent crude,
which expires at the end of tomorrow's session, fell 81¢ (1.9%) at $42.94. The number of COVID-19 cases around the world climbed above 17M, according to data from Johns Hopkins University, & the death toll rose to 668K. The US case tally climbed to 4.4K & the death toll rose to 152K, after crossing 150K late
yesterday. California & Florida posted single-day record death numbers yesterday & California added more than 12K. Meanwhile, OPEC & its allies (OPEC+) are due in Aug
to boost output by around 2M barrels a day as they relax production curbs put in place earlier this year.
Getting legislation passed in DC will not be easy. Those guys take a very long break in Aug after doing very little in recent months. Another rescue package for the economy looks to be very far away & the fight against the virus in southern states is not going well. The drop in the closing price for the expiring contract of gold means little because the new closing contract is already at 1966. Gold remains in heavy demand, not a good sign for stocks.
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
