Dow dropped 135, declines over advancers 5-4 & NAZ lost 76. The MLP index was fractionally lower to 128 & the REIT index fell 4 to the 341s. Junk bond funds fluctuated & Treasuries had a modest gain in price. Oil slid below 41 & gold sank 18 to 1796 (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)
Homebuilder sentiment jumped 14 points to 72 in Jul, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). That is exactly where it was in Mar, before the pandemic hit the US economy (anything above 50 is considered positive sentiment). The HMI plummeted to 30 in Apr. “Builders are seeing strong traffic and lots of interest in new construction as existing home inventory remains lean,” said NAHB Chairman Chuck Fowke. “Moreover, builders in the Northeast and the Midwest are benefiting from demand that was sidelined during lockdowns in the spring. Low interest rates are also fueling demand, and we expect housing to lead an overall economic recovery.” Mortgage rates have been setting record lows almost weekly, & it is unlikely they will turn higher any time soon. That has given buyers more purchasing power, especially for newly built homes, which come at a price premium. Mortgage applications to purchase a new home were up over 50% in Jun annually. Of the 3 components, current sales conditions jumped 16 points to 79, sales expectations in the next 6 months rose 7 points to 75 & buyer traffic rose 15 points to 58. Builders are clearly thrilled that demand is surging back, but they are also surprised & largely unprepared. Most builders either shut down or severely curtailed operations in Mar & Apr, & are now struggling to get back up to speed. They had stopped buying land & had laid off much of their labor force. Material makers did the same, which is why builders are now facing soaring prices for lumber. “Lumber prices are at a two-year high, and builders are reporting rising costs for other building materials while lot and skilled labor availability issues persist,” said Robert Dietz, NAHB's chief economist. “Nonetheless, the important story of the changing geography of housing demand is benefiting new construction. New home demand is improving in lower density markets, including small metro areas, rural markets and large metro exurbs, as people seek out larger homes and anticipate more flexibility for telework in the years ahead. Flight to the suburbs is real.”
Homebuilder sentiment jumps back to pre-coronavirus pandemic high
The central bank should take additional policy steps that convince the public that policy makers will do what it takes to get the economy going & inflation rising, said Chicago Fed Pres Charles Evans. “A lot of this is convincing...people in the markets and the public that we’re really in it to win it,” Evans added. Evans said the best policy to achieve this goal would be to establish markers that would need to be reached before the Fed raised interest rates. This is known as “foward guidance.” Evans is well known for being the driving force behind the use of forward guidance in the aftermath of the 2008 financial crisis. He convinced his colleagues in 2012 to announce publicly that the Fed would not raise rates until the unemployment rate fell below 6.5% or inflation rose over 2%. During that period, the market would often push longer-term interest rates yields higher in anticipation of a recovery, but this had the perverse effect of slowing the economy. In recent days, Fed Governor Lael Brainard & Philadelphia Fed Pres Patrick Harker have both also endorsed stronger forward guidance. Brainard said the Fed should allow the economy to run hotter - with inflation above 2% — before hiking rates. The Fed's benchmark rate is currently at zero. Other Fed officials, like St Louis Fed Pres James Bullard don't think the stronger promise is needed now. He thinks the market understands that the Fed is keeping its rate at zero. Fed Chairman Jerome Powell said in Jun that the central bank “isn’t thinking about thinking about” raising rates.
Fed needs stronger forward guidance to convince people ‘we’re really in it to win it.’ Evans says
China was the first country shutdown by coronavirus & became the first major economy to report quarterly growth. The country reported a 3.2% expansion in the latest qtr after anti-virus lockdowns were lifted & factories & stores reopened. The growth was a dramatic improvement over the previous qtr's 6.8% contraction. Economists say China is likely to recover faster than some other major economies due to the ruling Communist Party's decision to impose the most intensive anti-disease measures in history. Those cut off most access to cities with a total of 60M people & suspended trade & travel — steps. Manufacturing & some other industries are almost back to normal. But consumer spending is weak due to fear of possible job losses.
Gold futures fell to their lowest finish in more than a week, with $-denominated prices for the metal pressured as the $ looked to recoup its loss from a day earlier. Investors also assessed the landscape for the global economy & markets amid rising US coronavirus cases, while the ECB, as expected kept keep both its key rate & asset-buying program unchanged. Bullion has been held in a range around $1800 as rising cases of COVID-19 in many American states undermine the economic recovery, while US- China tensions are also rising. Weekly jobless claims data showed a decline of 10K to a post-pandemic low of 1.3M, though the small decline points to ongoing stress in the labor market. Retail sales climbed 7.5% last month after a record 18.2% rise in May. Weekly jobless claims data showed a decline of 10K to a post-pandemic low of 1.3M, though the small decline points to ongoing stress in the labor market. Gold for Aug fell $13 (0.7%) to settle at $1800 an ounce, after adding pennies yesterday. The settlement was the lowest for a most-active contract since Jul. Early today, the ECB decision was seen as giving the central bank some time to assess the impact of its policy moves before embarking on any further stimulative measures to prop up economies stricken by business closures & restrictions to help stem the spread of the pandemic.
Gold prices log lowest finish in more than a week
Oil futures ended lower, taking a cue from a decline in global equities, after holding their own a day earlier following a decision by OPEC & its allies to begin trimming production cuts next month. West Texas Intermediate crude for Aug fell 45¢ (1.1%) to settle at $40.75 a barrel, while Sep Brent crude, the global benchmark, lost 42¢ (1%) at $43.37 a barrel. The price decline for both benchmarks followed 2 straight sessions of gains. Oil ended at a more than 4-month high yesterday after the OPEC+ alliance agreed to allow record production cuts of 9.7M barrels per day to decrease to 7.7M barrels per day starting Aug, in line with a previous OPEC+ agreement to gradually taper the reductions. However, at the same time, countries that failed to abide by their quota limits since the latest pact began in May are required to cut output even more in Aug to compensate for their overproduction.
Oil ends lower as global equities decline, demand uncertainty persists
Stocks were sold, dragged down by a deluge of earnings results & new economic data on the state of the consumer & labor market as the pandemic continues. The Dow & NAZ were in the red all day, although buying in the last hour trimmed losses. The Dow has returned to where it was in early Jun, about the time coronavirus pandemic kicked into high gear again. On the other side the Dow is about 10% under its records reached in early 2020 while NAZ is flirting with the record made on Fri.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Homebuilder sentiment jumped 14 points to 72 in Jul, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). That is exactly where it was in Mar, before the pandemic hit the US economy (anything above 50 is considered positive sentiment). The HMI plummeted to 30 in Apr. “Builders are seeing strong traffic and lots of interest in new construction as existing home inventory remains lean,” said NAHB Chairman Chuck Fowke. “Moreover, builders in the Northeast and the Midwest are benefiting from demand that was sidelined during lockdowns in the spring. Low interest rates are also fueling demand, and we expect housing to lead an overall economic recovery.” Mortgage rates have been setting record lows almost weekly, & it is unlikely they will turn higher any time soon. That has given buyers more purchasing power, especially for newly built homes, which come at a price premium. Mortgage applications to purchase a new home were up over 50% in Jun annually. Of the 3 components, current sales conditions jumped 16 points to 79, sales expectations in the next 6 months rose 7 points to 75 & buyer traffic rose 15 points to 58. Builders are clearly thrilled that demand is surging back, but they are also surprised & largely unprepared. Most builders either shut down or severely curtailed operations in Mar & Apr, & are now struggling to get back up to speed. They had stopped buying land & had laid off much of their labor force. Material makers did the same, which is why builders are now facing soaring prices for lumber. “Lumber prices are at a two-year high, and builders are reporting rising costs for other building materials while lot and skilled labor availability issues persist,” said Robert Dietz, NAHB's chief economist. “Nonetheless, the important story of the changing geography of housing demand is benefiting new construction. New home demand is improving in lower density markets, including small metro areas, rural markets and large metro exurbs, as people seek out larger homes and anticipate more flexibility for telework in the years ahead. Flight to the suburbs is real.”
Homebuilder sentiment jumps back to pre-coronavirus pandemic high
The central bank should take additional policy steps that convince the public that policy makers will do what it takes to get the economy going & inflation rising, said Chicago Fed Pres Charles Evans. “A lot of this is convincing...people in the markets and the public that we’re really in it to win it,” Evans added. Evans said the best policy to achieve this goal would be to establish markers that would need to be reached before the Fed raised interest rates. This is known as “foward guidance.” Evans is well known for being the driving force behind the use of forward guidance in the aftermath of the 2008 financial crisis. He convinced his colleagues in 2012 to announce publicly that the Fed would not raise rates until the unemployment rate fell below 6.5% or inflation rose over 2%. During that period, the market would often push longer-term interest rates yields higher in anticipation of a recovery, but this had the perverse effect of slowing the economy. In recent days, Fed Governor Lael Brainard & Philadelphia Fed Pres Patrick Harker have both also endorsed stronger forward guidance. Brainard said the Fed should allow the economy to run hotter - with inflation above 2% — before hiking rates. The Fed's benchmark rate is currently at zero. Other Fed officials, like St Louis Fed Pres James Bullard don't think the stronger promise is needed now. He thinks the market understands that the Fed is keeping its rate at zero. Fed Chairman Jerome Powell said in Jun that the central bank “isn’t thinking about thinking about” raising rates.
Fed needs stronger forward guidance to convince people ‘we’re really in it to win it.’ Evans says
China was the first country shutdown by coronavirus & became the first major economy to report quarterly growth. The country reported a 3.2% expansion in the latest qtr after anti-virus lockdowns were lifted & factories & stores reopened. The growth was a dramatic improvement over the previous qtr's 6.8% contraction. Economists say China is likely to recover faster than some other major economies due to the ruling Communist Party's decision to impose the most intensive anti-disease measures in history. Those cut off most access to cities with a total of 60M people & suspended trade & travel — steps. Manufacturing & some other industries are almost back to normal. But consumer spending is weak due to fear of possible job losses.
China's economy grows 3.2%, first economy to rise since coronavirus pandemic
Gold futures fell to their lowest finish in more than a week, with $-denominated prices for the metal pressured as the $ looked to recoup its loss from a day earlier. Investors also assessed the landscape for the global economy & markets amid rising US coronavirus cases, while the ECB, as expected kept keep both its key rate & asset-buying program unchanged. Bullion has been held in a range around $1800 as rising cases of COVID-19 in many American states undermine the economic recovery, while US- China tensions are also rising. Weekly jobless claims data showed a decline of 10K to a post-pandemic low of 1.3M, though the small decline points to ongoing stress in the labor market. Retail sales climbed 7.5% last month after a record 18.2% rise in May. Weekly jobless claims data showed a decline of 10K to a post-pandemic low of 1.3M, though the small decline points to ongoing stress in the labor market. Gold for Aug fell $13 (0.7%) to settle at $1800 an ounce, after adding pennies yesterday. The settlement was the lowest for a most-active contract since Jul. Early today, the ECB decision was seen as giving the central bank some time to assess the impact of its policy moves before embarking on any further stimulative measures to prop up economies stricken by business closures & restrictions to help stem the spread of the pandemic.
Gold prices log lowest finish in more than a week
Oil futures ended lower, taking a cue from a decline in global equities, after holding their own a day earlier following a decision by OPEC & its allies to begin trimming production cuts next month. West Texas Intermediate crude for Aug fell 45¢ (1.1%) to settle at $40.75 a barrel, while Sep Brent crude, the global benchmark, lost 42¢ (1%) at $43.37 a barrel. The price decline for both benchmarks followed 2 straight sessions of gains. Oil ended at a more than 4-month high yesterday after the OPEC+ alliance agreed to allow record production cuts of 9.7M barrels per day to decrease to 7.7M barrels per day starting Aug, in line with a previous OPEC+ agreement to gradually taper the reductions. However, at the same time, countries that failed to abide by their quota limits since the latest pact began in May are required to cut output even more in Aug to compensate for their overproduction.
Oil ends lower as global equities decline, demand uncertainty persists
Stocks were sold, dragged down by a deluge of earnings results & new economic data on the state of the consumer & labor market as the pandemic continues. The Dow & NAZ were in the red all day, although buying in the last hour trimmed losses. The Dow has returned to where it was in early Jun, about the time coronavirus pandemic kicked into high gear again. On the other side the Dow is about 10% under its records reached in early 2020 while NAZ is flirting with the record made on Fri.
Dow Jones Industrials
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