Dow shot up 372, advancers over decliners 5-2 & NAZ gained a huge 250 to another record. The MLP index fell 3+ to the 127s & the REIT index went up 1+ to the 353s. Junk bond funds fluctuated & Treasuries were weak. Oil inched higher above 40 & gold added 3 to 1793, approaching its record high of 1891.
AMJ (Alerian MLP Index tracking fund)
Restaurants, dentists & other service-style companies that dominate the US economy saw a surge in growth in Jun as businesses were allowed to reopen, pointing to a gradual recovery after extended coronavirus lockdowns. The Institute for Supply Management's (ISM) index of nonmanufacturing companies jumped to 57.1% in Jun from 45.4% in May, marking the single biggest increase since the survey was created in 1997. It was also the highest reading since Feb & easily topped the 51% forecast. Any number above 50% indicates more companies are expanding, but the big increase in Jun overstates the improvement in the economy. Growth looked so strong because it occurred after a few months of extremely low activity. Business is no where close to precrisis levels. What's more, a resurgence in coronavirus cases has already delivered another blow to restaurants & other businesses that rely on crowds of customers. That could dampen business in Jul. Production & new orders both soared in Jun, topping 60%. The employment gauge also rose to 43.1% from 31.8%, reflecting the return of more people to work. The gov last week said the US has regained 4.8M jobs in Jun. Still, that leaves at least 15M who were working before the pandemic without jobs. 14 of the 18 service industries tracked by ISM expanded in Jun. Even as the economy rebounded, business leaders urged caution.
Service side of economy roars back in June, ISM shows, but momentum might be hard to sustain
Economic fallout from the coronavirus pandemic has cast doubt on whether China can meet its targets to buy US goods under this year's trade deal -- with energy emerging as the biggest casualty. China has made strides toward its agricultural & manufacturing targets, but it remains far behind -- maybe hopelessly far -- an ambitious target for purchases of oil, natural gas, refined petroleum products like propane & butane, & coal, prompting concerns from the US energy industry which is encouraging the US Trade Representative to increase pressure on China to reach the goal. The targets in the deal implied China would purchase around $25B of US energy in 2020 & even more in 2021. The latest data on US exports for the month of May show China has so far this year purchased only $2B of that sum, near the year's midway point. The collapse in energy demand & energy prices amid the coronavirus pandemic explains part of why China is so far behind. Nevertheless, China's US energy purchases present contrast to the strides it has made toward targets for the acquisition of agricultural & manufactured goods. Agricultural purchases are 39% of the pace needed to hit the phase one goal. But agricultural purchases are heavily seasonal in the fall when major crops like soybeans are harvested, giving China time to catch up if the deal remains intact. And China has purchased $19.5B of manufacturing goods, where the goal for the year is $84B. That puts manufactured goods at 56% of the pace needed to hit the goal. But energy is far behind -- running at only 18% of the pace needed to reach the goal. Catching up in the next 7 months would require massive purchases to begin immediately. To hit the goal, China would need to start purchasing more than $3B a month of energy, more every single month than it has been able to purchase in the past 5 months combined.
Labor Secretary Eugene Scalia said he does not think that $600-a-week enhanced unemployment benefits are needed "going forward" when asked if he supported trading continued enhanced benefits for the payroll tax cut that Pres Trump has floated. "It was a really important thing to do as we were shutting our economy down. Americans across the country were basically being told, and we needed to take measures, but they were basically being told, you can't go to work right now. ... I don't think we need that $600 benefit going forward," Scalia said. The federally enhanced unemployment benefits will expire on Jul 31. "During the so-called Great Recession 10, 12 years ago when we had a downturn, The added federal unemployment benefit was $25 a week," Scalia said. "What we did in the CARES Act was $600 a week." Trump said Thurs that payroll tax cuts could be included in a "phase four" coronavirus relief bill, which congressional Dems are expected to oppose. "We're working on a 'phase four.' We're working with Congress," Trump said. "Work has started. Steve Mnuchin can give you a little briefing. Talking about payroll tax cuts, we're talking about more money being infused. And it comes back to us."
Buyers returned after the holiday weekend & took the Dow over 26K. The service sector data was encouraging, however the economy continues to stumble forward as it recovers what from should turn out to be a short term depression. The coronavirus is fighting hard & does not want to go away which is limiting the economic recovery. The Dow is back where it was a month ago. All things considered. not so bad.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 4 0.60 | -0.05 | -0.1% |
| GC=F | Gold | 1,792.40 | +2.40 | +0.1% |
Restaurants, dentists & other service-style companies that dominate the US economy saw a surge in growth in Jun as businesses were allowed to reopen, pointing to a gradual recovery after extended coronavirus lockdowns. The Institute for Supply Management's (ISM) index of nonmanufacturing companies jumped to 57.1% in Jun from 45.4% in May, marking the single biggest increase since the survey was created in 1997. It was also the highest reading since Feb & easily topped the 51% forecast. Any number above 50% indicates more companies are expanding, but the big increase in Jun overstates the improvement in the economy. Growth looked so strong because it occurred after a few months of extremely low activity. Business is no where close to precrisis levels. What's more, a resurgence in coronavirus cases has already delivered another blow to restaurants & other businesses that rely on crowds of customers. That could dampen business in Jul. Production & new orders both soared in Jun, topping 60%. The employment gauge also rose to 43.1% from 31.8%, reflecting the return of more people to work. The gov last week said the US has regained 4.8M jobs in Jun. Still, that leaves at least 15M who were working before the pandemic without jobs. 14 of the 18 service industries tracked by ISM expanded in Jun. Even as the economy rebounded, business leaders urged caution.
Service side of economy roars back in June, ISM shows, but momentum might be hard to sustain
Economic fallout from the coronavirus pandemic has cast doubt on whether China can meet its targets to buy US goods under this year's trade deal -- with energy emerging as the biggest casualty. China has made strides toward its agricultural & manufacturing targets, but it remains far behind -- maybe hopelessly far -- an ambitious target for purchases of oil, natural gas, refined petroleum products like propane & butane, & coal, prompting concerns from the US energy industry which is encouraging the US Trade Representative to increase pressure on China to reach the goal. The targets in the deal implied China would purchase around $25B of US energy in 2020 & even more in 2021. The latest data on US exports for the month of May show China has so far this year purchased only $2B of that sum, near the year's midway point. The collapse in energy demand & energy prices amid the coronavirus pandemic explains part of why China is so far behind. Nevertheless, China's US energy purchases present contrast to the strides it has made toward targets for the acquisition of agricultural & manufactured goods. Agricultural purchases are 39% of the pace needed to hit the phase one goal. But agricultural purchases are heavily seasonal in the fall when major crops like soybeans are harvested, giving China time to catch up if the deal remains intact. And China has purchased $19.5B of manufacturing goods, where the goal for the year is $84B. That puts manufactured goods at 56% of the pace needed to hit the goal. But energy is far behind -- running at only 18% of the pace needed to reach the goal. Catching up in the next 7 months would require massive purchases to begin immediately. To hit the goal, China would need to start purchasing more than $3B a month of energy, more every single month than it has been able to purchase in the past 5 months combined.
China unlikely to meet U.S. trade targets
Labor Secretary Eugene Scalia said he does not think that $600-a-week enhanced unemployment benefits are needed "going forward" when asked if he supported trading continued enhanced benefits for the payroll tax cut that Pres Trump has floated. "It was a really important thing to do as we were shutting our economy down. Americans across the country were basically being told, and we needed to take measures, but they were basically being told, you can't go to work right now. ... I don't think we need that $600 benefit going forward," Scalia said. The federally enhanced unemployment benefits will expire on Jul 31. "During the so-called Great Recession 10, 12 years ago when we had a downturn, The added federal unemployment benefit was $25 a week," Scalia said. "What we did in the CARES Act was $600 a week." Trump said Thurs that payroll tax cuts could be included in a "phase four" coronavirus relief bill, which congressional Dems are expected to oppose. "We're working on a 'phase four.' We're working with Congress," Trump said. "Work has started. Steve Mnuchin can give you a little briefing. Talking about payroll tax cuts, we're talking about more money being infused. And it comes back to us."
Labor secretary Scalia: Extra $600 a week in unemployment insurance no longer needed
Buyers returned after the holiday weekend & took the Dow over 26K. The service sector data was encouraging, however the economy continues to stumble forward as it recovers what from should turn out to be a short term depression. The coronavirus is fighting hard & does not want to go away which is limiting the economic recovery. The Dow is back where it was a month ago. All things considered. not so bad.
Dow Jones Industrials
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