Markets fall. led by Nasdaq dropping to a 7 week low

Dow dropped 244 (above session lows), decliners over advancers 2-1 & NAZ fell 117.  The MLP index lost 1+ to the 115s & the REIT index sank 6+ to the 352s.  Junk bond funds hardly budged & Treasuries slid a little lower.  Oil was steady near 41 & gold added 8 to 1958 (more on both below).

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The first round of bills passed by Congress this year to combat the coronavirus pandemic, including the CARES Act & the extension of a small business forgivable loan program, will boost US economic growth by 4.7% , the Congressional Budget Office (CBO) said.  In its analysis, the non-partisan federal agency that provides financial & economic advice to Congress said the first 4 bills passed with near-unanimous support will also add about 3.1% to the size of GDP in 2021.  The cost for this fiscal stimulus: almost $2.9T over 2 years.  The report comes as Congress & the White House are struggling to agree on another coronavirus aid deal before lawmakers hit the road in Oct for the fall election campaigns.  A large gap between Rep & Dem offers & increasing confidence the economy is improving have left prospects for a deal uncertain, at best.  While the short-term impacts of the stimulus were to goose the economy, the CBO said the additional debt racked up to pay for the laws would be a drag in the long run.  However, in the near-term, CBO said it saw little evidence the federal borrowing was making it harder for the private sector to get loans.  CBO looked at 4 bills passed in Mar & Apr to deal with the virus and the later societal lockdown that threw the economy into a tailspin.  The biggest bills were the CARES Act, enacted into law in late Mar & a measure to extend additional borrowing authority for the Paycheck Protection Program (PPP), which provided loans to small businesses that could be forgiven if they did not lay off their employees.  CBO also looked at the effectiveness of the types of aid provided.  Major portions of the CARES Act included the PPP, the $600-a-week federal add-on payment on top of state unemployment benefits, $1200 direct payments to households & payments to state & local govs.  Of those, the CBO said the highest return was from the state & local gov payments, which it said boosted GDP by 89¢ for every $ spent on them from 2020-2023.  The enhanced unemployment benefits saw the 2nd-biggest rate of return, at 68¢ per $.  The checks sent to households boosted the economy by 61¢ per $ & the PPP, which has wide political support in both parties, was the least effective, at 37¢ added to GDP per $ spent.  The CBO said the PPP helped keep many workers employed, though, estimating it saved about 106M job-weeks, or average hours worked by full- & part-time workers in typical week.  About 70% of those job-weeks saved were in Q2.  The debt incurred to pay for these programs will be a drag on the economy over the long-run, though, the CBO warned.  It said GDP would be about 0.4% smaller in 2030 because of the higher debt.  But in the short run, CBO said it doesn't see private investment being more difficult because of the increased borrowing by the gov.

Congress’ coronavirus aid bills will end up adding about 5% to U.S. economic growth this year, CBO says

Warnings that US inflation is about to surge aren't supported by any evidence, and are tantamount to “ghost stories,” said Minneapolis Federal Reserve Pres Neel Kashkari.  These has been talk since 2008 that once inflation started to climb, it would accelerate, forcing the Fed to slam on the brakes by raising its policy interest rate sharply, Kashkari said.  These theories are similar to ghost stories because there is no evidence that they are true yet they can't be ruled out, he added.  Some economists worry that the consumer-price index is signaling higher inflation.  The CPI is up 6.3% annualized over past 3 months, the highest rate since 2008.  Core CPI, which excludes food & energy prices is up 5.1%, the highest since 1991.  Core commodities are up 8.1%, the highest since 1982.  Separately, Atlanta Fed Pres Raphael Bostic said the COVID-19 pandemic has generated “a lot of noise” in the inflation data.  “Month-to-month and quarter-to-quarter, the elements of the CPI are showing wide swings…so its hard to know what signal we’re seeing right now,” Bostic said.  Financial markets didn't react much to the Fed's pledge to allow inflation to overshoot its target & analysts said this is due to price level being so quiet in recent years.  St Louis Fed Pres James Bullard said that complacency about inflation may be tested.  “I actually think you may see more inflation than we have during the pre-pandemic era. when inflation was very subdued,” he said.  In a discussion, Bullard said there were several factors that could push the price level higher: a more relaxed Fed, huge fiscal deficits & possible bottleneck pressures given the 30% annual growth rate expected in Q3.  Kashkari said that, stepping back, higher inflation would be a “high-class problem” for the Fed.  That's because the Fed knows how to handle higher inflation - the problem is the central bank has limited tools to combat low inflation.  Persistent low inflation is posing challenges to advanced economies around the world, Kashkari noted.  This week, the Fed announced the final pieces of its strategy to avoid falling into the quicksand of low inflation.

Fed’s Kashkari says warnings of runaway inflation are just ‘ghost stories’

Moderna (MRNA) said it was on track to produce 20M doses of its experimental coronavirus vaccine by the end of the year, while maintaining its goal of readying 500M-1B doses in 2021.  Vaccines & treatments are seen as essential in controlling the Covid-19 pandemic that has shown no signs of slowing & killed over 944K worldwide.  A handful of vaccines are also being tested in large studies.  The company is working with Switzerland"s Lonza Group & Spain's Laboratorios Farmacéuticos Rovi to make the vaccine outside the US.  MRNA has a vaccine supply deal in place with the US for 100M doses & has finished advanced talks with the EU for the vaccine.  The Centers for Disease Control & Prevention anticipates that 35-45M doses of vaccines from the first 2 companies to receive authorization will be available in the US by the end of this year.  MRNA plans to seek emergency authorization for its vaccine's use in high-risk groups if it proves to be at least 70% effective, its CEO said earlier this week.  The stock rose 1.98.
If you would like to learn more about MRNA, click on this link:
club.ino.com/trend/analysis/stock/MRNA?a_aid=CD3289&a_bid=6ae5b6f7

Moderna expects to make 20 million doses of coronavirus vaccine by 2020 end

Gold futures finished to tally a 2nd weekly gain in a row, though prices only scored a modest boost from Federal Reserve policy that signaled a lower-for-longer path for interest rates for the next 3-4 years.  Dec gold  rose $12 (0.6%) to settle at $1962 an ounce, following a 1.1% slide yesterday.  For the week, gold notched a weekly gain of 0.7%, following a similar climb the week before.  Gold prices added to earlier gains after the Aug leading economic index data from the Conference Board revealed a rise of 1.2% in Aug, lower than the revised 2% climb in Jul—suggesting a slowdown in the economic rebound.  The Sep preliminary reading of the Univ of Mich's US consumer sentiment index, which stood at 78.9, was up from 74.1 the prior month.  Monetary policy changes were expected to hold a potential fresh catalyst for gold but it has failed to see a spark from the Federal Reserve’s decision on Wed to keep its policy interest rate near zero at least thru the end of 2023 to help the economy recover from the coronavirus pandemic.  The Fed's forecasts for 2023, released for the first time, also show the rate staying near zero from now until at least 2024.

Gold futures tally a second straight weekly gain

Oil futures split paths for the session, with US prices up modestly & global prices slightly lower but both benchmarks logging their biggest weekly gain since Jun after major oil producers pledged their full commitment to output cuts.  OPEC & their allies (OPEC+) held a Joint Ministerial Monitoring Committee meeting yesterday, extending the period during which countries that failed to limit production adequately in earlier months can make compensatory reductions.  OPEC+ in Aug relaxed earlier output curbs to 7.7M barrels per day in Aug, from a record 9.7M barrels.  Prince Abdulaziz bin Salman stressed the need for all countries to stick to their production ceilings.  Abdulaziz also had a warning for traders betting on a fall in crude prices.  “Make my day,” he said in a news conference.  West Texas Intermediate crude for Oct tacked on 14¢ to settle at $41.11 a barrel.  However, Nov Brent, the global benchmark, lost 15¢ at $43.15 a barrel.  For the week, WTI was up 10%, which marked the largest weekly rise for a front-month contract since the week ended Jun 5.  Brent added 8.3%, the strongest such rise since the week ended Jun 19.  Prices for the US benchmark ended below the session's highs & spent some time during Fri's session moving lower after a report that Libyan commander Khalifa Haftar announced a conditional lifting of a months-long blockage of oilfields & ports by the Libyan National Army.  That fed expectations for higher global crude supplies.  News reports Mon had said that Haftar planned to halt the blockade.

Oil futures log biggest weekly gain since June

This  was a quadruple witching day when options volumes tend to be particularly elevated, which may also account for some of the choppiness anecdotally associated with Sep as the worst-performing month for the Dow.  Buying in the last 2 hours trimmed losses for the Dow, but it still was a tough day for stocks.  With the presidential elections not far away, more gyrations in the stock market are expected. 

Dow Jones Industrials