Markets pare losses as September melancholy persists

Dow slumped 509 (above early lows), decliners over advancers a more mild about 7-1 & NAZ declined 14.  The MLP index was off 2+ to the 113s & the REIT index plummeted 10 to 340.  Junk bond funds were weak & Treasuries continued to be in demand.  Oil sank to the 39s (above session lows) & gold dropped 46 to 1915 (more on both below).

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Gov & business debt soared in Q2 as the US dealt with the coronavirus pandemic, even as personal net worth rose and & credit plunged at a record level.  A Federal Reserve showed the total household balance sheet in the US rose to nearly $119B in the Apr-Jun period, a 6.8% increase from the first qtr.  The gain in net worth was driven almost exclusively by the stock market.  Thanks in large part to unprecedented fiscal & monetary stimulus, the S&P 500 gained 20% during the qtr.  That in turn led to a $5.7T rise in net worth (75% of the total increase).  Real estate contributed $500M.  As financial assets climbed, debt, at least at the household level, went nowhere.  Consumer credit tumbled at a post-World War II record 6.6% annual pace thanks in large part to a decline in credit card balances to $954B from $1.02T.  Student loan debt was little changed at $1.7T, while auto loans edged higher to just shy of $1.2T.  That came as the federal gov & businesses continued to ratchet up debt.  In all, domestic nonfinancial debt totaled $59.3T.  Federal gov debt exploded at a 58.9% pace as Congress passed the CARES Act to support an economy that had gone into lockdown at the end of first qtr to combat the Covid-19 spread.  Nonfinancial business debt rose by 14%, which was below the 18.4% rise in Q1 but still well abovN2009.

Government debt rose at a 59% pace in Q2 amid effort to halt virus

House Dems released a bill to fund the gov until Dec 11, but Senate Reps quickly criticized it, leaving the path to a deal to prevent a shutdown unclear.  The plan, which would stop funding from lapsing after the Sep 30 deadline, did not include a White House request for farm aid or additional school lunch assistance, a Dem priority.  In a tweet, Senate Majority Leader Mitch McConnell said the proposal “shamefully leaves out key relief and support that American farmers need.”  Dems hope to vote on the bill as soon as this week.  Today, House Speaker Nancy Pelosi said the plan would “avert a catastrophic shutdown in the middle of the ongoing pandemic,” & called for lawmakers to resume talks toward coronavirus aid legislation.  The party and the Trump administration previously announced a tentative agreement to temporarily extend gov funding without adding unrelated or potentially toxic provisions.  The push to avoid a shutdown comes amid a protracted fight over how to structure a 5th pandemic relief package.

House Democrats to unveil bill to avoid shutdown, but McConnell criticizes it

Gold futures dropped by nearly 3%, amid an apparent flight to $s & rising global risks, including renewed COVID-19 lockdown measures in Europe, partly to blame as bullion prices slumped to their lowest finish in 2 months.  A selloff across global equity markets, tied partly to worries over the rise in COVID-19 cases & the potential for the renewal of restrictions on activity, as well as uncertainty over a fresh round of gov relief, added to the negative tone.  The bullion's price settlement pushed gold beneath its short-term, 50-day moving average at $1941 an ounce — a move that's seen as contributing to a view that gold's bullish short-term trend line was in jeopardy.  Market technicians view moving averages as dividing lines between bullish & bearish momentum in an asset.  Dec gold  lost $51 (2.6%) to settle at $1910 an ounce after trading as low as $1885.  The settlement was the lowest for a most-active contract since Jul 24.  Looking ahead, Federal Reserve Chair Jerome Powell will testify to the House Financial Services Committee on the CARES Act tomorrow & the House Select Subcommittee on the coronavirus crisis on Wed.

Gold prices drop nearly 3% as rise in coronavirus cases sparks dollar rally

Oil futures fell, with pressure attributed to expectations Libyan crude will soon return to the market, while worries over a rise in European COVID-19 cases & a global equity market selloff added to the negative tone.  West Texas Intermediate crude for Oct fell $2.18 (5.3%) to $38.93 a barrel, ahead of the contract’s settlement at the end of tomorrow's session.  Global benchmark, Nov Brent crude shed $2.03  (4.7%) to $41.12 a barrel.  Recent reports that Libyan military commander Khalifa Haftar, who controls the eastern portion of the country, would lift an 8-month blockade on crude exports that has virtually shut down production contributed to the weaker tone.

Oil prices tumble on expectations for return of Libyan crude production, global stock-market selloff

While this was a dreary day for investors, bargain hunters returned in the last hour & trimmed losses.  The Dow had been down more than 800 at its lows.  In Sep the Dow is down 1200 & NAZ dropped 1000.  Tomorrow is a new day, let's hope there is more enthusiasm for buying stocks.

Dow Jones Industrials