Markets decline to wrap up a cheerless October

Dow was off 155 (losses pare with buying into the close), decliners over advancers 2-1 & NAZ led the decline with a fall of 274.  The MLP index was off 1+ to 111 & the REIT index pulled back 4+ to the 332s.  Junk bond funds continued lower & Treasuries were sold.  Oil closed below 36 & gold rebounded 11 to 1979 (more on both below).

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Top policymakers in Washington sent mixed signals today about how quickly Congress could pass new coronavirus stimulus after the election.  Progress toward a relief deal ground to a halt in recent weeks as Reps & Dems differed over how much money they need to inject into efforts to slow record new infections in the US & boost a sluggish economy.  Despite the impasse, negotiators have acknowledged they will need to send aid in some form eventually.  Senate Majority Leader Mitch McConnell & House Speaker Nancy Pelosi, who have not agreed on much related to the virus response in recent months, differed again today when asked about when stimulus could pass.  The Rep said that he expects to handle relief “right at the beginning of the year,” with legislation “targeted particularly at small businesses that are struggling & hospitals that are now dealing with a 2nd wave of the coronavirus.”  Pelosi said she expects Congress “certainly will have something [done] at the start of the new presidency.”  But she said that “we don’t want to have to wait that long, because people have needs.”  The winner of the presidential election will get inaugurated on Jan 20 & the speaker said she believes Joe Biden will take the oath of office that day.  At the same time, Pres Trump pushed for even more rapid passage of stimulus than the top Senate Rep & Dem did.  Speaking to reporters today, he said “we will have a tremendous stimulus package immediately after the election.”  The mixed messages follow a day of tense correspondence between Pelosi & the Trump administration as the sides struggle to break a monthslong impasse over stimulus.  How they could craft a bipartisan deal capable of passing the Rep-held Senate & Dem-controlled House remains unclear.

McConnell foresees coronavirus stimulus in 2021, while Pelosi and Trump push for a deal sooner

The US reported a record 88K new coronavirus cases yesterday as the pandemic seeps into every area of the country & scientists warn of exponential growth ahead of the holidays.  “We’re starting to find ourselves on a steep slope of the epidemic curve, so I think you’re going to see cases accelerate,” Dr Scott Gottlieb, the former head of the Food & Drug Administration, said.  The positivity rate, or the percentage of total tests that are positive, is greater than 10% in roughly 15 states, a sign that “there’s more infection out there that we’re not turning over,” he added.  Gottlieb predicted that the US could hit 100K new cases by tomorrow.  The US is continuing its upward climb on what's now the pandemic's 3rd peak, with cases growing by 5% or more in 45 states as of yesterday, according to data compiled by Johns Hopkins University.  Over the last week, the US reported an average of 76K new cases every day, the highest 7-day average recorded yet & up more than 25% compared with a week ago.  The surge in the US follows a wave of new Covid-19 cases in countries across Europe that have prompted new, stringent lockdown measures on their businesses.  Germany Wed announced a “light lockdown,” with bars, restaurants, gyms, cinemas & theaters to close.  France said it would adopt a 2nd nationwide lockdown beginning today, ordering people to only leave their home for essential purposes.  Covid-19 hospitalizations are also on the rise — a sign that the pandemic has taken a turn for the worse in some parts of the country, particularly in the Midwest.  As of yesterday, 17 states reached record-high hospitalizations based on a 7-day average, including Iowa, Indiana, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota & Wisconsin, according to Covid Tracking Project.

U.S. reports record new Covid cases as experts warn of ‘exponential growth’

Starbucks (SBUX)  reported that sales in the US & China are recovering from the coronavirus pandemic  more quickly than expected, helping global same-store sales shrink just 9%.  The coffee chain's sales have been boosted by customers spending more on their Pumpkin Cream Cold Brew & Frappuccinos, although foot traffic remains down.  The company's outlook for fiscal 2021 is projecting a faster rebound than expected by analysts.  Last qtr, EPS was 33¢, down from 67¢ a year earlier.  Excluding items, the coffee chain earned 51¢, beating the 31¢ expected.  Net sales dropped 8% to $6.2B, topping expectations of $6.06B.  The company estimates that it lost $1.2B in sales because of the coronavirus pandemic.  Global same-store sales fell 9%.  While the number of transactions has fallen, customers are spending more on their coffee orders.  Execs said that customers are buying more cold beverages & plant-based options, both of which tend to be higher priced, & more upsizing, because customers are choosing to treat themselves.  In the US, same-store sales fell 9%.  Active membership in SBUX' US loyalty program rose 10% to 19.3M & drove 47% of transactions.  Demand improved throughout the qtr.  In Sep, US same-store sales fell just 4%, bolstered by the return of Pumpkin Spice Lattes.  SBUX expects EPS of $2.70-2.90, after adjustments, on revenue of $28-29B in fiscal 2021.  Global same-store sales are expected to grow 18-23% for the year, with US same-store sales forecast to increase 17% to 22% . The forecast assumes that US dining rooms will be fully reopened by the end of the fiscal Q2, when same-store sales are also expected to rebound.  China's same-store sales growth is expected to reach 27-32%.. For fiscal Q1, the company projects adjusted EPS of 50-55¢.  The company raised its div to 45¢. The stock fell 1.34.
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Starbucks sales fall less than expected as U.S. and China markets rebound

Gold ended higher to recoup some of the recent losses that pulled prices to their lowest level in weeks, but the yellow metal posted a 3rd-weekly loss after failing to find haven-related support despite a stock-market selloff.  Gold for Dec delivery climbed $11 (0.6%) to settle at $1879 an ounce after settling yesterday at $1868, the lowest most-active contract finish since Sep 25.  Gold futures, based on the most-active contract, ended 1.3% lower for the week, which marked their 3rd-straight weekly decline.  Prices also lost 0.8% for the month.  Gold has failed to find support despite a rise in COVID-19 cases that has seen European countries impose new restrictions on activity & raised worries about the strength of the US & global economic recovery.

Gold ends higher, but posts a third-weekly decline

China will promote “technological self-reliance” under the ruling Communist Party's latest 5-year plan but will open further to trade, officials said.  The comments reflect growing official urgency about nurturing Chinese producers of processor chips & other technology at a time when a tariff war with tmhe US & US export curbs have reduced access to components needed by China's fledgling tech industries.  “We will take scientific and technological self-reliance as a strategic support for national development,” Han Wenxiu, an adviser to Pres Xi Jinping, said.  The ruling party leadership said that its Five-Year Plan will speed up China's development as a “technology power."  It gave no details of which industries might be targeted or what support they might receive.  The full plan is due to be released in Mar, followed by legal changes & plans for individual industries after that.  Previous Chinese plans that called for creating competitors in electric cars, telecoms, solar power & other industries triggered complaints Beijing might support them with improper market barriers or subsidies.  Han and other officials appeared to be trying to head off complaints.  They promised Beijing will press ahead with market-oriented reforms including more opening to trade.  “No matter how the international situation changes, we will never waver in our basic national policy of opening up,” Han said.  “China will provide countries around the world with larger markets and more opportunities.”

Chinese promise market opening amid technology push

A measure of consumer confidence rose in late Oct to a new pandemic high, largely reflecting growing optimism among Dems that Joe Biden will win the presidential election.  The final reading of consumer sentiment index edged up to 81.8 in Oct from an initial 81.2, the Univ of Mich said.  The increase occurred despite a surge in coronavirus cases toward the end of the month, as Americans turned their attention to the presidential election.  Rising optimism was mostly felt by Dems.  53% of the people surveyed thought Biden would defeat Trump while 42% expected the pres to win reelection.  Optimism among Dems about their own finances also rose sharply, & for the first time in near 4 years, it nearly matched the expectations of Reps.  In 2016, it should be pointed out, 2/3 of survey respondents in the final sentiment poll before the election expected Hillary Clinton to defeat Trump, who scored a surprise upset.  An index that measures current conditions, meanwhile, rose to 85.9 from 84.9 earlier in the month, though it was still below Sep's level.  The rise in coronavirus cases & slower pace of hiring put Americans more on edge.  Consumers still think the situation will improve by early next year, particularly Dems.  An index that measures expectations for the next 6 months rose to 79.2 in late Oct from 78.5 earlier in the month & 75.6 in Sep.

Consumer sentiment rises in late October as Democrats anticipate Biden victory

Oil futures declined, building on their loss for the month, with US prices down roughly 11% from the end of Sep.  Dec West Texas Intermediate crude fell 38¢ (1.1%) to settle at $35.79 a barrel, the lowest front-month contract finish since Jun 1,

Oil futures finish lower for the session, with U.S. prices down roughly 11% for the month

Oct was a dreary month for investors, shown below.  Besides uncertainty about the outcome of the presidential election, concerns about the virus fighting back & its influence on delaying opening up economies in various states worry investors.  The Dow dropped almost 1000 in Oct, much of that coming in the 2nd ½ of the month.  For what it's worth, there was buying into the close which limted the loss for stosks today.

Dow Jones Industrials

Markets decline on unease over Coronavirus impact

Dow dropped 423, decliners over advancers 3-1 & NAZ sank 312.  The MLP index fell 2+ to the 109s & the REIT index lost 5+ to the 332s,  Junk bond funds drifted lower & Treasuries were sold.  Oil fell to the 35s & gold rebounded 13 to 1881. 

AMJ (Alerian MLP Index tracking fund)

CL=F Crude Oil 35.51    -0.66 -1.8%

GC=F Gold    1,881.60 +13.60 +0.7%

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Exon Mobil (XOM), a Dow stock & Dividend Aristocrat, reported its 3rd straight qtr of losses as depressed oil demand sparked by the coronavirus pandemic weighed on its operations.  During Q3, the company lost $680M, although XOM said results improved on a qtr-over-qtr basis thanks to “early stages of demand recovery.”  On an adjusted basis, EPS was a lost 18¢ per share while generating $46.2B in revenue.  The forecast called for a 25¢ loss per share & $46B in revenue.  A year ealier, the company had EPS of 75¢ on $65B in revenue.  During Q2 of 2020, XOM lost 70¢ per share on an adjusted basis, while revenue came in at $32.6B.  “We remain confident in our long-term strategy and the fundamentals of our business, and are taking the necessary actions to preserve value while protecting the balance sheet and dividend,” CEO Darren Woods said.  “We are on pace to achieve our 2020 cost-reduction targets and are progressing additional savings next year as we manage through this unprecedented down cycle.”  The company previously announced a reduction in its capital spending program — from $33B to $23B — & said it's ahead of schedule due to increased efficiencies & a slower project pace, among other things.  The company is targeting to spend $16-19B in its 2021 capital program.  XOM intends to reduce its US staff by 1900 employees, with global workforce reductions potentially rising to as much as 15%.  XOM has a global workforce of 88K, including 13K contractors.  XOM has repeatedly said its div remains a priority & Wed the company maintained its Q4 div at 87¢ per share.  But it was the first time since 1982 that the company didn't raise its payout.& XOM has repeatedly said its div remains a priority.  Wed the company maintained its Q4 div at 87¢.  But it was the first time since 1982 that the company didn’t raise its payout.  The stock was off 69¢.
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Exxon reports third straight quarter of losses with revenue down nearly 30%

Chevron (CVX), a Dow stock & Dividend Aristocrat, reported its 2nd straight qtr of losses after revenue during Q3 fell 32% year over year, hammered by Covid-19.  Amid declining oil prices CVX said it implemented aggressive cost-cutting measures.  The oil giant lost $207M.  On an adjusted basis, EPS was 11¢, far better than the 27¢ per share loss expected.  Revenue came in at $24.5B, which missed the estimate of $25.8B.  During Q2, the oil giant lost $1.59 per share on an adjusted basis, while revenue came in at $13.5B.  In Q3 a year earlier, the company had EPS on $36.1B in revenue.  “Third quarter results were down from a year ago, primarily due to lower commodity prices and margins resulting from the impact of COVID-19,” CEO Michael Wirth said.  “The world’s economy continues to operate below pre-pandemic levels, impacting demand for our products which are closely linked to economic activity.”  As energy companies struggle amid depressed oil prices, CVX said its capital spending declined 48% & its operating expenses were down 12%.  “We remain focused on what we can control — safe operations, capital discipline and cost management,” Wirth added.  On Wed the company declared a quarterly div of $1.29. The stock added 72¢:
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Chevron revenue plummets more than 30% as Covid slams demand

The Federal Reserve has lowered the barriers on its lending program for smaller businesses as part of an effort to broaden the appeal of the sparsely used facility.  In another pair of tweaks to its Main Street Lending Program (MSLP), the Fed said it is reducing the minimum loan size to $100K from $250K & will ease restrictions on debt for companies already participating in the Paycheck Protection Program.(PPP).  Aimed at helping small- & medium-sized firms get thru the Covid-19 pandemic, the program thus far has issued nearly 400 loans for a total of $3.7B.  The total capacity of the MSLP is $600B, thanks to $75B in collateral from the Treasury Dept that can be leveraged up.  The Fed said the changes are “two important ways to better target support to smaller businesses that employ millions of workers and are facing continued revenue shortfalls due to the pandemic.”  Both borrowers & lenders have complained, however, that some of the conditions of the loans are too stringent & the fees are more onerous than they’re willing to pay.  Where the PPP loans are forgivable under many circumstances, the Main Street loans are not, further dampening their appeal.  The other change apart from the minimum loan requirement exempts up to $2M in PPP loans when computing applicants' debt loads.  The Fed also said it is adjusting fees “to encourage the provision of these smaller loans.”  The move comes amid heightened concerns about an economic slowdown heading into the winter, triggered both by a rise in coronavirus cases & a continuing stalemate in DC over further fiscal relief.  Fed officials repeatedly have called for more stimulus from Congress, but the White House & congressional Dems have been unable to reconcile their competing proposals.

Fed lowers minimum loan level for small business lending program

Another dreary day for the stock market as the fight with Covid is getting most of the attention by traders.  The Dow is down 2100 this week (see below) & gold is attracting interest.

Dow Jones Industrials

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Markets climb higher on GDP and jobless claims data

Dow shot up 139, advancers over decliners better than 2-1 & NAZ soared 180.  The MLP index was fractionally higher to the 112s & the REIT index rose 5 to the 338s.  Junk bond funds crawled higher & Treasuries were sold while stocks rallied.  Oil was off 1+ to the 36s & gold dropped 9 to 1869 (more on both below).

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Moderna (MRNA) received $1.1B in customer deposits for it COVID-19 vaccine, expected to be available next year, as demand surges for a safeguard against the deadly airborne disease that would enable nations around the world to resume more normal lifestyles.  The biotechnology company said its vaccine, developed with the use of messenger RNA science & dubbed mRNA-1273, is now in Phase 3 trials with 30K participants in partnership with the National Institutes of Health & the Biomedical Advanced Research & Development Authority.  Advances with the product, expected to be available next spring, come as the death toll from COVID-19 tops 227K in the US, higher.  The pandemic has become a pivotal issue in the presidential campaign, with Joe Biden berating Pres Trump's handling of it even as Trump maintains the nation is "turning the corner" & that a once-vibrant economy damaged by the virus & related lockdowns is bouncing back.  About 37% of the participants in MRNA's Phase 3 trials are from minority groups, & 42% are considered high-risk.  A Phase 1 analysis of the product showed it was "generally well-tolerated across all age groups" & "induced rapid and strong immune responses" against the novel coronavirus," the company said.  "We are actively preparing for the launch of mRNA-1273 and we have signed a number of supply agreements with governments around the world," CEO Stéphane Bancel added.   "Moderna is committed to the highest data quality standards and rigorous scientific research as we continue to work with regulators to advance mRNA-1273."  Bancel concluded that, if the COVID-19 vaccine is launched, "2021 could be the most important inflection year in the company's history."  "We will have the resources to scale Moderna to maximize the impact we can have on patients in the next 10 years through numerous new medicines," he noted.  In Aug, MRNA announced a supply agreement with the US gov for an initial 100M doses of mRNA-1273.  In Sep, Canada exercised an increased option for 20M doses of mRNA-1273, & MRNAa announced the start of a rolling submission to Health Canada for mRNA-1273.  The stock shot up 5.54 (8%).
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Moderna rakes in $1.1B on coronavirus vaccine orders

Gold futures ended lower for 2nd session, pressured by the $ adding to its gains for the week while data revealed that the US economy expanded at a record pace in Q3.  The World Gold Council, meanwhile, reported a decline in total demand for gold in Q3 to the lowest quarterly total in 11 years.  Dec gold fell $11 (0.6%) to settle at $1868 an ounce, following a 1.7% plunge for the commodity yesterday.  Prices marked another finish at the lowest since Sep 25.  Overall global demand for gold dropped in Q3 from a year earlier, but investment demand soared, according to data from the World Gold Council.  Total gold demand fell by 19% in Q3 year on year to 892 metric tons, the lowest quarterly total since 2009.  Global gold investment for the qtr, which includes coins & bars & inflows into gold-backed exchange-traded funds, totaled 494 metric tons, up 21% from a year ago, the World Gold Council said.  Gold prices also extended their declines after a report showed that US GDP expanded at a record 33.1% annual pace in Q3.  The forecast called for a 33% spurt in annualized growth.  Weekly jobless claims revealed a fall of 40K to 751K, marking the 4th decline in the past 5 months.

Gold settles lower as U.S. GDP expands at a record pace and investors favor the dollar

ExxonMobil (XOM), a Dow stock & Dividend Aristocrat, said that it intends to reduce its US staff by1900 employees as the energy giant continues to see its operations pressured by the coronavirus pandemic . The layoffs will occur thru a mix of voluntary & involuntary programs.  The reduction is part of ongoing reorganization efforts aimed at improving efficiency & reducing costs.  “These actions will improve the company’s long-term cost competitiveness and ensure the company manages through the current unprecedented market conditions,” the company said.  “The impact of COVID-19 on the demand for ExxonMobil’s products has increased the urgency of the ongoing efficiency work.”  Earlier in Oct XOM said it was cutting its European operations by 1600 positions thru the end of 2021.  The stock rose 1.40 (4%).
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Exxon announces additional job cuts amid ongoing Covid-19 hit to oil demand

Oil futures extended their losses for the week, heading for their lowest settlement in roughly 5 months, as rising COVID-19 cases sparked tighter restrictions on activity in Europe ^ underlined worries about the outlook for the US & global economic recovery.  West Texas Intermediate crude for Dec fell $1.25 (3.3%) to $36.14 a barrel.  A settlement around this level would be the lowest for a front-month contract since early Jun.  Dec Brent, the global benchmark, was off $1.31 (3.4%) at $37.81 a barrel, with prices for the front-month contract poised to finish at their lowest since late May.  Oil fell sharply as France & Germany imposed tighter restrictions in response to the rising number of COVID-19 cases.  The US. reported 79K new cases yesterday, the 2nd day in a row that the figure topped 70K, as several states reported a jump in infections.  Oil traders looked past the production disruptions caused by Hurricane Zeta, which made landfall in Louisiana yesterday as a Category 2 storm.  The Bureau of Safety & Environmental Enforcement estimated that 2/3 of oil production in the Gulf of Mexico had been shut-in by the storm, along with around 44.5% of natural gas production.

Oil prices post lowest finish in about 5 months as rising coronavirus cases underline demand fears

Investors bought stocks on the encouraging news from the GDP report & weekly jobless claims.  However selling in the closing minutes of trading pared the Dow's advance by 150.  More earnings are coming tomorrow which could excite traders.

Dow Jones Industrials