Thursday, October 22, 2020

Markets pull back as stimulus deal remains elusive

Dow fell 22,  advancers over decliners 3-2 & NAZ was off 35.  The MLP index gained 2 to the 118s & the REIT index was fractionally higher to the 351s.  Junk bond funds slid lower & Treasury prices drifted.  Oil  rose above 40 again & gold sank 28 to 1901.

AMJ (Alerian MLP Index tracking fund)

stock chart

CL=FCrude Oil40.60
  +0.57 +1.4%


















GC=F Gold  1,905.00
 -24.50  -1.3%






















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The number of Americans applying for state unemployment benefits unexpectedly dropped last week, falling below 800K for the first time since the coronavirus pandemic shut down the nation's economy in mid-Mar.  The latest jobless claims figures from the Labor Dept, covering last week, show that 787K workers sought aid last week, still about 4-times the pre-crisis level.  Close to 65M Americans  roughly 40% of the labor force  have sought jobless aid since the coronavirus lockdowns began in mid-Mar.  Jobless claims have not been this low since mid Mar when 282K Americans filed for aid, shortly before the virus-induced crisis triggered a flood of layoffs.  The forecast called for 860K new claims.  The number of people who are continuing to receive unemployment benefits fell to 8.37M, a decline of about 1M from the previous week. The decline suggests that employers are calling their workers back.  Still, some of the declines in continuing claims may represent workers who have used up the maximum number of payments available thru state unemployment programs (typically about 6 months) & are now receiving benefits through a separate federal program that extends the aid by 13 weeks.  Congress created the extra federal benefits earlier this year with the passage of the CARES Act.

Jobless claims lower than expected, but remain historically high

White House officials & Dem leaders suggested this week that Congress may not pass a relief deal until after the election.  House Speaker Nancy Pelosi & Treasury Secretary Steve Mnuchin have continued to narrow their differences on a $2T aid package during multiple discussions this week, a Pelosi spokesperson tweeted.  But even if they strike a deal before Nov 3, the legislation faces little chance of passing amid an increasingly tight timeline & mounting opposition from Senate Reps.  Pelosi said: "We could do it in the House. You hear what the leader in the Senate is saying, but that's really up to the president. We're negotiating with him. We've made progress, and I have to say we've made progress in this regard."  Larry Kudlow, top economic adviser to Pres Trump, echoed that sentiment last week, warning that it would be "almost impossible" to executive a relief package before the election, even if Congress overcame a monthslong impasse & reached an agreement on more aid.  "Maybe some of it could be executed," he said.  "But you certainly couldn't get a grand, large deal."  Kudlow said Wed that a relief package during the lame-duck session, after the election but before the next administration starts, "could be a possibility."  Still, White House chief of staff Mark Meadows acknowledged the difficulty of passing legislation after Nov 3, particularly with the White House & Senate both up for grabs this year.  “I don’t think our chances get better after election," Meadows said.  "I think the next 24 to 48 hours will tell us a whole lot.”

Coronavirus stimulus may not pass until after election: White House, Dem leaders

Sales of existing homes rose a higher-than-expected 9.4% in Sep to a seasonally adjusted annualized rate of 6.54M units, according to the National Association of Realtors.  Sales were up 20.9% annually.  Sales could be more robust if there were more homes available.  The inventory of homes for sale fell 19.2% annually to just 1.47M homes for sale at the end of Sep.  At the current sales pace that represents a 2.7-month supply, the lowest since the Realtors began tracking this metric in 1982.  Tight supply continues to push prices higher.  The median price of an existing home sold in Sep was $312K, a 14.8% gain compared with Sep 2019.  That is a new high for this series, dating back to 1968.  It is also an all-time high when adjusted for inflation.  “Americans are splurging on spending for housing,” said Lawrence Yun, chief economist at the NAR, noting that they are also spending more on home improvements at retailers like Home Depot (HD), a Dow stock, & Lowe’s (LOW).  “Home prices are simply rising too fast.”  Yun said this could limit the opportunities for first-time buyers in the future.  The first-time buyer share of the market fell to 31% in Sep from 33% in Aug.  Supply is weakest at the low end of the market & that is where prices are rising fastest.  The median is also being skewed higher because sales are stronger on the higher end of the market, where supply is less lean.  Prices are also driven by low mortgage rates, which give buyers more purchasing power.  Mortgage rates set record lows in Sep but had popped slightly higher in Aug, when a lot of these contracts were signed.  Rates are still, however, historically low & have been for most of the year.  Rates were about a full percentage point higher last year.  Interestingly, vacation & resort home sales were up 34% annually, as more people move wherever they want in the work- & school-from-home culture of the coronavirus pandemic

September existing home sales jump 9.5%, but ’prices are rising too fast

The fate of the stimulus deal is still unknown although it's difficult to imagine anything can be signed off before the election.  The jobless claims number shows improvement even though claims are still running at a very high level.

Dow Jones Industrials







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