Markets sink in a choppy day of trading

Dow dropped 620 (but off session lows), decliners over advancers 3-1 & NAZ tumbled 266.  The MLP index fell 2+ to the 145s & the REIT index lost 3+ to the 372s.  Junk bond funds drifted lower & Treasuries continued weak.  Oil was flattish in the 52s & gold rebounded 12 to 1850 (more on both below).

AMJ (Alerian MLP Index tracking fund)

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A construction slowdown during the coronavirus pandemic is hurting demand for Caterpillar's (CAT), a Dow stock, heavy machinery, but the manufacturer said dealers & customers expect a turnaround this year.  The company said that revenue fell 15% in Q4 due to lower volumes & less demand from customers & dealers.  Revenue declined in each of it's main businesses: construction, mining, energy & transportation.  CFO Andrew Bonfield said that while a rebound in home construction was boosting purchases for some machinery, spending cuts by local & state govs were weighing on road construction.  "People in an uncertain time are just not necessarily sanctioning new projects," he added.  CAT sees signs of a turnaround.  Its order backlog increased in Q4 compared with the previous 3 months & a year earlier as dealers ordered new machines ahead of the traditionally busy spring season.  For the current Q1, CAT expects stronger sales of construction equipment in particular.  "Customers are starting to feel a bit more confident," Bonfield said.  Lower demand for machinery in Q4 is a contrast to consumer-focused manufacturers, who have struggled to keep up with large orders from customers at home buying new boats and kitchen appliances.  The oil-&-gas industry remained a particularly weak market.  Lower energy prices have led to fewer developments of oil & gas projects.  In all, revenue in the qtr fell 15% to $11.3B from the qtr a year before & profit declined 29% to $780M.  The stock was off 1.62.
If you would like to learn more about CAT, click on this link:
club.ino.com/trend/analysis/stock/CAT?a_aid=CD3289&a_bid=6ae5b6f7 

Caterpillar flags signs of recovery amid slack demand

Eli Lilly (LLY) beat estimates for Q4 profit on, boosted by strong demand for its diabetes & cancer drugs & a partial lift from sales of its Covid-19 antibody treatment.  The company recorded $871M in quarterly sales of the Covid-19 therapy, bamlanivimab, benefiting from the US gov's move to stock up on the drug for emergency use.  The Covid-19 therapy belongs to a class of drugs known as monoclonal antibodies & has been authorized for use in the US in patients who are at risk of serious illness from the infection.  Sales of key drugs in the qtr beat expectations as high demand helped offset pricing pressures from rebates or after-market discounts to health insurers & pharmacy benefits managers.  Sales of cancer treatment Alimta also grew 23% to $653M, trouncing estimates of $560M.  The company lowered its 2021 EPS forecast to $7.10-$7.75 per share from its prior forecast of $7.25-$7.90, citing higher investments.  It, however, kept its sales & adjusted profit forecasts unchanged.  EPS rose to $2.32 from $1.64 a year earlier.  Excluding items, EPS was $2.75, beating estimates of $2.35.  Overall sales rose 21.7% to $7.44B.  The stock declined 2.01.
If you would like to learn more about LLY, click on this link:
club.ino.com/trend/analysis/stock/LLY?a_aid=CD3289&a_bid=6ae5b6f7 

Eli Lilly profit beats estimates on demand for its cancer and diabetes drugs

Gold futures settled higher, scoring their first gain in 7 sessions but returned a loss for the month, even though investors focused on worries about rising speculation in the stock market & the efficacy of COVID vaccines.  Investors harbored concerns about a bubble in the stock market.  Against high volatility in stocks, gold prices have been elevated, popping above its 50-day moving average at $1858 an ounce.  Apr gold rose $9 (0.5%) to settle at $1850 after it settled 0.4% lower yesterday, marking gold's 6th straight day of declines, the longest skid for prices since the 7-session loss ended Mar 5, 2019.  Based on the most-active contract settlements, prices lost 0.5% for the week & fell 2.4% from the Dec 31 finish for the Feb gold contract.  Market participants are growing increasingly concerned that an army of individual investors gathering on chat forums like Reddit & battling professional short sellers, could create ripples throughout the financial system.  Meanwhile, concerns that the economic recovery may take longer than hoped, even with vaccines to fight the pandemic, have been disrupting the bullish trend for stocks & buoying precious metals.

Gold logs first gain in 7 sessions, but ends lower for the month

Oil futures finished sharply higher for the month, finding support as traders remained hopeful that efforts to rein in global supplies will offset pressure on demand from the continued spread of COVID-19 & slower-than-expected vaccine rollouts.  OPEC & their allies (OPEC+) agreed in Jan to keep most oil production curbs in place from Feb to the end of Mar.  Additionally, Saudi Arabia agreed to implement a unilateral production cut of 1M barrels a day starting in Feb.  West Texas Intermediate crude for Mar inched down 14¢ (0.3%) to settle at $52.20 a barrel.  Prices based on the front-month contract was off slightly for the week, but tallied a climb of 7.6% for month of Jan.  Mar Brent crude, which expired at the end of the day's session, rose 35¢ (0.6%) to end at $55.88 a barrel, logging a 0.9% weekly gain & a 7.9% increase for the month.  Apr Brent, the most active & now front-month contract, fell 6¢ to $55.04 a barrel.

Oil futures gain nearly 8% for the month

The stock market had another very choppy day due to hedge funds, short selling, individual investors, beaten up stocks rebounding from near death, etc.  The Dow began the day at even for Jan, but was in the red all day (& for the month).  At the low, it was down 750.  Buyers returned in the PM t to limit the loss.  Next week may be a tough one for stock starting with sluggish economic data reports coming in the week.

Dow Jones Industrials

Markets fall on unsatisfactory vaccine news and market trading frenzy

Dow sank 303, decliners over advancers 5-4 & NAZ sank 111.  The MLP index crawled up to the 148s & the REIT index added 1+ to the 377s.  Junk bond funds were mixed & Treasuries are being sold.  Oil rose in the 52s & gold jumped 19 to 1860 on unusual trading in the stock market.

AMJ (Alerian MLP index tracking fund)

CL=F Crude Oil 52.86   +0.52 +1.0%

GC=F Gold     1,864.20 +23.00 +1.3%

 

 

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Homebuyers signed fewer contracts to buy existing homes in Dec, as record high prices & record low supply stood in the way of strong demand.  The pending home sales index from the National Association of Realtors fell, 0.3% month-to-month, the 4th straight monthly decline.  This index is a predictor of future closed sales.  Pending sales were, however, 21.4% higher than Dec 2019 & this was the highest Dec reading on record.  “Pending home sales contracts have dipped during recent months, but I would attribute that to having too few homes for sale,” said Lawrence Yun, NAR's chief economist.  “There is a high demand for housing and a great number of would-be buyers, and therefore sales should rise with more new listings.”  At the end of Dec, inventory stood at just 1.07M homes for sale, down 23% year over year.  At the current sales place, that represents a 1.9-month supply, the lowest number of homes since the Realtors began tracking this metric in 1982.  Demand was uneven across the country, with the largest decline in sales seen in the Midwest.  Sales there fell 3.6% for the month, but were up 13.9% annually.  In the Northeast, pending sales rose 3.1% month to month & were 22.1% higher year over year.  In the South they increased 0.1% monthly & 26.6% annually.  In the West, sales were unchanged for the month & 18.9% higher compared with Dec 2019.  “This elevated demand without a significant boost in supply has caused home prices to increase and we can expect further upward pressure on prices for the foreseeable future,” Yun added.  The median price of a home sold in Dec (based on closed sales) was nearly 13% higher than Dec 2019 & the highest Dec price the Realtors have ever recorded.

December pending home sales drop as buyers face record high prices, low supply

Johnson & Johnson (JNJ), a Dow stock & Dividend Aristocrat, said its single-dose coronavirus vaccine was 66% effective overall in protecting against Covid-19.  The vaccine, however, appeared to be less potent against other variants.  The Food & Drug Administration has indicated it would authorize a vaccine that’s safe & at least 50% effective.  The flu vaccine, by comparison, generally reduces people's risk of getting influenza by 40-60% compared with people who aren't inoculated, according to the Centers for Disease Control & Prevention.  The level of protection varied by region, JNJ said, with the vaccine demonstrating 66% effectiveness overall, 72% in the US, 66% in Latin America & 57% in South Africa after 4 weeks.  JNJ said the vaccine was 85% effective in preventing severe disease 4 weeks after vaccination in all adults.  The vaccine offered complete protection against Covid-related hospitalizations 4 weeks after vaccination.  “We’re proud to have reached this critical milestone and our commitment to address this global health crisis continues with urgency for everyone, everywhere,” JNJ CEO Alex Gorsky said.  The stock dropped 5.74.
If you would like to learn more about JNJ, click on this link:
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J&J says its Covid vaccine is 66% effective, but the single shot may fall short against variants

The coronavirus vaccine developed by AstraZeneca (AZN) & the University of Oxford has been approved by Europe's drug regulator, the European Medicines Agency (EMA).  The EMA said it had assessed the safety & effectiveness of the Covid vaccine & recommended by consensus a formal conditional marketing authorization be granted by the European Commission, the EU's exec arm.  “With this third positive opinion, we have further expanded the arsenal of vaccines available to EU and EEA member states to combat the pandemic and protect their citizens,” Emer Cooke, exec director of EMA, said.  “As in previous cases, the CHMP has rigorously evaluated this vaccine, and the scientific basis of our work underpins our firm commitment to safeguard the health of EU citizens,” Cooke said, referring to the EMA's human medicines committee.  The vaccine is already in use in the UK, having been approved at the end of Dec, & now makes up the bulk of jabs being administered in the country.  The approval comes at a tricky time for the EU, with its vaccination program sluggish at best & looking very vulnerable to supply shortages.  The stock was off 56¢.
If you would like to learn more about AZN, click on this link:
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AstraZeneca-Oxford Covid vaccine approved for use by European regulator

These are trying times for investors with the goings on in the stock market.  GameStop & Reddit are providing plenty of excitement with little guys buying & hedge funds shorting.  While the trading is exciting, it's best for amateurs to watch wild price swings from the sidelines.  Hedge funds are run by pros & some are getting wiped out already.  So called smart investing doesn't mean much today.  Meanwhile the fight against the virus currently involves a lot of struggling.

Dow Jones Industrials

 

Markets advance after yesterday's selloff

Dow jumped 300 (but 300 below early highs)  advancers over decliners 5-2 & NAZ went up 66.  The MLP index added 2+ to the 147s & the REIT index rose 2+ to the 377s.  Junk bond funds inched higher & Treasuries remained weak with heavy selling.  Oil declined in the 52s & gold fell 3 to 1845 (more on both below).

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The House will forge ahead next week with the process that would allow Dems to pass a coronavirus relief bill without Rep support, Speaker Nancy Pelosi said.  She said her chamber will move to pass a budget resolution, the first step toward approving legislation thru reconciliation.  The process would enable Senate Dems to approve an aid measure without GOP votes.  Pelosi said the House plans to pass a resolution & send it across the Capitol, where the Senate will also have to pass a budget measure.  She expects that “by the end of the week we’ll be finished with the budget resolution.”  The speaker said she hopes Dems can still win GOP support for Pres Biden's $1.9T rescue package as the White House holds talks with bipartisan lawmakers.  But the House wants to prepare in case Dems fail to win over Reps skeptical of the price tag.  “We have to be ready,” she added.  Earlier today, Senate Majority Leader Schumer signaled the chamber would also move to pass a budget resolution soon.  He said the Senate “as early as next week will begin the process of considering a very strong Covid relief bill.”  Dems have pushed to inject more money into speeding up the Covid-19 vaccination effort & propping up households & businesses as a slowing but devastating virus surge batters the economy.  While the US gained back ground after a drubbing early last year, more than 18M people are still receiving unemployment benefits as public health restrictions stay in place.

Pelosi says House will take first step toward passing Covid relief next week, with or without GOP

Gold futures ended lower to notch a 6th straight decline — their longest streak of session losses since Mar 2019.  Prices had moved up in early dealings in the wake of some downbeat data on the US economy, then turned lower as Treasury yields climbed sharply.  Rising bond yields can dull the luster of gold, which offer no yield.  Meanwhile, data released today from the World Gold Council revealed that global gold demand fell last year to its lowest level since 2009.  Feb gold lost $7 (0.4%) to settle at $1837 an ounce.  The loss was gold's 6th straight day of declines, the longest skid for prices since the 7-session loss ended Mar 2019.  Apr gold, which is now the most-active futures contract, declined by $7 (0.4%) to settle at $1841 an ounce.  The Apr contract has been trading in a range of $1878-1821 for about 2 weeks.  Gold prices had moved up shortly after some downbeat US economic data early today.  A reading of those seeking initial jobless claims last week fell by 67K to a seasonally adjusted 847K, marking the lowest level in 3 weeks, but layoffs were still high early in 2021 as the economy wrestled with a winter surge in the coronavirus pandemic.  Separately, a report on US economic growth, or GDP, showed that the economy grew at a modest 4% annual pace in the final 3 months of 2020, suggesting that the road to recovery may be longer than more optimistic expectations.  The move for gold also come after the Fed held monetary policy steady, while noting that the sectors of the economy already damaged by the coronavirus pandemic are experiencing another round of pain.  The central bank's interest-rate committee also said the pace of the economic recovery & employment has “moderated” in recent months.

Gold prices end lower to mark longest skid in nearly 2 years

American Airllines (AAL) shares jumped by more than 30% despite posting a record annual net loss of $8.9B, a trading frenzy fueled by mentions in a Reddit chat room.  The carrier is the most-shorted US airline & the big move comes after explosive rallies in other heavily shorted stocks.  The rally cooled a few hours ago, with shares up 4%, after stock trading platform Robinhood said it was restricting trading in AAL to only those closing out of positions, adding the carrier to a list of other stocks in which it limited trading after their share prices shot up in recent days.  Airline analysts were quick to say the big move early today was not based on the state of AAL's business.  The airline &  its competitors are struggling to gain their footing in the coronavirus pandemic, with a recovery still elusive.  The percentage of short interest in AAL shares far outpaces that of its competitors.  Short interest in AAL was 25% of the company's float, compared with 14% of Spirit Airlines (SAVE) & about 5% of United Airlines (UAL).  The stock rose 1.54 (down 3+  mnnnn  nnnnnnnnnn from its early high).
If you would like to learn more about AAL, click on this link:
club.ino.com/trend/analysis/stock/AAL?a_aid=CD3289&a_bid=6ae5b6f7

American Airlines surges after better-than-expected earnings

Oil futures settled with a loss, as concerns over a slowdown in energy demand, due to the impact of the latest resurgence of coronavirus pandemic, undermined support provided yesterday from a bigger-than-expected drop in US crude supplies.  Slowing travel activity in China amid a resurgence in COVID-19 fed expectations for weaker demand from the world's biggest energy consumer.  Oil earlier found support in early trading, as prices attempted to extend gains from yesterday, when the Energy Information Administration reported a 10M-barrel decline in last week's US crude inventories.  West Texas Intermediate crude for Mar delivery fell by 51¢ (1%) to settle at $52.34 a barrel.  Mar Brent crude, which expires at the end of tomorrow's session, declined by 28¢ (0.5%) to $55.53 a barrel.  Apr Brent, the most active contract, shed 43¢ (0.8%) to $55.10 a barrel.  Chinese authorities have taken steps to dissuade travel around the Lunar New Year, with officials predicting Chinese will make 1.7B trips during the travel rush, down 40% from 2019.  Travel was curtailed in 2020 due to the coronavirus.

Oil ends lower as demand concerns undermine support from supply decline

Stocks went up in the first 2 hours of trading, then stayed about even until the last 2 hours when there was profit taking.  A lot is going on with speculators playing games shorting stocks.  That is always a dangerous game, especially today with all the attention it received.  When all is said & done, it's best to watch from the sidelines & let the big boys (whoever they are) make money or get beaten up.  Meanwhile economic data is so-so.  It has been fairly good, all considered.  But the virus keeps fighting back hard.  Even with some improvement recently, it's going to be around for months & will be a significant factor in limiting future economic growth.  But the bulls have faith & keep hanging in there, buying stocks.

Dow Jones Industrials