Markets waffle after consumer confidence drops to a March 2020 low

Dow edged up 15 to another record, decliners over advancers about 5-4 & NAZ added 6.  The MLP index was off 2+ to the 178s & the REIT index went up 2+ to the 465s.  Junk bond funds did little & Treasuries were purchased heavily.  Oil dropped 1+ to the high 67s & gold jumped 28 to 1798 (more on both below).

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A key consumer sentiment reading saw a dramatic drop in early Aug as the delta variant of Covid-19 increased fears about the path of the economy, the University of Michigan said.  The consumer sentiment index tumbled to 70.2 in its preliminary Aug reading, down more than 13% from Jul's result of 81.2 & below the Apr 2020 mark of 71.8 that was lowest of the pandemic era.  It was the lowest reading for the measure since 2011. The forecast expected a reading of 81.3 for Aug.  And a sudden drop of that magnitude is extremely rare for the index.  “Over the past half century, the Sentiment Index has only recorded larger losses in six other surveys, all connected to sudden negative changes in the economy,” Richard Curtin, chief economist for the University of Michigan's Surveys of Consumers, said.  2 of those larger month-over-month movers were Apr 2020 amid the pandemic & Oct 2008, during the financial crisis.  The dramatic decline comes as the delta variant of Covid-19 has spread rapidly across the US, leading some states & cities to reinstate mask mandates & other health restrictions.  Hospitals in many states in the southern part of the country are reporting a shortage of beds to handle patients.  Health concerns could be causing a short-term decline in consumer confidence that could reverse if the situation stabilizes, Curtin added.  “Consumers have correctly reasoned that the economy’s performance will be diminished over the next several months, but the extraordinary surge in negative economic assessments also reflects an emotional response, mainly from dashed hopes that the pandemic would soon end,” Curtin said. “In the months ahead, it is likely that consumers will again voice more reasonable expectations, and with control of the Delta variant, shift toward outright optimism.”  To be sure, the consumer sentiment index is just one preliminary data point.  Other recent economic data points, including weekly jobless claims, have pointed toward a continued economic recovery.

Consumer sentiment measure falls to pandemic-era low, sees one of largest drops on record

Dr Scott Gottlieb said he expects the coronavirus to become an endemic virus in the US & other Western countries after the recent surge in delta variant infections calms down.  “We’re transitioning from this being a pandemic to being more of an endemic virus, at least here in the United States and probably other Western markets,” Gottlieb added.  An endemic virus is one that remains in the American population at a relatively low frequency, like the seasonal flu, for example.  Gottlieb — commissioner of the Food & Drug Administration from 2017-2019 has previously said “true herd immunity” for Covid may actually be impossible with new infections occurring in the years ahead.  “It’s not a binary point in time, but I think after we get through this delta wave, this is going to become more of an endemic illness where you just see sort of a persistent infection through the winter ... but not at the levels that we’re experiencing certainly right now, and it’s not necessarily dependent upon the booster shots,” he continued.  He expects the spread of the highly transmissible delta variant to remain noteworthy in the weeks ahead.  “You’re going to see the delta wave course through probably between late September through October,” Gottlieb said.  “Hopefully we’ll be on the other side of it or coming on the other side of it sometime in November, and we won’t see a big surge of infection after this on the other side of this delta wave.”  The tri-state region of New York, New Jersey & Connecticut will begin to see an uptick in delta cases as rates slow down in the South.

Dr. Scott Gottlieb expects Covid to be an ‘endemic’ virus in U.S. after delta surge

A key Centers for Disease Control & Prevention (CDC) panel unanimously voted to recommend booster shots of Pfizer's (PFE) or Moderna's (MRNA) Covid-19 vaccines to immunocompromised Americans, clearing a major hurdle enabling vulnerable patients to get a 3rd dose.  The decision by the Advisory Committee on Immunization Practices follows the Food & Drug Administration's (FDA) approval yesterday of the booster shots for immunocompromised patients.  The CDC, which has the final say, is expected to adopt the panel's recommendation later today.  With both OK's, booster doses could start being administered immediately.  “Over the past almost year and a half I have taken care of many patients with life threatening disease, and including deadly disease, and even after a vaccination” who are immunocompromised, Dr Camille Nelson Kotton, a transplant & infectious disease specialist at Massachusetts General Hospital, told the panel in strongly supporting boosters for patients with weak immune systems.  “They’re just suffering from a lack of good vaccine protection, we know that vaccine efficacy is diminished in this population.”  The FDA approved 3rd doses of PFE & MRNA vaccines for “solid organ transplant recipients or those who are diagnosed with conditions that are considered to have an equivalent level of immunocompromise.”  The agencies didn’t clear boosters for other fully vaccinated individuals or for recipients of Johnson & Johnson’s (JNJ), a Dow stock & Dividend ARistocrat, vaccine manufactured under its Janssen vaccine division.  “Currently there are not data to support the use of an additional mRNA COVID-19 vaccine dose after a primary Janssen Covid-19 vaccine in immunocompromised people.  FDA & CDC are actively working to provide guidance on this issue,” the CDC's Dr Neela Goswami wrote.  The CDC recommended a 3rd dose for vulnerable Americans 28 days or more after completing the initial 2 rounds of shots.  Booster doses are also recommended for cancer patients & HIV patients after data showed that immune responses after the initial 2 doses in those patients did not provide adequate protection against Covid-19 & its variants.

CDC panel recommends booster doses of Covid vaccine for vulnerable Americans

Gold futures traded higher, with a decline in a US consumer sentiment index contributing to the metal's rise, prompting prices to finish higher for the week.  Data showed that the University of Michigan consumer sentiment index fell to 70.2 in Aug, the lowest level since the height of the pandemic in Apr 2020, from 81.2 in Jul.  Following the data, the ICE U.S. Dollar Index moved down by 0.6% & US Treasury yields slipped, with 10-year Treasury yields at 1.314% versus 1.366% yesterday.  The moves helped to support haven demand for gold.  Dec gold rose $26 (1.5%) at $1778 an ounce, following a 0.1% decline yesterday.  For the week, the metal saw a rise of nearly 0.9%, based on the most-active contract.  Gold has been whipsawed in recent weeks by uncertainty about the strength of the global economic rebound amid the spread of the delta variant of COVID-19 & talk of the Federal Reserve tapering its pandemic-era monetary accommodations later this year or early next year.  The precious metal trade also has come against the backdrop of equity buying that has taken the Dow to a series of record-high closes, undermining demand for safe-haven gold.

Gold prices rise to finish higher for the week after fall in consumer sentiment reading

Oil futures declined, but the US benchmark maintained a small weekly gain, as investors worried about the spread of the delta variant of the coronavirus that causes COVID-19 & its effect on crude demand.  West Texas Intermediate crude for Sep fell 65¢ (0.9%) to settle at $68.44 a barrel, leaving it with a weekly gain of 0.2%.  October Brent crude the global benchmark, lost 72¢ (1%) to settle at $70.59 a barrel.  Crude lost ground yesterday after the Intl Energy Agency, in its monthly report, lowered its forecast for 2021 oil-demand growth, while increasing its 2022 outlook.  OPEC left its demand outlook unchanged in its monthly report while raising its non-OPEC supply forecast.  Baker Hughes said the number of active domestic oil rigs was up by 10 at 397 this week, marking the largest weekly rise since the 13-rig increase reported on April 1.  On Wed, the White House said it would press OPEC+ to raise output to ensure stable energy supplies.  Traders eyed the path of a tropical depression in the Atlantic, named Fred, which was expected to move near the west coast of the Florida peninsula Sat night & Sun.

Oil declines, but U.S. prices notch a weekly gain as traders weigh spread of delta variant

The Dow was up 300 this week.  Not bad all considered.  However Mon will start with the very gloomy consumer confidence report.  There continue to be dark clouds for investors to understand while gold & Treasuries are in demand again..

Dow Jones Industrials