Mixed markets with tech stocks under pressure

Dow slid back 34 after being much higher all day, decliners over advancers 3-2 & NAZ fell 350.  The MLP index added 2 to the 184s & the REIT index gained 5+ to the 429s.  Junk bond funds continued higher & Treasuries were weak in PM trading.  Oil was little changed in the high 64s & gold added 5 to 1836 (more on both below).

AMJ (Alerian MLP Index tracking fund)

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The global tally of confirmed cases of the coronavirus-borne illness COVID-19 climbed above 158, as cases continue to surge in Southeast Asia, & especially India, & BioNTech (BNTX) said there’s no evidence the vaccine it developed with Pfizer (PFE) needs adapting to protect against variants.  India reported 360K new cases today, while more than 3700 people died.  India's case tally has now climbed above 22.6M & more than 246K fatalities, numbers that experts widely deem to be massively undercounted.  India's hospitals are struggling with a shortage of supplies, including testing, treatments & oxygen, & fears are growing for the northeastern state of Assam, where cases are spreading faster than anywhere else.  The Indian Medical Association has joined a chorus of voices calling on Prime Minister Narendra Modi to lock the whole country down, instead of relying on regional measures that have so far failed to contain the spread of 2 highly infectious variants, including the B.1.617 strain, a double-mutant variant that has 2 spike proteins instead of one.  The association said it was “astonished to see the extreme lethargy and inappropriate actions from the Ministry of Health in combating the agonizing crisis born out of the devastating second wave of the Covid-19 pandemic.”

India’s COVID crisis deepens, as BioNTech says there’s no evidence its vaccine needs adapting to cope with new variants

Gold prices climbed, headed for a 4th consecutive gain, supported by a fall in the $ to a roughly 2½-month low, as well as some weakness in the stock market.  Jun gold was up $6 to settle at $1837 an ounce, after the most-active contract logged a 3.6% weekly gain.  Prices extended a climb to the highest in 3 months  On Fri, gold booked the highest finish in almost 3 months after the Labor Dept reported that the economy gained 266K jobs in Apr, far fewer than even the most subdued forecast for the month, raising some questions about the strength & pace of the recovery from the COVID pandemic.

Gold extends climb to highest level since February as dollar sinks to 2 1/2-month low

Chancellor Angela Merkel's ruling conservative alliance has seen its popularity ratings hit an all-time low, deepening an apparent shift in voter trends in Germany.  Merkel's Christian Democratic Union & its affiliated Bavarian party saw their popularity fall to 23% in the latest voter poll.  The survey showed support for Merkel's CDU-CSU bloc had fallen yet again, from 24% the previous week to hit its lowest level in the history of the weekly poll.  The Green Party remained in the lead with 26% of the vote, albeit with its rating also down 1 percentage point from the week before.  In 3rd place, with 16%, was the Social Democratic Party, the current junior coalition partner with the CDU-CSU.  The center-left SPD yesterday that the Finance Minister Olaf Scholz will lead its election campaign.  So he will be facing the Greens' Annalena Baerbock & the center-right CDU-CSU’s candidate Armin Laschet in the race to replace Merkel in Sep's vote.  In a show of just how much voter trends are changing, the Green Party has gone from being a fringe movement to a contender to lead gov.  If current opinion polls are borne out in the election, the Greens will lead Germany's gov with a likely a coalition partner or 2.  The departure of Merkel after 4 terms in office is heralding a shift in German politics.  But the coronavirus crisis also might have shaped a fall from grace for the CDU-CSU bloc over its handling of the pandemic — a challenge for any gov.

Merkel’s bloc hits historic low in polls just as Covid rules start to loosen

Oil futures ended a few pennies higher, after a ransomware attack forced the shutdown of pipelines supplying around 45% of fuel to the East Coast.  Crude prices spent some time during the session trading a bit lower on expectations that the US will have to slow its refining activities & boost imports of gasoline.  West Texas Intermediate crude for Jun rose 2¢ to settle at $64.92 a barrel.  Jul Brent crude, the global benchmark, added 4¢ at $68.32 a barrel.

Oil ends pennies higher as traders weigh impact of Colonial Pipeline cyberattac

The Dow topped 35K in early trading, but was hit selling in the PM.  Tech stocks had no fans today.  The India story is dreary, a dark cloud hanging over the stock market.

Dow Jones Industrials

Markets edge higher while tech shares are weak

Dow rose 262, advancers modestly ahead of decliners & NAZ dropped 226.  The MLP index added 1+ to the 184s & the REIT index shot up 5+ to the 229s.  Junk bond funds were in demand & Treasuries crawled higher.  Oil slid back to 64 & gold added 8 to 1839.

AMJ (Alerian MLP index tracking fund)

CL=F Crude Oil  64.45   -0.45  -0.7%

GC=F Gold     1,841.20 +9.90 +0.5%

 

 

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Chicago Federal Reserve Pres Charles Evans said that employment & inflation will have to pick up substantially before he will change his position on monetary policy.  Speaking after the hugely disappointing jobs report, the official said he still thinks the employment picture is strong, though significant areas of weakness remain.  “It’s a little more complicated. We’re restarting the economy. A lot of sectors are experiencing growth pains,” Evans added.  “Hopefully, it’s just a one-month kind of thing and we’re going to get better employment. I certainly think so.”  Nonfarm payrolls increased by just 266K in Apr, well below the 1M estimate.  That left total employment more than 7.5M below Feb 2020, the month before the Covid-19 pandemic declaration.  Evans noted that the job market continues to receive strong policy support thru the Ts spent in Congress & the Fed's own policies.  But as the economy has improved, investors have begun to wonder when the Fed might start pulling back on its measures.  The central bank is holding short-term borrowing rates near zero & continues to buy at least $120B of bonds a month.  He indicated that the key measures the Fed watches – employment and inflation – remain a good deal from levels that would persuade him to tighten.  “I think it’s going to take quite some time for us to actually see it in the data, assess it,” he added.  “I can’t give you a time frame.”  In addition to the weak jobs number, inflation remains below the Fed's 2% average target. Evans said it likely will take months to hit that goal, adding that he would be comfortable if inflation ran a little hot for a while.  “To average 2% you’ve got to be above 2% for some period of time,” he said.  “So inflation rates of 2.5% don’t bother me as long as it’s consistent with averaging 2% over some period of time.”

Fed’s Evans says employment and inflation need to pick up before policy changes

The rate of average daily new Covid cases in the US fell to below 41K over the weekend, down 30% from 2 weeks ago & the lowest level since Sep, Johns Hopkins University data showed.  The country has reported an average of 2M vaccinations per day over the past week, according to Centers for Disease Control & Prevention (CDC) data, down 40% from its peak level.  The US is reporting 41K daily new infections, based on a 7-day average of data, down 30% over the past 14 days & 43% from the most recent high point, when the country was seeing about 71K daily cases in mid-Apr.  It is also the lowest average since Sep 19.  The latest 7-day average of daily Covid deaths is 667, far below the winter highs.  Following 2.3M vaccinations reported administered yesterday, the nationwide average over the past week is 2M shots per day, according to the CDC.  Though the daily rate has shown some signs of steadying in recent days, it is down significantly from the peak level of 3.4M shots per day on Apr 13.  About 46% of Americans have received at least one dose & more than 1/3 are fully vaccinated.

U.S. Covid cases down 30% over past two weeks as country averages 2 million shots per day

The largest US fuel pipeline has been crippled shut since Fri after a cybersecurity attack — & it's not clear how long the outage will last.  The operator of Colonial Pipeline fell prey to a ransomware attack on Fri, forcing all pipeline operations to stop.  A hacker group known as DarkSide may be responsible for the attack.  Colonial Pipeline said it is developing a system restart plan & that some smaller lines are now operational.  The company added it will “bring our full system back online only when we believe it is safe to do so, and in full compliance with the approval of all federal regulations.”  Colonial operates the country''s largest refined products pipeline & transports 2.5M barrels per days.  It connects refineries from the Gulf Coast to more than 50M people in the South & East.  The pipeline transports gas, diesel, home heating oil & jet fuel.

A top U.S. pipeline is crippled by a cyberattack. Here’s what you need to know

Stocks are taking time to rest after a long rally shown below.  There is a lot of legislation in DC, but its future is uncertain.  The fight against the virus continues because the virus has not given up.

Dow Jones Industrials

 

Higher markets after a jobs report miss

Dow shot up 228, advancers over decliners 5-2 & NAZ climbed 119.  The MLP index went up 2+ to the 183s & the REIT index advanced 4+ to the 428s.  Junk bond funds rose & Treasuries were weak.  Oil crawled higher in the 64s & gold jumped 16 to 1832 on the negative jobs report (more on both below)

AMJ (Alerian MLP Index tracking fund)

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More than 1 in 4 unemployed Americans have been out of work for over a year, according to Bureau of Labor Statistics.  Long-term joblessness has been rising steadily throughout the Covid pandemic & poses greater financial risks for affected households.  Nearly 2.7M people were unemployed for 52 weeks or more in Apr — more than double the number in Feb.  They represent 29% of the 9.2M total jobless workers last month.  These data don't include a seasonal adjustment.  “Ten million Americans are still looking for work, and many of them have been since the beginning of the pandemic,” Rep Don Beyer said.  These statistics are likely an undercount.  Certain workers, like those who left the labor force entirely due to pandemic health risks or child-care duties, aren't considered unemployed since they're not actively looking for work.  It's likely that the long-term unemployed are overrepresented in the hardest-hit industries, i.e. leisure & hospitality.  There are almost 3M fewer jobs in that sector relative to pre-pandemic levels — accounting for a 3rd of the 8.2M jobs yet to return.  Hiring in the sector, which includes restaurants, bars & hotels, for example, grew by 331K last month.  In Apr, 4.2M were long-term unemployed — 43% of all jobless workers.  That's close to the historical peak hit in the aftermath of the last recession: 45.5% in Apr 2010.  In Apr 2010, more than 4.6M had been out of work at least 52 weeks & it took another 20 months for that number to dip below the 4M mark.

29% of unemployed Americans have been jobless over a year

Rising asset prices in the stock market & elsewhere are posing increasing threats to the financial system, the Federal Reserve warned.  In its semiannual Financial Stability Report, the central bank said that while the system overall has remained largely stable even thru the Covid-19 pandemic, future dangers are rising, in particular should the aggressive run on stocks tail off.  Investors have snapped up equities, corp bonds & cryptocurrencies.  They've poured Bs into blank-check companies called SPACs, & the market has been mostly brisk for traditional initial public offerings.  Fed Chair Jerome Powell & others have been asked repeatedly about whether they're concerned over the rising prices.  Powell specifically has said that as long as interest rates stay low, the valuations are justified.  However, the report notes that there's danger lurking should market sentiment change.  “High asset prices in part reflect the continued low level of Treasury yields. However, valuations for some assets are elevated relative to historical norms even when using measures that account for Treasury yields,” the report states.  “In this setting, asset prices may be vulnerable to significant declines should risk appetite fall.”  In an accompanying statement, Fed Governor Lael Brainard said the situation bears watching & points out the importance of making sure the system has proper safeguards.  She specifically mentioned having banks increase their capital requirements during economic expansions as a buffer against downturns.  The report also mentions risk at hedge funds & other nonbank financial institutions on several occasions as potential threats to the system.  “Vulnerabilities associated with elevated risk appetite are rising. Valuations across a range of asset classes have continued to rise from levels that were already elevated late last year,” Brainard said.  “The combination of  stretched valuations with very high levels of corporate indebtedness bear watching because of the potential to amplify the effects of a re-pricing event.”  The report notes that particular sectors including energy, travel & hospitality have particularly high vulnerabilities because of their sensitivity to the pandemic.  The Fed also talks about potential threats from money market & open-end funds.

Fed warns about potential for ‘significant declines’ in asset prices as valuations climb

India's daily new Covid-19 cases crossed 400K for the 3rd time this month as the country struggles to contain a devastating second wave.  Health ministry data released today showed there were 414K new cases over a 24-hour period, where at least 3915 people succumbed to the disease.  But reports of cemeteries as well as a growing number of obituaries in local papers suggest the official figures undercount the true death toll.  Total reported cases in the South Asian country currently stands at 21.5M while fatalities exceed 234K.  In just the last 7 days, India has reported more than 2.7M cases & over 25K deaths, for an average of at least 153 people dying every hour.

India reports over 400,000 daily cases for the third time in seven days

Just 266K nonfarm payroll jobs were added to the US labor market in Apr, far below the estimated 1M new jobs projected, surprising economists & analysts who expected a healthy number of gains as more Americans get vaccinated & businesses reopen during the ongoing pandemic.  By comparison, the labor market added 770K jobs in Mar & 536K jobs in Feb.  The 6.1% unemployment rate & 9.8M people unemployed remained steady in Apr compared with the months prior.  However, today's snapshot is much better than exactly a year ago, but improvements are leveling off while rates of joblessness remain well above pre-pandemic levels.  Some of the biggest gains in jobs occurred in the leisure & hospitality industry, which added 331K new jobs in Apr.  Hiring happened across restaurants & bars; gambling & recreation; & accommodation.  Gains also happened across local gov education, as schools reopened & rehired teachers as well as office administration & support roles.  The social assistance industry saw a boost in child care services jobs, as facilities nationwide welcomed kids back in-person.  The financial industry saw jobs increase across real estate & rental leasing; in “other services,” workers filled roles in maintenance repair & laundry services.  Gains elsewhere in the labor market did little to offset major losses.  The worst performing industries for the month include temporary help services jobs, which lost 111K positions last month.  This could indicate that staffing firms are having trouble finding businesses that want to hire temporary workers which could be an indicator of labor shortages or that workers are holding out for permanent jobs during the market recovery.  Transportation & warehousing, which remained strong during market upheavals last spring to keep pace with skyrocketing e-commerce demand, shed 74K workers in Apr, most being couriers & messengers.

The workforce added just 266,000 new jobs in April—what that means for workers

Gold prices climbed to log their highest finish in almost 3 months after a closely watched reading of US labor conditions for the month was much weaker than forecast.  The Labor Dept reported that the economy gained only 266K jobs in Apr, far fewer than even the most subdued forecast for the month, raising some questions about the strength & pace of the recovery from the COVID pandemic.  Minneapolis Fed Pres Neel Kashkari after the jobs report said that Apr surprise for jobs shows the importance of basing monetary policy on outcomes, not forecasts.  Jun gold added $15 (0.9%) to settle at $1831 an ounce, following a 1.8% rise yesterday.  Prices for the most-active contract was 3.6% higher for the week & marked their highest finish since Feb 10.

Gold settles at a nearly 3-month high after a weaker-than-expected U.S. April jobs report

Oil futures rose & scored weekly gains on growing optimism over the economic reopening in the US & Europe, though concerns remain about the surge in COVID-19 cases in India.  West Texas Intermediate crude for Jun delivery tacked on 19¢ to settle at $64.90 a barrel, leaving front-month prices for the US benchmark up 2.1% for the week.  Jul Brent crude, the global benchmark, rose 19¢ at $68.28 a barrel & Brent gained 2.3% for the week.  Strong economic data out of the US & China & optimism over prospects for Europe as vaccine distribution improves has helped buoy oil.  China's exports & imports grew faster than expected in Apr.  At the same time, upside for oil has been limited, with Brent failing earlier this week to top the $70-a-barrel threshold, as COVID-19 cases continue to surge in India, the world's 3rd-largest oil importer.

Oil scores weekly gains as reopening optimism outweighs COVID worries

The easiest explanation for stock buying today is that the jobs report will stimulate those guys in DC to pass those pork bills.  We'll see.  Last Apr, over 20M jobs were lost, a truly eye popping number.  Since then there has been monthly increases, although the numbers have slowed in recent months.  The US economy is one of the best performing ones in the world.  But those who can not find work are facing times.  The outlook for the Dow is very optimistic as it approaches 35K even though some people are hurting.  There was a little selling into the close which should be expected.  And safe haven gold continues in demand.

Dow Jones Industrials