Friday, July 23, 2021

Markets extend winning streak into new record territory

Dow went up 238 (close to session highs), advancers over decliners 3-2 & NAZ gained 152.  The MLP index was about even in the 182s & the REIT index gained 4 to the 463s.  Junk bond funds fluctuated & Treasuries continued to be weak.  Oil inched up to 72 & gold slid back 2 to 1802 (more on both below).

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Treasury Secretary Janet Yellen urged Congress to raise or suspend the debt ceiling by the end of the month, warning that her dept will need to deploy "extraordinary measures" beginning Aug 2 to prevent the gov from defaulting.  "If Congress has not acted to suspend or increase the d ebt limit by Monday, August 2, 2021, Treasury will need to start taking certain additional extraordinary measures in order to prevent the United States from defaulting on its obligations," Yellen wrote in a letterto the top 4 congressional leaders.  The debt ceiling, which is currently around $22T, is the legal limit on the total amount of debt that the federal gov can accrue; according to the Committee for a Responsible Federal Budget.  It applies to both the $16.2T held by the public & the $5.9T owed by the gov.  In 2019, former Pres Trump suspended the nation's borrowing limit for 2 years, but that suspension is poised to expire on Jul 31 & Dems seemingly do not have a plan yet to raise the limit or suspend it again.  "We’re considering all options," House Speaker Nancy Pelosi said.  If Congress is unable to increase the debt limit, the Treasury would enter uncharted territory, incapable of paying bills – including payments to Social Security beneficiaries, gov employees or service members – since it would have no cash on hand.  The Treasury Dept would be unable to issue any more bills or bonds & would instead have to rely on tax revenue & emergency accounts to pay bills.

Yellen urges Congress to raise debt limit, warns Treasury will deploy soon

Covid cases are on the rise in all 50 states & DC as the delta variant rapidly spreads across the US & the virus once again tightens its grip.  The US is reporting an average of about 43K new cases per day over the past week — far below pandemic highs but up 65% over the previous 7 days & nearly 3 times as high as the level 2 weeks ago, data compiled by Johns Hopkins University shows.  Cases hit a 15-month low in late Jun before they began to rise yet again as fewer people got vaccinated & the more infectious delta variant took hold in the country.  Vaccination rates peaked in Apr at more than 3M shots per day but have dropped off considerably in recent months to around 530K a day, according to the Centers for Disease Control & Prevention.  Hospital admissions of Covid patients are up 32% compared with one week ago.  The count of daily Covid deaths, which typically lag an increase in case counts by a few weeks or more, has ticked upward but not at the same pace as cases or hospitalizations.  Many Americans most vulnerable to the virus also now have some level of protection, as 89% of seniors have received at least one shot.  The overwhelming majority of serious Covid cases — 97% of hospital admissions & 99.5% of Covid deaths — are occurring among those who are not vaccinated, Surgeon General Vivek Murthy said.

Covid cases are rising again in all 50 states across U.S. as delta variant tightens its grip

US economic growth faltered slightly in Jun compared with the previous month, according to the Federal Reserve Bank of Chicago.  The Chicago Fed National Activity Index, which measures overall economic activity & related inflationary pressure, fell to 0.09 in Jun from 0.26 in May.  The index is comprised of 85 economic indicators drawn from 4 broad categories of data: production & income; employment, unemployment & hours; personal consumption & housing; & sales, orders & inventories.  In Jun, 40 of the 85 individual indicators deteriorated from May, while 45 made positive contributions to the index last month.  The contribution of the employment, unemployment & hours category to the index dropped to 0.09 in Jun from 0.15 in May.  Although employment rose by 850K jobs in Jun, the jobless rate ticked up to 5.9% last month, partially offsetting the gains in the labor market.  Production-related indicators, meanwhile, contributed just 0.01 to the index last month – a sharp decrease from the 0.26 it added in May.  Industrial output climbed 0.4% in Jun, but manufacturing production shrank 0.1%.  The contribution of the sales, orders & investors category to the index increase 0.06 in Jun.  The data comes as a nationwide surge in the delta variant of COVID-19 rattles investors, who are worried that rising infections could bring about new lockdown measures and a drawn-out economic recovery.

US economic growth lost momentum in June, Chicago Fed says

Gold futures ended lower to post their first weekly loss in 5 weeks, as Treasury yields bounced & the $ edged higher.  Gold for Aug fell $3 to settle at $1801 an ounce.  For the week, the most-active gold contract marked a 0.7% loss.  Gold's loss for the week follows choppy trading in many financial asset markets.  A steep selloff in equities on Mon & other assets viewed as risky added to a safe-haven Treasury rally that drove the yield on the 10-year note to a 5-month lows.  Investors, however, rushed in to buy the dip in stocks, while the Treasury rally lost steam, allowing yields to rise.  The greenback also firmed, with the ICE US Dollar Index on track for a 0.2% weekly rise.  Higher Treasury yields can raise the opportunity cost of holding nonyielding assets, while a stronger $ makes commodities priced in the unit more expensive to buyers using other currencies.  Gold prices found some support, moving back above the $1800 mark right after research firm IHS Markit said its preliminary composite output index for the US fell to a 4-month low of 59.7 in Jul, from 63.7 in Jun.

Gold prices end lower to log first weekly loss in 5 weeks

Oil futures edged lower, easing back from a 3-session rise that allowed prices to rebound from Mon's drop to the lowest settlements since May.  Oil futures edged lower today, easing back from a 3-session rise that allowed prices to rebound from Mon's drop to the lowest settlements since May.  West Texas Intermediate crude for Sep fell 12¢ to $71.79 a barrel, leaving the US benchmark about flat for the week, based on the front-month contracts.  Sep Brent, the global benchmark, was off 15¢ at $73.64 a barrel, leaving it also about even for the week.  Crude plunged Mon, with WTI dropping more than 7%, in a broad selloff that was attributed in part to worries about the spread of the delta variant of the coronavirus & it's impact on energy demand.  Crude & other assets, including equities, subsequently bounced back, posting gainns for 3 sessions in a row, as investors proved eager to buy the dip.  Data from the Energy Information Administration released Wed revealed a weekly increase in US crude supplies, following 8-straight weeks of declines, but stocks at the nation’s storage hub at Cushing, Okla fell to their lowest since Jan 2020.

Oil prices move up to end the volatile week with a modest gain

This was an unusually wild week for stocks.  After the large selloff on Mon, buyers returned & bought the stocks averages to record levels.  For the week, Dow & NAZ were each up about 400.  But there are dark clouds for stocks.  Congress has a lot to get done next week & raising the debt-ceiling is the most critical.  Higher inflation, the virus threat & the economic recovery has gotten a little sluggish (shown above) also have to be watched.

Dow Jones Industrials

Markets rise as markets try to extend gains to new records

Dow jumped 227 (going over 35K), advancers over decliners only 4-3 & NAZ rose 69.  The MLP index fell 1 to the 181s & the REIT index added 2 to the 461s.  Junk bond funds inched higher & Treasuries were sold (more below).  Oil was off pennies in the 71s & gold dropped 8 to 1796, falling below the important 1800 resistant level.

AMJ (Alerian MLP index tracking fund)

CL=FCrude Oil71.52

GC=FGold   1,800.50



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Speaker Nancy Pelosi stood by her earlier demand that the House will not vote on the bipartisan infrastructure deal until the Senate also passes a sweeping, multitrillion-dollar spending package using budget reconciliation.  "We are here to get the job done. We cannot respond to some of the legislation until the Senate acts," Pelosi, said.  "We will not take up the infrastructure bill until the Senate passes the reconciliation measure."  Lawmakers are in the process of trying to pass 2 proposals that make up the bulk of Pres Biden's "Build Back Better" economic agenda: A $1.2T bipartisan infrastructure bill, which focuses on mostly traditional projects like roads & bridges, & a $3.5T reconciliation bill, which includes funding for universal preschool, free community college, Medicare expansion & combating climate change.  Although Biden initially suggested that he would veto the pared-down spending bill if Dems in Congress didn't simultaneously pass a larger reconciliation bill, the pre– facing an uproar from Reps – almost immediately recanted that statement & clarified that he would sign the agreement if passed on its own.  Still, Dems have indicated their own support for making the passage of the smaller bill contingent on the success of a larger bill that would be passed using the procedural tool known as budget reconciliation, allowing the party to circumvent a 60-vote Rep filibuster.  By tethering the bipartisan bill to the reconciliation package, Pelosi is trying to ensure that progressive members of her caucus rally around both measures.  Because Dems have an unusually narrow advantage in the House (Pelosi has just 3 votes to spare), it's possible that left-leaning lawmakers could torpedo the bipartisan deal – which Rep Pramila Jayapal has previously threatened to do.

Pelosi reiterates no bipartisan infrastructure bill without reconciliation package

Reps on the House Budget Committee are asking congressional leaders to include spending controls with any debt ceiling increase, as the Jul 31 expiration of the debt limit suspension looms.  Reps for weeks have said they plan to use the fact Congress will be forced to raise the debt limit draw focus to what they see as the country's "spending problem."  The letter highlights what the Reps say are alarming statistics about the federal gov's spending & proposes actions Congress could take to rein that in.  "With record amounts of government spending over the past two years accompanied by historic levels of inflation, in addition to the dramatically changed fiscal conditions of the country over the past five decades, it is imperative for Congress to take meaningful steps now to place our country’s finances on a more sustainable and appropriate path," the letter says.   It cites Congressional Budget Office projections that the deficit this year will be $3T & that the gov is projected to spend more than $60T over the next 10 years – without even factoring in Dems' pending $3.5T plus spending plan.  "Unchecked government spending is increasing inflation across the economy and harming American families – especially those on low and fixed incomes," the letter adds.  It notes that previous debt ceiling increases have included spending controls & suggests some ways that Congress could control its future spending.   Among them are pairing the debt ceiling bill with major federal spending cuts; federal targets for spending-to-GDP ratios; stepping up enforcement of previous spending reforms like Pay-As-You-Go & the Congressional Budget Act; & a balanced budget amendment.  The letter is signed by all 15 Reps on the House Budget Committee.  Congress cannot steer this country out of a fiscal crisis with a penny-wise & pound-foolish approach that ignores the unsustainable fiscal trajectory we are currently on," Smith said.  "Already we are witnessing the effects of unchecked government spending on our economy with record inflation that is driving up the cost of food, clothing, and energy for American workers and families."

Republicans ask for spending cuts with debt ceiling bill, blame 'unchecked government spending' for inflation

Treasury yields climbed ahead of the release of Jul's flash purchasing managers' index readings.  The yield on the benchmark 10-year Treasury note added 3 basis points, climbing to 1.288% & the yield on the 30-year Treasury bond gained 2 basis points, rising to 1.927%.  Yields move inversely to prices & a basis point is equal to 0.01 percentage points.  Markit's Jul PMI data, which should shortly give an indication as to the state of the US economic recovery.  Treasury yields rebounded having fallen yesterday after jobless claims data came in higher than expected.  The number of first-time unemployment insurance claims filed last week came in at 419K, versus the 350K filings expected.

Treasury yields climb with10-year rate topping 1.28%

Stocks are climbing again to record levels, but the advance-decline ratio is not impressive.  Next week will be a very significant week in DC when those guys have to decide how to deal with the huge spending bills & raise the Treasury debt ceiling limit.  It is shaping up as a very wild weeks in the stock market.

Dow Jones Industrials


Thursday, July 22, 2021

Markets edge higher while Congress struggles with infrastructure plan

Dow finished up 25, decliners over advancers 2-1 & NAZ gained 52.  The MLP index rose a graction to the 183s & the REIT index retreated 4+ to the 459s.  Junk bond funds were mixed  & Treasuries attracted buyers.  Oil went up 1+ to the 71s (3 day rally following the plunge on Mon) & gold went up 4 to 1807 (more on both below).

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Live 24 hours gold chart [Kitco Inc.]

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Dr Scott Gottlieb said the current spike in Covid infections due to the highly contagious delta variant may be over sooner than many experts believe.  However, the former FDA chief urged Americans to take precautions in the meantime as delta, first found in India, takes hold as the dominant variant in the US.  “I think the bottom line is we’re going to see continued growth, at least in the next three to four weeks. There’s going to be a peak sometime probably around late August, early September,” Gottlieb said.  “I happen to believe that we’re further into this delta wave than we’re measuring so this may be over sooner than we think. But we don’t really know because we’re not doing a lot of testing now either.”  There may be another small bump in infection rates as schools reopen in the fall & become “vectors of transmission” as they did with the B.1.1.7 variant, first discovered in Britain, & now called alpha, said Gottlieb.  Gottlieb also warned that just wearing masks, particularly cloth masks, may not enough to prevent Covid infections from the delta variant in classrooms.   He advised schools to create pods, space out children in the classroom, avoid group meals & suspend certain large activities, as well as improve air filtration & quality levels.  “There might be other things you do that actually achieve more risk reduction than the masks in the setting of a much more contagious variant where we know there’s going to be spread even with masks,” Gottlieb added.  “If we’re going to tell people to wear masks, I do think we need to start educating people better about quality of masks and the differences in terms of the reduction and risk you’re achieving with different kinds of masks.”

Dr. Scott Gottlieb says the Covid delta spike may peak sooner than many believe

A failed Senate test vote dealt a blow to the bipartisan infrastructure framework, but the plan could have a chance to move forward again as soon as Mon.  The Reps working to craft the $1.2T proposal voted yesterday against advancing it as they draft final legislation.  Despite the setback, the 22 Dem & GOP senators drawing up the plan said they hope to release & push ahead with a bill “in the coming days.”  The vote leaves Pres Biden's top legislative priority in flux.  If the bipartisan deal to revamp transportation, broadband & utilities falls apart, Dems will have to consider whether to pair physical infrastructure plans with their separate $3.5T package to address climate change, child care & health care.  Biden considers both plans critical to boosting the economy & preparing the country to face a warming planet.  Asked yesterday, Biden said he believes the Senate will vote Mon to advance the bipartisan framework he negotiated with senators.  “It’s a good thing, and I think we’re going to get it done,” he said.   House Speaker Nancy Pelosi has said she will not take up either bill until the Senate passes both. 

Here’s what’s next for the bipartisan infrastructure plan after setback in the Senate

CSX railroad's Q2 profit more than doubled as the economy continued to rebound from the depths of the coronavirus pandemic & it hauled 27% more freight than a year ago.  EPS was 52¢, up from 22¢ a year ago.  This year's results included a one-time boost of 12¢ related to a $349M sale of property rights to the state of Virginia for passenger rail service.  Adjusted results of 40¢ topped the forecast for adjusted EPS of 37¢.  The number of shipments CSX delivered jumped in every category of freight compared to a year ago, when the economy slowed to a crawl because of restrictions related to the pandemic.  "This quarter’s results highlight just how quickly volumes have rebounded as each of our three lines of business experienced record growth as we lapped the most severe economic impacts of the pandemic," CEO Jim Foote said.  Revenue grew 33% to $2.99B, which also topped forecasts. CSX is sticking to its outlook for double-digit revenue growth this year.  Foote said the economy appears robust right now but many businesses are also facing challenges getting the supplies or employees they need, including CSX.  The railroad has only managed to hire about 200 of the 500 new employees it has been trying bring aboard since Jan.  "No way did I or anybody else in the last six months realize how difficult it was going to be to try and get people to come to work these days," Foote added. "It is an enormous challenge for us to go out and find people that want to be conductors on the railroad just like it is hard to find people that want to be baristas or anything else. It is very, very difficult."  The stock rose 1.10.
If you would like to learn more about CSX, click on this link:

CSX profit more than doubled as railroad hauled 27% more

Gold futures marked a modest gain, holding to a relatively tight trading range following data showing an unexpected rise in first-time US jobless claims, as investors weighed the ECB's latest announcement on monetary policy.  Gold for Aug edged up $2 to settle at $1805 an ounce after ending yesterday at the lowest for a most-active contract since Jul 8.  Early today, Treasury yields had continued to rebound from a 5-month low & the $ strengthened after the ECB struck a dovish stance as it adjusted its rate guidance following its earlier adoption of a new inflation target.  The $ then pared its rise & Treasury yields turned lower, however, after data showed first-time claims for unemployment benefits jumped by 51K to 419K last week.  The yield on the 10-year Treasury note edged down 3.4 basis points to 1.247% after earlier trading above 1.30%.  Rising yields can weigh on gold because it raises the opportunity cost of holding nonyielding assets.  A stronger $ can also be a negative for commodities priced in the unit, making them more expensive to users of other currencies.

Gold prices settle higher after ECB decision, rise in U.S. jobless claims

Oil futures rose for a 3rd straight session, erasing a Mon rout to turn higher for the week.  Traders shook off concerns about the impact of the spread of the delta variant of the coronavirus on energy demand & a rise in US crude inventories last week, with oil prices finding support from rising investor appetite for assets perceived as risky, as well as tight supplies.  West Texas Intermediate crude (WTI) for Sep climbed $1.66 (2.3%) to settle at $71.91 a barrel , following a climb of 4.6% yesterday.  For the week, prices moved higher.  The Aug contract, which was the front month at the end of last week, had finished Fri at $71.81.  Sep Brent crude, the global benchmark, rose $1.56 (2.2%) at $73.79 a barrel.  On Mon, WTI had plunged by more than 7%, while Brent lost more than 6% but today, front-month contract prices for both settled at their highest since Jul 14.  Oil rose yesterday, with an unexpected rise in US crude inventories reported by the Energy Information Administration (EIA) offset by a fall in supplies at Cushing, Oklahoma, the delivery hub for Nymex oil futures.  Despite the weekly rise of 2.1M barrels in US crude supplies, the EIA said inventories at 439M barrels are about 7% below the 5-year average for this time of year.

Oil prices post highest settlement in more than a week

Those guys in DC don't how to craft spending bills.  Instead they slop around Bs of $s, without understanding numbers.  It's all politics.  The infrastructure bill is stuck in the mud & now they also have to figure out how to increase the debt limit.  Whatever they come up, will be a mess that is not good for the economy.  However the popular stock averages remain near record highs.

Dow Jones Industrials