Monday, March 1, 2021

Markets rebound on vaccine optimism and economic recovery

Dow jumped 603, advancers over decliners better than 4-1 & NAZ soared 396.   The MLP index shot up 8+ to the 162s & the REIT index rose 2+ to the 384s.  Junk bond funds remained strong & Treasuries were purchased as stocks rallied.  Oil slid back almost 1 to under 61 & gold fell 6 to 1791 (more on both below).

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Dr Scott Gottlieb said that he sees promising signs that suggest Covid vaccines are effective in reducing person-to-person spread of the virus in addition to their well-documented ability to protect against severe disease.  He cautioned that while the early data appears positive, some uncertainty remains.  “I think there’s a reduction in transmission. The question is: What’s the magnitude of that?” said Gottlieb.  The FDA issued emergency use authorization for the trio of vaccines after individually determining they were safe and effective at preventing recipients from developing symptomatic Covid disease, particularly severe cases and deaths.  What’s been less clear since the US began administering shots of vaccines in Dec is specific data around limiting virus spread; one reason doctors have been urging even those who have been vaccinated to continue taking precautions.  For example, since announcing Johnson & Johnson's (JNJ), a Dow stock & Dividend Aristocrat, vaccine was given emergency use authorization, the FDA said there was not “evidence that the vaccine presents transmission of SARS-CoV-2 from person-to-person.”  However, Gottlieb said there's reason to be optimistic that the vaccines do just that, even if “the definitive study” proving it has yet to emerge.  “The accumulating evidence is very convincing that there’s a reduction in transmission,” added Gottlieb.  He pointed to 2 studies conducted in Israel, one of the world’s leading countries in vaccinating its population, that suggest the Pfizer (PFE)-BioNTech (BNTX) vaccine cut down on virus transmission.  Gottlieb also said JNJ found in its trial a 74% reduction in participants developing asymptomatic infection.  That finding from JNJ, Gottlieb said, “is a pretty good indication that there’s a reduction in transmission.”  “I think most people agree ... people who are vaccinated are less likely to transmit the infection if they do become infected themselves,” Gottlieb said, while adding he expects a more definitive answer “within the next month or two.”

Dr. Scott Gottlieb sees promising signs that Covid vaccines reduce transmission

Gold futures gave up early gains today to stretch losses into a 5th straight session despite a pause in the run up for Treasury yields.  Gold for Apr lost $5 to settle at $1723 an ounce after trading as high as $1757.  Prices based on the most-active contract registered another finish at the lowest since Jun 2020.  Today's move comes after gold saw a weekly decline of about 2.7% & a loss of 6.6% for the month, which was its largest monthly fall since 2016.  The Federal Reserve has suggested the climb in yields reflects upbeat expectations for an economic recovery fueled by the vaccine program & the likelihood of additional fiscal stimulus.  Meanwhile, the $ was up 0.2%.  A firmer $, which most commodities are priced in, & rising yields can make gold less appealing to buyers comparing the haven asset against yield-bearing investments that are perceived as safe.  Gold doesn't offer a coupon.

Gold prices stretch losing streak to 5 sessions

The head of the Centers for Disease Control  & Prevention said  that she is “really worried” about some states rolling back public health measures intended to contain the coronavirus pandemic as US cases appear to be leveling off at a “very high number.”  The declines in Covid-19 cases seen since early Jan now appear to be stalling at around 70K new cases per day, CDC Director Dr Rochelle Walensky said.  “With these statistics, I am really worried about more states rolling back the exact public health measures we have recommended to protect people from Covid-19.”  “Seventy thousand cases a day seems good compared to where we were just a few months ago,” she added.  “Please hear me clearly: At this level of cases with variants spreading, we stand to completely lose the hard-earned ground we have gained.”  The US is recording at least 67K new Covid-19 cases each day, based on a 7-day average.  The US peaked at close to 250K cases per day in early Jan following the winter holidays.  Top US health officials, including Walensky & White House Chief Medical Advisory Dr Anthony Fauci, have warned in recent weeks that the rise of more contagious variants could reverse the current downward trajectory in infections in the US & delay the nation's recovery from the pandemic.

CDC director worried about states rolling back Covid measures as cases plateau

Oil futures ended lower, as traders eyed tensions between the US & Saudi Arabia, ahead of a decision this week by OPEC & its allies that’s expected to see a loosening of production curbs.  West Texas Intermediate crude for Apr fell 86¢ (1.4%) to settle at $60.64 a barrel.  May Brent crude, the global benchmark, shed 73¢ (1.1%) to $63.69 a barrel.  Prices had found support in earlier dealings amid prospects for the passage of a US stimulus bill, which is expected to provide a boost to energy demand.  The House on Sat passed the Biden administration’s $1.9T package of COVID-19 relief spending.  It now moves to the Senate, where it may be pared as Dems work to push it thru a chamber that's divided 50-50, with VP Kamala Harris serving as the tiebreaking vote.  Oil has rallied so far this year, boosted by expectations for the rollout of COVID-19 vaccines & fiscal stimulus to lead to a strong pickup in demand, while efforts by OPEC+ to keep a lid on production have helped keep the market in balance, a move enhanced by Saudi Arabia's decision to cut an additional 1M barrels a day in Feb & Mar.

Oil ends lower as traders eye Saudi Arabia ahead of this week’s OPEC+ output decision

Investors bid stocks higher aggressively after a dreary time last week.  Optimism about more vaccines to fight the virus & positive economic data was very encouraging.  Meanwhile the stimulus bill is going to the Senate where it faces an uncertain future.

Dow Jones Industrials








Markets rally as J&J vaccine is approved

Dow vaulted 686, advancers over decliners 6-1 & NAZ jumped 320.  The MLP index soared 7+ to the 161s & the REIT index advanced 5 to 387.  Junk bond funds rose along with stocks & Treasuries continued in strong demand, bringing lower yields.  Oil  climbed in the 61s & gold gained 12 to 1740.

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CL=FCrude Oil61.92
  +0.42+0.7%











GC=FGold   1,739.30
+10.50+0.6%











 




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The Food & Drug Administration (FDA) announced that it had issued an emergency use authorization for the Johnson & Johnson Covid-19 vaccine, the 3rd overall.  “The authorization of this vaccine expands the availability of vaccines, the best medical prevention method for COVID-19, to help us in the fight against this pandemic, which has claimed over half a million lives in the United States,” said Acting FDA Commissioner Dr Janet Woodcock   “The FDA, through our open and transparent scientific review process, has now authorized three COVID-19 vaccines with the urgency called for during this pandemic, using the agency’s rigorous standards for safety, effectiveness and manufacturing quality needed to support emergency use authorization.”  The FDA said tests on the Janssen Biotech vaccine was about 67% effective in preventing moderate to severe cases within 14 days after dosing & 66% effective against severe to critical cases after 28 days.  Unlike the previous vaccines, which are more effective, it takes just one shot.  The stock rose 1.69.
If you would like to learn more about JNJ, click on this link:
club.ino.com/trend/analysis/stock/JNJa_aid=CD3289&a_bid=6ae5b6f7

Johnson & Johnson COVID-19 vaccine 3rd to receive emergency use authorization

More than one M Americans were lifted out of poverty in Jan as a result of federal stimulus checks & additional unemployment benefits, according to economists at the University of Chicago & University of Notre Dame.  It's the first drop in poverty since the summer, they said, though they cautioned the gains may quickly erode absent of more relief.  Federal lawmakers in Dec passed a $900B Covid-19 relief measure that offered $600 stimulus checks & a $300 weekly boost in jobless benefits.  It also extended unemployment benefits to those who don't typically qualify, like self-employed & gig workers.  That cash infusion led the US poverty rate to fall to 11.3% in Jan, from 11.8% in Dec.  That means about 1.6M people fell from the ranks of the poor as the gov began distributing payments.  The reduction marks a turnaround from the growing hardship that emerged after CARES Act pandemic relief began to dry up last year.  More than 8M people fell into povertybetween Jun-Dec.

Stimulus checks, unemployment benefits lift 1.6 million Americans out of poverty

American manufacturers grew in Feb at the fastest pace since the onset of the pandemic & business leaders are increasingly optimistic about the economy, a new survey showed.  The Institute for Supply Management (ISM) said its manufacturing index rose to 60.8% last month from 58.7% in Jan & matched a 2-year high.  Readings over 50% indicate growth & anything over 55% is considered exceptional.  The increase surpassed expectations which expected the the ISM index to total 58.9%.  The biggest worry?  A shortage of certain key materials such as semiconductors are pushing prices higher & in some cases constraining production.  That could lead to an increase in inflation & even hinder the recovery.  New orders, production & employment all improved last month.  The index for new orders advanced 3.7 points to 64.8% while the production gauge increased 2.5 points to 63.2%  The employment barometer also climbed for the 3rd month in a row — to 54.4% from 52.6% — despite higher absenteeism & a dearth of skilled labor.  The increase in employment bodes well for the US jobs report for Feb.  The current prediction is for the number of new jobs created to rise to 240K from a meager 49K in Jan.  16 of the 18 industries tracked by ISM expanded in Feb.  The ISM index is compiled from a poll of senior execs who are asked whether business is getting better or worse.  The gauge tends to rise or fall in tandem with the health of the economy.   Manufacturers have led the economic recovery & production has returned close to normal.  Businesses are even more optimistic about the next year.  Orders are increasing in anticipation of strong sales as the vaccines do their work & more gov stimulus is pumped into the economy.  The Biden administration is on the verge of passing another federal aid package that could total close to $2T.

U.S. manufacturers growing at fastest pace since start of pandemic, ISM finds

Excitement over the new vaccine brought out buyers in droves.  The news on the economy didn't hurt.  For the time being inflation fears, which brought on selling last week, has receded.  But those fears have not gone away.  Negative thinking investors are buying safe haven gold & Treasuries.

Dow Jones Industrials

 






Friday, February 26, 2021

Markets seesaw in very choppy trading

Dow fell 469 with selling into the close, decliners & advancers were even, & NAZ rebounded 72.  The MLP index was off 4+ to the 154s & the REIT index fell 4+ to the 383s.  Junk bond funds went up & Treasuries remained in heavy demand taking the yield on the 10 year Treasury down to 1.467%.  Oil gave back almost 2 to the 61s & gold plunged 49 to 1726 (more on both below).

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The decline in Covid-19 cases reported in the US since early Jan may be flattening, a concerning shift as highly transmissible variants threaten to exacerbate infections, the head of the Centers for Disease Control & Prevention said.  “Over the last few weeks, cases and hospital admissions in the United States have been coming down since early January, and deaths have been declining in the past week,” CDC Director Dr Rochelle Walensky said.  “But the latest data suggest that these declines may be stalling, potentially leveling off at still a very high number.”  The nation is now reporting a daily average of 73K new cases over the last week, a slight uptick compared with a week ago, according to data compiled by Johns Hopkins University.  The US peaked at close to 250K cases per day in early Jan following the winter holidays.  The recent shift may be a sign that new, highly transmissible variants of the coronavirus are beginning to take hold, Walensky said.  One variant, known as B.1.1.7 & first found in the UK, is expected to become the predominant strain by mid- to-late Mar, experts have predicted.  The B.1.1.7 variant appears to account for roughly 10% of new Covid-19 cases in the US, up from just 1% a few weeks ago, Walensky added.  However, some states have more cases of the highly transmissible variant than others.  Top US health officials have warned in recent weeks that the variants could reverse the current downward trajectory in infections in the US & delay the nation’s recovery from the pandemic.  The head of the federal health agency said states shouldn't begin to lift restrictions on businesses & gatherings given the direction of cases & high level of viral spread.  “I want to be clear: Cases, hospital admissions and deaths all remain very high, and the recent shift in the pandemic must be taken extremely seriously,” Walensky said.

CDC director warns recent decline in U.S. Covid cases may have stalled as variants spread

The number of confirmed cases of the coronavirus-borne illness COVID-19 climbed above 113M, amid a flurry of positive vaccine news & as a regulatory advisory committee gathered to review Johnson & Johnson's (JNJ), a Dow stock & Dividend Aristocrat, vaccine candidate for a possible emergency use authorization.  There are high hopes that the Food & Drug Administration's (FDA) advisory committee team of experts will vote that the benefits of JNJ's vaccine outweigh the risks, as it is expected to greatly enhance the global effort to get jabs in arms.  The vaccine is a one-dose regimen, unlike the ones that have already been granted emergency use which require 2 doses weeks apart.  It also comes without the refrigeration requirements that make administering doses tricky.  The FDA said earlier this week that the JNJ dose does not appear to have safety issues.  The stock fell 4.75 (3%).
If you would like to learn more about JNJ, click on this link:
club.ino.com/trend/analysis/stock/JNJa_aid=CD3289&a_bid=6ae5b6f7

Global COVID cases top 113 million as FDA committee meets to vote on J&J vaccine

The Chicago Business Barometer, a measure of business conditions in the Chicago region softened to 59.5 in Feb from a strong 63.8 reading in the prior month, according to MNI Market News International.  The Jan reading was the highest since Jul 2018.  The forecast had expected the index to slip, but only to 61.  Any reading above 50 indicates improving conditions.  The index, known in market shorthand as the Chicago PMI, is the last of the regional manufacturing indices before the closely-watched national ISM data for Feb is released on Mon. The national ISM index fell to 58.7 in Jan from a revised 60.5 in the prior month, the 8th straight month the headline index was above the 50% break between expansion & contraction. 

Chicago factory performance retreats in February after hitting highest level since 2018

The US trade deficit in goods widened to $83.7B in Jan from a revised $83.2B in the prior month, the Commerce Dept said.  It was the 2nd highest gap on record.  Imports of goods such as consumer electronics rose 1.1% to $219B in Jan.  Goods imports were up 8.2% compared to a year earlier.  Exports rose 1.4% to $135B were down 0.7% compared with one year ago.  An advanced look at wholesale inventories, meanwhile, showed a 1.3% gain in Jan.  And an early look at retail inventories showed that category down 0.6%.  Auto inventories fell a sharp 1.4% in the month.  A fuller report on the US trade deficit that includes services such as tourism & finance will be issued next week.  The US usually has a strong surplus in services because of tourism, but the sector has suffered during the pandemic.

U.S. trade deficit widens slightly in January, second highest on record

Gold futures fell for a 4th straight session to suffer the biggest monthly loss in over 4 years, as a dramatic rise in gov bond yields undercut demand for the precious metal, pulling prices down to their lowest finish since Jun.  The metal extended its slide as a perkier $ combined to provide a further drag, with gold for Apr delivery off $46 (2.6%) to settle at $1728 an ounce, the lowest finish since last Jun.  Gold based on the most-active contract saw a weekly decline of 2.7% & a loss of 6.6% for the month, which was its largest monthly fall since 2016.  Yesterday, the 10-year benchmark Treasury note, touched a yield near 1.54% intraday, compared with 1.34% last Fri.  A firmer $ today, with the buck up 0.8% was also weighing on bullion.   Vaccine rollouts & hope for a bounce back from the COVID-19 pandemic in H2 has been one of the key drivers of the improved outlook for the economy and for the selloff in bonds, with prices falling as yields rise.  US data released today showed that the Chicago Business Barometer, a measure of business conditions in the Chicago region, softened to 59.5 in Feb from a strong 63.8 reading in the prior month.  However, the final reading of consumer sentiment in Feb inched up to 76.8 points from 76.2 earlier in the month, according to a survey produced by the Univ of Mich.

Gold prices book lowest close since June and steepest monthly drop in four years

Oil futures settled sharply lower, with a rise by the $ & jitters ahead of next week's meeting of OPEC & its allies prompting the US crude benchmark to pull back from a 22-month high.  The US contract, however, still gained nearly 18% for the month, to tally a 4th-consecutive monthly climb.  OPEC+ ministers are scheduled to meet on Mar 3 & 4 to discuss production curbs.  The elephant in the room is what Saudi Arabia will do with regard to its unilateral output cut of 1M barrels per day in Feb & Mar.  The rise in oil prices may stir calls to loosen the curbs, driven in part by fears US shale producers & others will increase output in response to stronger prices and take market share from OPEC+ members.  West Texas Intermediate crude for Apr fell $2.03 (3.2%) to settle at $61.50 a barrel, after posting its highest front-month close since May 1, 2019 yesterday.  Prices ended nearly 18% higher for the month.  The front-month global benchmark Apr Brent crude contract expired at the end of the trading session.  The contract settled at $66.13, down 75¢ (1.1%) for a monthly gain of 18%.  May Brent crude, which is now the front month, lost $1.69 (2.6%) at $64.42 a barrel.

Oil futures settle lower, but U.S. benchmark logs a monthly gain of nearly 18%

The chart below tells the story in Feb for the Dow & NAZ.  They rose in the first few days of the month followed by the averages trending sideways.  The news on the vaccine front is good, but over the short term eyes are watching the goings on for the stimulus bill which faces an uncertain future next week.

Dow Jones Industrials