Monday, March 8, 2021

Markets rise in uneven trading while yields keep climbing

Dow roared ahead 306 (below early highs), advancers over decliners 3-2 but NAZ remained lower, down 310   The MLP index was off fractionally to 171 & the REIT index rose 4+ to the 382s.  Junk bond funds were weak & Treasuries continued out of favor (taking yields higher).  Oil fell 1+ to the 64s & gold tumbled 17 to 1681 (more on both below).

AMJ (Alerian MLP Index tracking fund)

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The House plans to pass Dems' $1.9T coronavirus relief bill tomorrow to get fresh aid to Americans &starting this month.  The chamber aims to approve the rescue package in time for Pres Biden to sign it before key unemployment programs expire on Sun.  The Senate passed the legislation on Sat. The bill extends a $300 per week boost to unemployment benefits through Sep 6 & sends direct payments of up to $1400 to most Americans.  The stimulus money will start hitting accounts this month, Biden said.  The bill also includes an expansion of the child tax credit, rental payment assistance & funds for Covid-19 vaccine distribution & testing.  It directs money to state, local & tribal govs, along with schools.  Dems passed the bill in the evenly split Senate without Rep support thru the budget reconciliation process.   They are not expected to win any votes from House Reps, as the GOP criticizes what it calls wasteful spending in the bill.  

The House is preparing to pass the $1.9 trillion Covid relief bill on Tuesday

In many ways, the coronavirus crisis has paved the way to better budgeting.  Consumers are paying down debt & saving more than they have in decades.  Many are leveraging low interest rates to refinance & lower their monthly bills.  Federal relief, such as stimulus checks, expanded unemployment benefits & an extended pause in loan repayments, have even given some a chance to catch up on past-due payments.  Altogether, Americans repaid almost $83B in credit card debt during 2020 — a record.  That marks only “the second time in the past 35 years we’ve even ended the year owing less credit card debt than we started with,” said Jill Gonzalez, an analyst at WalletHub. The first time was in 2009, in the wake of the last recession.  By the end of last year, the average household credit card balance fell to $8K, WalletHub found.  Credit cards are one of the mo st expensive ways to borrow money.  Card rates now stand at 15.99%, on average, down slightly from a record high of 17.85%.  Many experts predict there could be a surge in consumer spending once more people are vaccomated & Covid-related restrictions are lifted, which could undo some of the recent progress made toward paying down debt.  According to the National Retail Federation, economic indicators point toward potentially record retail sales growth during 2021.  Consumers have “plenty of purchasing power” that will combine with pent-up demand to provide “accelerants for growth,” the trade association said.

Americans paid off a record $83 billion in credit card debt amid Covid

A rise in the $ & gov bond yields combined to dim appetite for bullion, pushing prices to their lowest finish since a $1.9T COVID-19 relief bill is set to be voted on by the House as early as tomorrow, after the Senate narrowly approved the aid package over the weekend with concessions to accommodate centrist Dems.  The fiscal package was expected to be a boost for gold because it means additional gov spending, making safe-haven metals a more compelling investment; however, the prospects of a brighter economic outlook domestically & outside the US may be weighing on near-term gold demand.  Gold for Apr fell $20 (1.2%) to settle at $1678 an ounce, with prices based on the most-active contract ending at their lowest since last Apr.  Prices for gold last week booked a 1.8% weekly decline.  Treasury Secretary Janet Yellen said higher long-term Treasury debt yields were a sign market participants were anticipating a stronger recovery, not of increased inflation concerns.  Gold is often used as a hedge against inflation.

Gold price settles at 11-month low as Treasury yield hangs near 1.6%

Health experts made a concerted effort over the weekend to highlight the risks posed by new variants of the coronavirus-borne illness COVID-19 & urged Americans not to drop their guard until the vaccine program is in full swing.  The message was a reinforcement of the one pushed last week by the administration of Pres Biden, after several states announced plans to reopen for business in the near term.  Michael Osterholm, director of the University of Minnesota’s Center for Infectious Disease Research & Policy said, adding that the current vaccination rate just isn't fast enough to stop the spread of the new variants.  “We are in the eye of the hurricane right now,” Osterholm said.  “Things are going very well, we see blue skies.”  But the UK variant “is about to come upon us,” he said. “Today it’s wreaking havoc in parts of Europe.”  To counter the threat, Osterholm said the US must not let up on coronavirus restrictions & must work to vaccinate the population even faster.  The Centers for Disease Control & Prevention’s vaccine tracker shows that 116M doses had been delivered to states, 90M doses had been administered & 59M people had received one or more doses, equal to 17.7% of the population.  Already 31M Americans have received 2 doses, equal to 9.2% of the population.  The US vaccinated about 2M people a day on average last week with one day nearly hitting 3M.  Progress in the form of falling cases, hospitalizations & now a relief package continues in a predictable & positive direction.

Health experts urge Americans not to drop their guard on COVID as death toll tops 525,000

Oil futures pulled back, posting their first loss in 4 sessions after an attack on Saudi oil facilities briefly lifted global benchmark Brent crude prices above $70 a barrel for the first time since early last year.  Warplanes from a Saudi-led coalition dropped bombs on Yemen’s rebel-held capital San’a on Sun, following attacks on Saudi Arabia's oil & military facilities.  The coalition blamed the administration of Pres Biden for the attacks by Iran-backed Houthi rebels after a decision to remove them from US terror lists.  Saudi Arabia, however, said its largest oil export terminal at Ras Tanura in the Persian Gulf was unscathed after a drone attack.  The price of the front-month May Brent fell $1.12 (1.6%) to settle at $68.24 a barrel, after hitting a high of $71.38 a barrel on Sun.  It was the first time the global benchmark traded above $70 since Jan 2020.  Apr West Texas Intermedia, US benchmark, lost $1.04 (1.6%) at $65.05 a barrel after hitting a higher near $68 overnight.  Both contracts are up more than 30% YTD, adding more than 7% last week following a surprise move by OPEC & its allies to rollover current production cuts thru end-Apr.  OPEC's 13 members pumped 24.86M barrels of oil per day in Feb, down 840K barrels per day from Jan.  OPEC's 9 partners, meanwhile, added 12.97M barrels per day, for an increase of 60K barrels per day from a month earlier.  Overall, Saudi Arabia stuck to its pledge to cut an additional 1M barrels per day of its own output last month, driving total output by OPEC & its Russia-led allies to a 4-month low.

Oil logs first loss in 4 sessions, as buying after attack on Saudi oil facilities fades

There was selling in the PM when enthusiasm by investors dimmed.  Tech stocks as shown by the NAZ were hit with selling all day, taking the NAZ lower & into the red YTD.  Oil, gold & Treasuries were also sold, indicating all is not well for stocks & commodities.  And Dow could not hold above 32K it reached in the AM.

Dow Jones Industrials

Markets jump after Senate passes stimulus bill

Dow surged 453, advancers over decliners 5-2 but NAZ fell 31.  The MLP index was steady in the 171s & the REIT index gained 5+ to the 383s.  Junk bond funds hardly budged in price & Treasuries were sold.  Oil eased back to the 65s & gold dropped 21 to 1677.

AMJ (Alerian MLP index tracking fund)

CL=FCrude Oil65.38

GC=FGold   1,685.00



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China's Feb exports grew at a record pace from a year earlier when Covid-19 battered the world's 2nd-biggest economy, customs data showed, while imports rose less sharply.  Exports in $ terms skyrocketed 155% in Feb compared with a year earlier, while imports gained 17.3%, the most since Oct 2018.  The data did not include figures for Jan alone.  In Jan-Feb, exports jumped 60.6% from a year earlier, when lockdowns to contain the pandemic paralyzed the country's economic activity.  That exceeded the forecast for a 38.9% surge.  Strong exports, which benefited from China's success in largely containing the public health crisis, have helped fuel the country's recovery from a pandemic-induced paralysis.  The surge was driven by a rebound in foreign demand, customs said, citing improvements in manufacturing industries in the EU & the US, & their increased imports of Chinese products thanks to fiscal stimulus measures.  "In addition, a majority of manufacturing employees (in China) chose to stay put over the Lunar New Year holidays," the statement continued.  "Our survey showed a lot of firms in export-oriented provinces stayed open, and orders that usually only get delivered after the new year had been delivered normally."  Chinese factory activity usually goes dormant during the Lunar New Year break, which fell in the middle of Feb this year, as workers return to their hometowns.  This year, the gov appealed to workers to avoid travelling to curb the risk of a spread of the coronavirus.  In Jan-Feb, imports increased 22.2% from a year earlier, above the 15% forecast, partly due to stockpiling of semiconductors & energy products, according to customs.  China posted a trade surplus of $103B for the first 2 months.  The forecast was for the trade surplus to narrow to $60B from $78B in Dec.  In yuan terms, exports rose 50% in the 2 months from a year earlier, while imports gained 15%.  "Due to the impact of the new coronavirus, overall trade (in yuan terms) in January-February last year fell 9.7%, and the low base was one of the reasons for the larger increase this year," customs said.  "But even when compared with normal years, such as the comparable periods in 2018 and 2019, growth in China's overall trade was around 20%."

China Feb exports post record surge from COVID-19-depressed 2020 levels

Half of US states showed double-digit growth in job listings in Feb as companies look to rehire, according to new data from CareerBuilder.  CareerBuilder CEO Irina Novoselsky comments came Fri on the heels of the Labor Dept announcing that employers added 379K jobs in Feb.  "Half of the states in the United States are seeing double-digit job posting growth, which is really a leading indicator for companies starting to get out there and looking to hire," Novoselsky said.  "We started seeing that throughout February and it's continuing in the first week of March... everything that we're seeing is continuing to show that positive momentum of job growth."  The US economy created more jobs than expected in Feb, driven by bars & restaurants rehiring tens of thousands of workers as coronavirus caseloads fell nationwide & states relaxed restrictions on business activity.  Novoselsky predicted that at the current pace, it will take about 2 years to return to pre-pandemic employment highs & noted a 195% surge in people looking for work-from-home jobs on  "This is going to have a big impact on companies deciding, 'Are you paying people's salaries based on where they live or where the company is based?'," Novoselsky added.  "Because as this migration starts, this is going to change on how people compete in the salaries that are given to different locations and roles, potentially."

Job postings real indicator of employment picture

The Centers for Disease Control & Prevention (CDC) released new guidance for people who've been fully vaccinated against Covid-19, a highly anticipated step as the nation tries to ease back into normality following almost a year of restrictions due to the pandemic.  “There are some activities that fully vaccinated people can begin to resume now in the privacy of their own homes. Everyone – even those who are vaccinated – should continue with all mitigation strategies when in public settings,” CDC Director Dr. Rochelle Walensky said.  According to the guidance, fully vaccinated people can safely visit with other fully vaccinated people & some unvaccinated people inside without wearing masks or social distancing, according to the guidance.  Someone is considered fully vaccinated 2 weeks following either a single shot of Johnson & Johnson's newly authorized vaccine or 2 weeks after their 2nd shot of Moderna's (MRNA) or Pfizer's (PFE) 2-dose regimens.  Roughly 59M people in the US have received at least one shot with 31M of those people receiving 2 doses, just over 9% of the nation's population, according to the CDC, which doesn't break down which vaccine people received.  People who are fully inoculated can also visit with unvaccinated people from a single household without wearing masks or social distancing as long as they're at low risk for severe disease.  “For example, fully vaccinated grandparents can visit indoors with their unvaccinated healthy daughter and her healthy children without wearing masks or physical distancing, provided none of the unvaccinated family members are at risk of severe COVID-19,” according to the CDC guidance.  Fully vaccinated people don't have to quarantine or get tested for Covid-19 if exposed to someone with the virus as long as they're not showing symptoms, the agency advises.  However, if a vaccinated person begins to display symptoms, they should isolate themselves & get tested for Covid-19.

CDC says people who are fully vaccinated against Covid can meet safely indoors without masks

Investors were happy to see the Senate pass the bloated pork stimulus bill & are bidding stocks higher.  However tech stocks have to deal with dark clouds overhead after their spectacular run in the last year.  Brent oil, the intl standard, is flirting with 70, not seen for over a year.  Some people will be helped from more gov spending, however that also raises the specter of high inflation down the road.

Dow Jones Industrials


Friday, March 5, 2021

Markets rise in wild reversal as rate fears ease

Dow soared 570, advancers over decliners almost 3-1 & NAZ short up 196 (both close to daily highs).  The MLP index was fractionally lower to the 168s & the REIT index rebounded 3+ to 377.  Junk bond funds were little changed & Treasuries finished even after buying in early trading was reversed by selling in the PM.  Oil rocketed ahead 2+ to the 66s & gold was off 3 to 1697 (more on both below).

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The nation's trade deficit widened 1.9% to $68.2B in Jan, the Commerce Dept said.  The forecast called for a $67.6B gap.  The trade deficit in Dec was revised to a gap of $67B versus the prior estimate of $66.6B.  The trade gap is close to a 14-year high of $69B reached in Nov.  Imports rose 1.2% in Jan to $260.2B, led by consumer goods such as pharmaceuticals.  Exports rose 1% to $191.9B.  Exports are still down more than 7.5% from last year.  Both imports & exports of services declined slightly in Jan.  The services surplus is near an 8-year low while the goods trade deficit is near record levels.  US economic growth is expected to push higher this year & the trade gap is seen widening as a result.  Pres Biden's nominee to be the top trade official signaled this week that the guys in DC won't ignore rising trade deficits as has been the case under prior administrations.  Katherine Tai, who Biden has nominated to become US Trade Representative, told Congress earlier this week that trade liberalization in the past led to less prosperity & higher unemployment.

U.S. trade deficit widens in January on stronger consumer demand

Gold futures ended below the $1700 mark, with prices for the precious metal posting a 3rd straight weekly loss.  The $ index touched its highest level in over 3 months & Treasury yields briefly topped 1.6% as the latest employment report showed a larger-than-expected job gains in Feb.  Higher gov bond yields & a stronger $ can make gold less attractive to investors seeking a safe-haven.  Gold for Apr fell $2 to settle at $1698 an ounce, after it lost 0.9% yesterday.  Prices for the most-active contract ended at their lowest since Jun 5.  For the week, gold suffered a 1.8% decline based on the most-active contract.  The Labor Dept indicated the US created 379K new jobs in Feb—the biggest gain in 4 months, perhaps undercutting some appetite for bullion as the economy looks to be on the recovery path from the COVID-19 pandemic.

Gold prices end below $1,700 as markets weigh hot February U.S. jobs report

China's #2 leader announced a healthy economic growth target & plans to make this nation self-reliant in technology amid tension with the US & Europe over trade, Hong Kong & human rights.  The ruling Communist Party aims for growth “over 6%” as the world's 2nd-largest economy rebounds from the coronavirus, Premier Li Keqiang said in a speech to China's ceremonial legislature.  3000 delegates gathered for its annual 2-week meeting, the year's highest-profile political event, under intense security & anti-virus controls.  The party is shifting from fighting the virus that emerged in central China in late 2019 back to its longer-term goal of becoming a global competitor in profitable technologies including telecoms, clean energy & electric cars.  The NPC meeting usually focuses on domestic issues but increasingly is overshadowed by geopolitics as Pres Xi Jinping's gov pursues more assertive trade & strategic policies abroad, cracks down on dissent at home & faces criticism over its treatment of Hong Kong & ethnic minorities.  Also, the gov announced a 6.8% rise in military spending to 1.4T yuan ($217B) as China faces tension with India & other neighbors over conflicting territorial claims & ambitions to match the US & Russia in ballistic missile, stealth fighter & other weapons technology.  That figure in a budget report released while Li spoke is less than the double-digit increases of earlier years but outpaces economic growth & is a marked rise in real terms at a time when inflation is close to zero . Foreign analysts say total military spending is up to 40% more than the reported figure, which is the world's 2nd-highest after the US.

China sets economic-growth target of 6%, aims to be more self-reliant on tech

US & global benchmark crude-oil prices log their highest settlements since 2019, up more than 7% for the week, a day after OPEC & its allies (OPEC+), in a surprise move, said they would rollover current production cuts to the end of Apr.  Saudi Arabia also extended its voluntary output cut of 1 M barrels per day, which was due to expire at the end of Mar, thru the month of Apr, though Russia & Kazakhstan have been allowed a modest production boost for next month.  West Texas Intermediate (WTI) crude for Apr rose $2.26 (3.5%) to settle at $66.09 a barrel.  Front-month contract prices saw their highest finish in 2 years after US benchmark crude prices surged 4.2% on Thurs.  May Brent crude, the global benchmark, gained $2.62 (3.9%) to settle at $69.36 a barrel, following its 4.2% rally on Thurs.  Prices settled today also at the highest in years.  For the week, WTI crude ended 7.5% higher, while Brent crude logged a weekly climb of 7.7% — its 7th straight weekly gain.  Thurs's OPEC+ decision is viewed by market participants as the group adopting a cautious approach to the global economic recovery from the pandemic that has disrupted uptake of fossil fuels & pummeled crude values.  Data from Baker Hughes today showed that the number of active US oil-drilling rigs edged higher for a 2nd straight week, up by one to 310 rigs.

WTI, Brent oil settle at highest levels since 2019 after OPEC+ decision

In early trading, Treasury yields rose to about 1.6%, hovering around a one-year high after the Labor Dept's Feb jobs report showed the economy made additional strides to bring back payrolls early this year, with jobs rising by a better-than-expected 379K during the month.  The above average payroll report, upward revisions, & a falling unemployment rate (to 6.2%) point to continued recovery.  But the impact of the massive stimulus bill is being evaluated.  For the week, Dow gained 600 while NAZ fell 270 because of selling in the last 3 days.        

Dow Jones Industrials