Friday, July 30, 2021

Markets drifted lower but rose for the month

Dow retreated 149, decliners over advancers about 2-1 & NAZ slipped 105.  The MLP index lost 3 to the 182s & the REIT index was fractionally higher to the 464s.  Junk bond funds were mixed & Treasuries continued in demand.  Oil crawled higher in the 73s & gold declined 22 to 1814 (more on both below).

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Live 24 hours gold chart [Kitco Inc.]

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The pace of vaccinations is rising again as the delta variant drives a new surge in cases across the US, especially in states with the lowest vaccination rates &, not so coincidentally, the worst outbreaks.  Centers for Disease Control & Prevention data shows nearly 800K shots were recorded nationwide on Sun, the highest single-day total in weeks.  The 7-day average of reported vaccinations, including first & 2nd shots, has risen by 16% over the past week to 615K shots per day as of yesterday.  The stark contrast in hospitalizations & deaths between the vaccinated & unvaccinated has become clear in recent weeks & may be convincing people on the fence about getting the shots, according to Jen Kates, a senior VP at the Kaiser Family Foundation.  The overwhelming majority of serious Covid cases — 97% of hospital admissions & 99.5% of Covid deaths — are occurring among those who are not vaccinated.  “Cases are rising, and almost all of those who are hospitalized and dying are unvaccinated,” she said.  “The data are right there, and I think people are realizing that vaccines are our best bet at controlling this.”  The number of first vaccine doses has climbed more sharply than the overall rate in recent days, representing new people getting their very first shots An average of about 390K first doses were administered every day over the past 7 days as of yesterday, up 31% from a week ago.  “That is the marker you want to see — the first doses trending up,” said Kates, because it represents new people getting their first shots.  That includes people receiving a first shot of the vaccine.  The pace of daily shots remains far from peak levels, when more than 3M daily vaccinations, were being reported in mid-Apr.  But the upward trend in first doses is encouraging, public officials say.  48 states & DC have reported an increase in average daily first doses compared to the prior week, up from 37 states with increasing rates of first doses a week ago.  States with the worst outbreaks are seeing the biggest jumps in vaccination rates. 

U.S. vaccine rates rise as Americans in hard-hit states rush to get Covid shots

Exxon Mobil, a Dow stock & Dividend Aristocrat, posted its biggest quarterly profit in more than a year that also topped estimates as demand for oil, gas & chemicals rebounded, quelling some concerns over its recent weak performance.  2021 capital spending is expected to be at the lower end of the previously forecast of $16-19B.  "Positive momentum continued during the second quarter across all of our businesses as the global economic recovery increased demand for our products," CEO Darren Woods said.  Some of the deep cost cuts undertaken last year as the COVID-19 pandemic slashed demand have remained, allowing price gains to bolster profits.  EPS was $1.10 in Q2, beating the estimate of 99¢.  Oil & gas production also led the way in the qtr with an operating profit of $3.19B.  Output fell 2% to 3.6M oil-equivalent barrels per day during the qtr.  The company's net income for Q2 came in at $4.69B, compared with a loss of $1.08B a year ago, which included a gain related to reversing an inventory writedown.  Absent the inventory change, the loss would have been $3B.  The stock lost 1.40
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Exxon surpasses estimates with largest quarterly profit in a year

Chevron (CVX), a Dow stock & Dividend Aristocrat, reported its highest profit in 6 qtrs & joined an oil industry stampede to reward investors with share buybacks, as rebounding crude oil prices carried earnings & cash flow to pre-pandemic levels.  Oil & gas are trading near multi-year highs as fuel consumption has thrown off pandemic losses & natural gas has soared on weather demand.  The company cut its annual capital spending forecast.  At about $13B, it is now below what it had spent last year.  It had earlier budgeted $14-16B a year in annual capital spending thru 2025.  CVX last year cut expenses to allow profits to flow at above $50 a barrel.  Lower costs & higher prices generated the highest cash flow in 2 years, enabling the company to pare debt & resume share repurchases.  Share buybacks will resume this quarter at an annual rate of $2-3B, said CEO Michael Wirth, about ½ the annual rate it had planned.  "We’ve always said we would begin buybacks when we were confident that we could sustain it, and our breakeven is $50 per barrel and we are now well above it," ChiefFO Pierre Breber said.  "We’re trying to win back investors...demand for our products has fully recovered, demand for our stock is recovering."  The 2nd-largest US producer's oil & gas production earned $3.18B in the qtr, compared with a loss of $6.09B a year ago.  Total oil & gas production rose 5% over a year ago to 3.13M barrels of oil equivalent per day (boepd), while CVX sold its US oil for $54 a barrel last qtr, compared with $19 a year earlier.  CVX expects output from the Permian basin to be almost same as last year’s, but said it will add drilling rigs in H2.  CFO Breber said cost-cuts are largely over & it has achieved targeted savings from its 2020 takeover of Noble Energy.  It is aiming to raise as much as $2B from asset sales this year.  Adjusted EPS of $1.71 per share beat estimates of $1.59.  The stock was off 98¢
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Chevron tops profit estimates, joins share buyback stampede

Gold futures finished lower, capping a strong week & month for bullion that recently saw prices touch their highest levels in 6 weeks.  Dec gold, the most-active contract, fell $18 (1%) to settle at $1817 an ounce.  A 1.7% surge yesterday marked the highest settlement for the most-active futures contract since Jun 16 & largest one-day percentage gain since May 6.  For the week, bullion based on the most-active contracts rose 0.9% & scored a 2.6% monthly advance, its 3rd such gain of the past 4 months.  Gold gained yesterday, buoyed by weaker-than-expected US economic data, even as the Federal Reserve indicated Wed that the central bank may taper its bond-buying programs in coming months.  Data released today revealed that inflation in the US rose sharply again in Jun, with the PCE price index up 0.5%.  Separately, data showed consumer spending rose by 1% last month.  Also, the final reading of University of Michigan's consumer sentiment index declined to 81.2 in Jul from 85.5 in Jun.

Gold prices decline, but tally a rise for the month

Oil futures settled higher, shaking off earlier declines as tight US crude supplies helped lift prices up for a 4th month in a row.  US benchmark West Texas Intermediate crude for Sep rose 33 (0.5%) to settle at $73.95 a barrel, the highest front-month finish since Jul 13.  Front-month prices logged a 2.6% weekly rise & a 0.7% monthly climb.  Global benchmark Brent crude saw its front-month Sep , which expired at the end of the session, move up by 28¢ to end at $76.33 a barrel, around 3% higher for the week & up 1.6% for the month.  The most-actively traded Oct Brent crude contract rose 31¢ to settle at $75.41 a barrel.  Crude got a boost earlier this week as US gov data showed a weekly drawdown in domestic crude, gasoline & distillate inventories.  Domestic crude inventories are tight at 436M barrels last week — about 7% below the 7-year average for this time of year, according to the Energy Information Administration.

Oil prices finish higher to score a 4th-straight monthly gain

The news on vaccinations sounds good although the virus continues its fight.  Stocks, although choppy, had a fairly good month with the Dow gaining over 400.  The pork filled bills in Congress, the fight with the virus & confusion about wearing masks are major issues to watch.

Dow Jones Industrials

Markets fall after key inflation indicator rises

Dow dropped 123, decliners over advancers 5-4 & NAZ was off 103. The MLP index fell 1+ to the 184s & the REIT index jumped 4+ to 468.  Junk bond funds fluctuated & Treasuries were heavily purchased.  Oil did little in the 73s & gold pulled back 8 to 1827.

AMJ (Alerian MLP index tracking fund)

CL=FCrude Oil73.90

GC=FGold  1,828.90
 -6.90 -0.4%



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The core personal consumption expenditures price index, the Federal Reserve's preferred inflation measure, accelerated in Jun by the most on an annual basis in almost 3 decades.  Core PCE, which excludes food & energy, increased 3.5% year over year in Jun, according to the Bureau of Economic Analysis.  The reading, which was the highest since 1991, was up fractionally from last month's 3.4% print.  Prices rose 0.4% on a monthly basis, slowing from the 0.5% increase in May.  The forecast anticipated prices would climb 3.7% annually & 0.6% month over month.  Overall, the personal consumption expenditures price index rose 4% year over year & 0.5% in Jun.  Last month, prices increased at a 3.9% annual rate.  Businesses have been grappling with higher costs in a number of areas, ranging from commodities to logistics, as the economy looks to put the COVID-19 pandemic in the rear view mirror.  Lockdowns aimed at slowing the spread of the virus resulted in supply-chain disruptions that have limited output amid a period of strong pent-up demand.  That has resulted in a number of companies hiking prices.  The Federal Reserve has said this period of rising prices is transitory & that bottlenecks that have occurred as a result of the pandemic will eventually work themselves out.  At that point, the Fed anticipates price pressures will ease.  The report also showed personal income ticked up 0.1% month over month versus a 2.2% decline in May.  Personal spending was up 1% in Jun after slipping 0.1% the previous month.  The forecast expected income to decline 0.3% & consumption to tick up 0.7%.

Fed's preferred inflation reading shows prices jump 3.5% annually

The CDC warned House lawmakers that the delta variant sweeping across the country is as contagious as chickenpox, has a longer transmission window than the original Covid-19 strain & may make older people sicker, even if they've been fully vaccinated.  The warning was made in a confidential document that was reviewed & authenticated by the federal health agency.  Delta, now in at least 132 countries & already the dominant form of the disease in the US, is more transmissible than the common cold, the 1918 Spanish flu, smallpox, Ebola, MERS and SARS, according to the document.  Only measles appears to spread faster than the variant.  “The war has changed,” officials of the Centers for Disease Control & Prevention (CDC) wrote.  Health officials said federal & state leaders should communicate to the public the benefits of getting vaccinated, adding the Covid vaccine shots reduce the risk of severe disease & death “10-fold or greater” & reduce the risk of infection “3-fold.”  Vaccines prevent more than 90% of severe disease, but may be less effective at preventing infection, they said, making community spread among the vaccinated more likely.  The document said 35K symptomatic infections are occurring per week among 162M vaccinated Americans.  Separately, the CDC said 5914 fully vaccinated people have been hospitalized or have died with Covid infections as of Jul 19, the most recent data available.  Breakthrough cases, which occur in the fully vaccinated, happen more frequently in gatherings of people & in groups at risk of primary vaccine failure.  Health officials also said federal & state leaders should consider vaccine mandates, particularly for health-care workers, universal masking & other community mitigation strategies.  Pres Biden announced yesterday his administration would require federal workers to prove their vaccination status or submit to a series of rigorous safety protocols.

CDC warns delta is as contagious as chickenpox and may make people sicker than original Covid

The Senate will vote today to move forward with a bipartisan infrastructure bill as Majority Leader Chuck Schumer pushes to pass it as soon as next week.  The procedural measure will need a simple majority to pass in the Senate split 50-50 by party.  The chamber last advanced the proposal by a 67-32 margin in a Wed test vote.  The vote continues a scramble by Dems to clinch 2 massive pieces of their economic agenda before the Senate leaves for its recess scheduled to start Aug. 9. The chamber could stay in session thru the weekend to debate & amend the plan.  The measure would put $550B in new funds into transportation, power, water & broadband.  While negotiators have outlined how much money would go into everything from roads to railways & electric vehicle charging stations, senators have not released final legislation.  Dems aim to pass the bill along with a 2nd, separate $3.5T package that would include a bevy of other party priorities.  The proposal could address child care, paid leave, tax credits for households & climate policy.  Schumer hopes to approve a budget resolution, a key step in getting the bill thru Congress, before the Senate leaves for its recess.  The vote would unlock the budget reconciliation process, which would allow Dems to pass their plan without a Rep vote.  The bipartisan plan had more than enough GOP support to advance this week.  17 Rep senators including Minority Leader Mitch McConnell, voted to move forward with it Wed.  They joined all 50 Dems.  Their support for the procedural motion does not mean they will back the final bill.  It will need 60 votes to get thru the Senate.

Senate set to advance bipartisan infrastructure bill on Friday in procedural vote

The inflation news is very disturbing, especially because many of those guys in DC don't understand numbers .  They believe money grows on trees & tomorrow will take care of itself.  Watch the goings on in DC before they go on "vacation."  The virus news is not encouraging for investors.  However, with a constantly changing message, it's evaluate its credibility.  In Jul the Dow is up 500 & above 35K.

Dow Jones Industrials


Thursday, July 29, 2021

Markets climb higher following disappointing GDP data

Dow went up 153, advancers over decliners 5-2 & NAZ gained 15.  The MLP index fluctuated in the 185s & the REIT index was flattish in the 464s.  Junk bond funds did little & Treasuries had a little selling.  Oil jumped 1+ to the 73s & gold soared 29 to 1828 (more below).

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]

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Dr Scott Gottlieb said that he expects surging US coronavirus cases, linked to the highly transmissible delta variant, to start decreasing in just a few weeks.  “Probably, in two or three weeks, I think that we were probably about three weeks behind the U.K.,” he added.  “The U.K. clearly is on a downslope...I would expect some of the southern states that really were the epicenter of this epidemic to start rolling over in the next two or three weeks.”  While the epidemic is still expanding across southern states, the rate of expansion is showing signs slowing.  Gottlieb said that the slowdown is a sign that those southern states may be reaching their peak.  Gottlieb did warn, however, that northern states may start to see more delta spread, as rates decrease in the south.  “Here, in this country, it’s going to be much more regionalized now, I don’t expect the density of the spread of delta in states like New York or Michigan to be what it was in the south,” Gottlieb continued.  “We have more vaccine coverage, up there, we’ve had more prior infection, but you will see an uptick in cases, even in states where there is a lot of vaccine coverage, probably just not as severe.”

Delta variant: The epidemic will sweep across the U.S. at different times, Dr. Scott Gottlieb says

Israeli health officials plan to offer booster shots of the Pfizer (PFE)-BioNTech (BNTX) Covid-19 vaccine to people over age 60 as the shot’s effectiveness appears to wane as the delta variant spreads across the world.  The heads of health maintenance organizations that have been administering the PFE vaccine will begin administering a 3rd shots Sun.  The booster shots are available for patients above 60 who have already received their 2nd shot at least 5 months earlier.  The country's Health Ministry reported last week that the 2-dose vaccine is now just 39% effective in Israel where the highly transmissible delta variant is the dominant strain.  The shot still works very well in preventing people from getting seriously sick, Israeli officials said, demonstrating 88% effectiveness against hospitalization & 91% effectiveness against severe illness.  The data out of Israel, which began vaccinating its population ahead of many other countries, is bolstering arguments from drugmakers that people will eventually need to get booster shots to protect against emerging variants.  PFE CEO Albert Bourla yesterday doubled down on his comments that people will need a 3rd dose of the vaccine to maintain its high level of protection against the virus.  The US drugmaker published new data yesterday from a company-funded study that showed the vaccine's efficacy dropped to about 84% after 4-6 months.  “We have seen also data from Israel that there is a waning of immunity and that starts impacting what used to be what was 100% against hospitalization. Now, after the six-month period, is becoming low 90s and mid-to-high 80s,” Bourla said.  The Centers for Disease Control & Prevention, the Food & Drug Administration & the World Health Organization have said they don’t recommend Covid booster shots at this time, citing a lack of data.  US & world health officials have said they are looking at the Israeli research, which was not peer-reviewed & was scant on details.

Israel to give Covid booster shots to some as efficacy appears to wane

The number of Americans collecting unemployment benefits slid last week, another sign that the job market continues to recover rapidly from the coronavirus recession   Jobless claims dropped by 24K to 400K last week, the Labor Dept reported.  Weekly applications have fallen more or less steadily this year — from a peak of 904K in early to Jan.  But they remain high by historic standards.  Before COVID struck the US in Mar 2020, claims were coming in at about 220K a week.  The job market & overall economy have been recovering from the collapse of the spring of 2020.  The rollout of vaccines this year has encouraged businesses to reopen or expand their hours & sent cooped-up consumers back out to visit restaurants, bars & shops.  Still the health crisis isn't over.  COVID-19 cases are ticking up as the highly contagious delta variant spreads among the unvaccinated.  The US is reporting an average of more than 50K new cases a day, up from fewer than 12K a day in late Jun.  The increase in cases could have economic consequences if govs decide to restrict business activity again or if consumers choose to stay at home as a precaution.  For now, though, the economy is so strong that many businesses say they can't find workers.  Employers posted a record 9.2M job openings in May, advertising vacancies faster than applicants can fill them.  Responding to complaints of a labor shortage, 22 states have decided to end a $300-a-week federal employment benefits meant to cushion the economic fallout from the pandemic.  20 states have dropped out of 2 other federal programs -- one of which provides benefits to the self-employed & gig workers & another that serves those who have been out of work for 6 months or longer.  The expanded programs are scheduled to expire nationwide Sep 6.  Overall, 13.2M people were receiving some type of jobless aid, down from 31.9M a year ago.

US jobless claims down 24,000 to 400,000 as economy recovers

Gold futures rallied, buoyed by weaker-than-expected US economic data, even as the Federal Reserve indicated yesterday that the central bank may taper its bond-buying programs in coming months & demand for gold fell in a report from the World Gold Council.  The central bank, however, underscored that policy makers required more economic improvement before moving definitely toward tapering.  During the press conference that followed the statement, Fed Chair Jerome Powell said the FOMC had a deep dive into how & when to taper & said an announcement on when to start a tapering program would depend on the data.  The most-active Dec gold contract rose $31 (1.7%) to settle at $1835 an ounce.  Based on the most-active contracts, that was the highest most-active contract finish since Jun 16 & largest one-day percentage gain since May 6.  Gold also rallied despite a report from the World Gold Council that indicated global gold demand declined in H1 from the same period in 2020, as investment in the precious metal dropped by 60%.  In the first 6 months of this year, world gold demand, excluding over-the-counter trades, totaled 1833 metric tons, down 10% year on year.  The investment segment of gold demand in H1, which includes bars & coins & gold-backed exchange-traded funds (ETFs), totaled 455 metric tons, down 60% from the same period a year earlier,

Gold rallies to a more than 6-week high after Fed policy update and weaker-than-expected U.S. economic data

Oil futures rose, with both US & global benchmark crude marking another settlement at the highest in over 2 weeks, a day after US gov data revealed a weekly drawdown in domestic crude, gasoline & distillate inventories.  Based on the front months, WTI & Brent crude posted their highest settlements since Jul 13 & largest one-day $ & percentage gains since Jul 22.  West Texas Intermediate crude for Sepv rose $1.23 (1.7%) to settle at $73.62 a barrel.  Oct Brent, the most-active contract, added $1.23 (1.7%) to settle at $75.10 a barrel.  The EIA said yesterday that US crude inventories fell by 4.1M barrels last week, marking the 9th weekly decline in 10 weeks.  In addition, crude inventories in Cushing, Oklahoma, fell by 1.2M barrels, leaving inventories at the delivery hub for WTI futures at their lowest since Jan 2020. 

Oil prices extend rise to highest finish in over 2 weeks

Investors did not pay much attention to Powell's comments yesterday & were forgiving about relatively sluggish GDP data.  The goings on in DC may be getting more attention   The Dow had a decent day all considered, but tech stocks were out of favor. 

Dow Jones Industrials