Markets rise on encouraging news about Abbott's vaccine

Dow climbed 160, advancers over decliners about 4-3 & NAZ gave back 39.  The MLP index went up 1+ to the 124s & the REIT index advanced 6 to 361 (5 month high).  Junk bond funds barely budged in price & Treasuries remained weak.  Oil slid below 43 & gold dropped 15 to 1937 (more on both below).

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The US & China raded jibes as military tensions grow between the world's 2 largest economies, with the US defense chief vowing not to “cede an inch” in the Pacific & China saying the US was risking soldiers’ lives.  Both are at loggerheads over issues from technology & human rights to Chinese military activities in the disputed South China Sea, with each accusing the other of deliberately provocative behaviour.  In the latest US move against China blacklisted 24 Chinese companies & targeted individuals over construction & military actions in the busy South China Sea waterway.  In Hawaii, Defense Secretary Mark Esper said Beijing is using an aggressive military modernization program in a bid to project power globally.  “To advance the CCP’s agenda, the People’s Liberation Army continues to pursue an aggressive modernisation plan to achieve a world class military by the middle of the century,” Esper said, referring to the ruling Chinese Communist Party.  “This will undoubtedly involve the PLA’s provocative behaviour in the South and East China Seas, and anywhere else the Chinese government has deemed critical to its interests.”  However, the US also wants to “hopefully continue to work with the People’s Republic of China to get them back on a trajectory that is more aligned with the international rules based order,” Esper added.  Speaking before a regional tour, Esper described the Indo-Pacific as the epicentre of a “great power competition with China.”  In Beijing, China's Defense Ministry shot back at “certain U.S. politicians” it said were damaging Sino-US military ties in the run-up to the Nov election for their own selfish gain, even seeking to create military clashes.  “This kind of behaviour puts the lives of frontline officers and soldiers on both sides at risk,” spokesman Wu Qian told reporters.  China is not scared of “provocation and pressure” from the US, & will resolutely defend itself & not allow the US to cause trouble, he added.  “We hope the U.S. side will truly adopt a strategic vision, view China’s development with an open and rational attitude, and leave behind the quagmire of anxiety and entanglement.”  The tension, including China's drills this week along its coast, have sparked fears of accidental conflict, against which Taiwan Pres Tsai Ing-wen warned.

US, China trade jibes as military tensions worsen

Pres Trump plans to announce today the purchase of 150M rapid Covid-19 tests as part of a $750M agreement with Abbott Labs (ABT), a Dividend Aristocrat, a White House official confirmed.  “This is a major development that will help our country to remain open, get Americans back to work, and kids back to school,” White House communications director Alyssa Farah said.  “The Trump Administration is proud to partner with Abbott labs to make this purchase possible to help the American people.”  The Food & Drug Administration (FDA) granted emergency use approval Wed to ABT for its new coronavirus antigen test, which it said is the first Covid-19 test that costs about $5 & delivers results in minutes on a testing card without lab equipment, similar to a pregnancy test.  ABT said after it received FDA authorization that it will “ship tens of millions of tests in September, ramping production to 50 million tests a month in October.”  The test, called BinaxNOW, is an antigen test, which are somewhat more likely to incorrectly diagnose someone as negative when they are in fact infected than by using molecular tests.  While molecular tests are the most accurate on the market, they depend on technical lab equipment, trained personnel & a strained supply chain, which makes scaling up molecular tests to a massive scale difficult.  “Due to the potential for decreased sensitivity compared to molecular assays, negative results from an antigen test may need to be confirmed with a molecular test prior to making treatment decisions,” the FDA said in its authorization of the BinaxNOW test.  “Negative results from an antigen test should be considered in the context of clinical observations, patient history and epidemiological information.”  The test is only authorized for use in patients suspected to have Covid-19 and “within seven days of symptom onset,” the FDA adde, meaning it is not authorized to test asymptomatic or presymptomatic people.  The stock rose 8.10 (8%).
If you would like to learn more about ABT, click on this link:
club.ino.com/trend/analysis/stock/ABT?a_aid=CD3289&a_bid=6ae5b6f7

Trump to announce $750 million deal with Abbott for at least 150 million rapid coronavirus tests

Gold futures end lower after a volatile session that saw prices move in either direction by as much as 2%.  Federal Reserve Chair Jerome Powell announced changes to the central bank's policy framework in a speech at the Jackson Hole economic symposium that were perceived as offering a more accommodative monetary policy, & bullish for bullion buyers in the long run.  However, the policy change was largely expected & analysts said some investors resorted to profit taking in the wake of the speech.  The Fed said that it has adopted an “average inflation target” & recognizes the benefits for a strong labor market.  The Fed’s strategy retains 2% annual inflation as a target but the Fed said it “seeks to achieve inflation that averages 2% over time.”  “It is hard to overstate the benefits of sustaining a strong labor market, a key national goal,” Powell said discussing the policy shift.  Dec gold fell $19 (1%) to settle at $1932 an ounce.  Prices traded as low as $1914, but also as high as $1987 during the session.  Prices rose 1.5% yesterday to finish that day at around a one-week high.  Traders parsed the latest economic data, with new applications for US jobless benefits down again in late Aug to just above 1M & resumed a downward trend, perhaps signaling the resumption of a gradual if painfully slow recovery in the US labor market.  Initial jobless claims, a rough gauge of layoffs, declined by 98K to 1M from 1.1M in the prior week, the Labor Dept said.  Meanwhile, a historic decline in US 2nd-qtr GDP was revised to 31.7% annual rate from 32.9%.

Gold ends lower in volatile session as Fed policy strategy change lacks element of surprise 

Oil futures declined, putting an end to a 3-session streak of gains in US prices, as traders bet on a quick recovery for the energy market in the Gulf of Mexico region after one of strongest hurricanes in years made landfall near the heart of the US refining industry.  Hurricane Laura came ashore in the early today, near the Texas-Louisiana border, as a Category 4 storm after achieving sustained winds of around 150 miles per hour.  The National Hurricane Center said Laura has since weakened to a tropical storm as it moved further inland over Louisiana and Arkansas currently.  The Interior Dept's Bureau of Safety & Environmental Enforcement estimated that 84.3% of current oil production in the Gulf of Mexico was shut in, unchanged from a day earlier.  It also said 60.1% natural-gas production was shut, down from 60.9% a day earlier.  Over 45% of  US petroleum refining capacity is located along the Gulf Coast, according to the Energy Information Administration.  West Texas Intermediate crude for Oct declined 35¢ (0.8%) to settle at $43.04 a barrel.  Oct Brent crude, the global benchmark, declined 55¢ (1.2%, to $45.09 a barrel

U.S. oil prices suffer first loss in 4 sessions as traders bet on quick output recovery from Gulf storm

On what was schedule to be a quiet day, Powell spoke & markets listened.  They like what he had to say.  At lunchtime there was nervousness & stocks were sold.  But buyers returned in the PM, taking the Dow higher, about 1K below its records reached in Feb.  The ABT vaccine excited investors.  The Dow is up over 2K in Aug, not bad!!

Dow Jones Industrials