Dow dropped 66, decliners over advancers 3-2 & NAZ shot up 81 to yet another record. The MLP index fell 3+ to the 131s & the REIT index was off 1+ to the 358s (flattish for the last 2 months). Junk bond funds were mixed & Treasuries went higher. Oil slid lower in the 42s & gold rose 16 to 2015 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
China refineries processed a record amount of crude oil last month, & now they are looking to the US to find crude. China is looking to book oil tankers for Aug & Sep to ship
at least 20M barrels of US crude. The
move comes as there is increasing pressure on the Chinese to fulfill
their commitments to the Phase One US-China trade deal
as they lag in the purchase of many US commodities. The move by China
to ramp up oil purchases comes right ahead of the review of the
US-China trade deal, initially slated for Sat, which was delayed
due to scheduling issues with no new date agreed upon. The
move by China is a positive sign for the fate of global
trade. Still, the irony is that it may not immediately help US oil
producers & may make our own oil inventories very tight. It was not
too long ago when US energy producers were begging China to buy our
abundant supply, but now not so much. US oil inventories are starting to fall. In part, because many US
oil producers have been squeezed out of business by the recent
coronavirus oil price crash, or existing companies lack the capital to
increase production. Since the Covid-19 pandemic,
US oil production has seen a drop of well over 2M barrels per
day. That is the most significant drop since they have been keeping
records. The OPEC Plus production cuts have also taken their toll on
US oil supply leading to the biggest 3-week drop in Gulf Coast
crude supplies in history. That means that US oil supplies were
already falling, & the major purchase of oil by China may cause a
spike in US energy prices when we get closer to the winter heating
season. Yet a move by the Trump administration may ease that short squeeze
after the administration successfully seized Iranian fuel from four
tankers sailing to Venezuela, increasing its “maximum pressure campaign”
against Tehran. Iran & Venezuela have tried to outmaneuver sanctions
that the US has placed on both countries by forming an oil
partnership. The confiscated cargo, first reported Thurs, was a direct violation of US sanctions. A senior
official clarified that the tankers were not seized, but the oil is now
in US possession. It's probably a good thing that the US seized that oil because now we can turn around & sell some of it to China. That extra oil should come in handy as our supply tightens.
China thirsty for US crude oil after record refinery action
Kohl’s (KSS) revenue fell 23% during the fiscal Q2, which wasn't as bad as feared as the coronavirus pandemic forced stores to close across the US & many shoppers stayed home. Instead, sales shifted online, & digital sales soared 58% compared
with a year earlier. Shoppers stocked up on workout gear, pajamas, toys & cozy clothing. The online business made up 41% of total
sales, compared with 20% one year earlier. Still, the retailer offered a grim outlook ahead of the all-important holiday season. “As
we look ahead, we are planning for the crisis to continue to impact our
business in the near-term,” CEO Michelle Gass said. The company is
planning “conservatively” for the remainder of 2020. Management added
the back-to-school season has started “soft,” with many
parents still unclear about how & when their children will be
returning to classrooms again. EPS fell to 30¢ from $1.51 a year earlier. Excluding
one-time charges, the retailer lost 25¢ a share, which was better
than the loss of 83¢ loss forecast. Net sales fell to $3.2B from $4.2B. That was better than the $3.1B expected. KSS did not report same-store sales, which track revenue at stores open for at least 12 months, due to the pandemic. Gross profit
margin shrank to 33.1% from 38.8% a year earlier, due to increased
shipping costs for online orders & heightened promotions. KSS temporarily
shut stores to try to help curb the spread of Covid-19, but said it has
since reopened all locations “with new safety and operating procedures,
accelerated digital growth, & showed great discipline in managing
inventory & expenses meaningfully lower.” It ended Q2 with $2.4B in cash on hand & $500M of availability on its credit revolver. KSS is expecting shoppers to begin buying for the
holidays earlier this year due to the pandemic & the uncertainty it
brings with it. “We will meet their needs accordingly,” the company said. The stock dropped 3.44 (15%). If you would like to learn more about KSS, click on this link:
club.ino.com/trend/analysis/stock/KSS?a_aid=CD3289&a_bid=6ae5b6f7
Kohl’s paints grim picture of holiday shopping as pandemic hits sales, shares tank
US coronavirus cases appear to be ticking lower, with the 7-day
average of newly reported infections falling below 50K for the first
time in nearly a month. The US reported 35K new cases of the virus yesterday, bringing the average over the past 7 days to 49K, down
nearly 10% compared with a week ago, according to Johns Hopkins University data. New cases regularly drop early in
the week as labs & local gov offices reopen after the weekend.
Home-building activity has staged a significant turnaround from the coronavirus-related slowdown. US home builders began construction on homes at a
seasonally-adjusted annual rate of 1.496M in Jul, up 22.6% from
the previous month & 23.4% from a year ago, the Census Bureau
reported. The pace of home building is now 7% down from the
pre-coronavirus high. Permitting activity occurred at a seasonally-adjusted annual rate of 1.495M, up 18.8% from Jun & 9.4% from Jul 2019. The forecast called for housing starts at a pace of 1.252M & building permits to come in at a
pace of 1.33M. Increases in both single-family & multifamily starts contributed to the overall increase. Construction on buildings with 5 or more units increased 56.7% on a
monthly basis, while single-family starts rose 8.2%. Demand for homes was at a fever pitch before the pandemic & it's now returned in earnest. Low mortgage rates have made buying a
home a more affordable proposition for Ms of Americans, while the
reality of living, working & attending school at home has prompted
many households to search for bigger properties, particularly in the
suburbs. However, there is a shortage of existing homes for sale to meet this
excess demand. And that's creating more interest in newly-built homes,
which is a boon to the home-building sector.
Housing starts soar 22.6% in July as Americans re-enter the housing market in droves
Gold prices finished higher to extend a rally, with the
precious metal regaining traction above the psychologically significant
level at $2K amid persistent weakness in the $ & slack in
gov bond yields. Moves in bullion come as the global death toll for the coronavirus
pandemic approached 775K, according to data compiled by Johns Hopkins
University. And signs of Sino-American tensions were evident as the Commerce Dept issued new rules curbing Huawei's access to foreign-made chips yesterday. Dec gold rose $14 (0.7%) to settle at $2012 an ounce, after the
metal climbed 2.5% yesterday to mark its best daily point & percentage
gain since Apr 22.
Gold ends higher for a second session and retakes perch atop $2,000
Oil futures edged lower in quiet trade as traders looked ahead to data on US crude supplies & a meeting by an OPEC+ panel charged with monitoring the effect of production cuts by major producers. West Texas Intermediate crude for Sep was down 23¢ (0.5%) at $42.66 a barrel. The global benchmark, Oct Brent crude fell 11¢ to $45.26 a barrel. Crude gained ground yesterday, buoyed in part by reports that compliance with output cuts by members of OPEC+ — OPEC & its allies, notably Russia — ran at a historically high 94-97% in Jul, according to surveys. OPEC+'s Joint Technical Committee, which met yesterday, pegged compliance at 95%. The OPEC+ Joint Ministerial Monitoring Committee, which makes recommendations on output, is set to meet tomorrow, but is largely expected to take a wait-&-see approach after members in Aug went ahead with a plan to scale back output cuts from 9.7M barrels a day to 7.7M barrels a day, albeit with some producers who had failed to abide by earlier restrictions agreeing to maintain deeper cuts.
Oil prices struggle for direction as traders await supply data, OPEC+ committee meeting
Traders are anxiously waiting to learn about the new stimulus bill which is still in limbo. On the coronavirus front, the cases are declining but not very quickly. While the news is good, it will take time to have a meaningful effect on getting the virus under control. The NAZ & S&P 500 extended their rallies, bringing new record highs. But the Dow is under its record (shown below) & down about 800 YTD.
Dow Jones Industrials
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