Markets extend decline as covid cases rise

Dow sank 317 (off session lows), decliners over advancers about 4-1 & NAZ dropped 76.  The MLP index was off 2+ to the 121s & the REIT index fell 6+ to the 362s.  Junk bond funds were little changed & Treasuries remained in strong demand.  Oil slid back to 41 & gold went up 12 to 1873 (more on both below).

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Newly diagnosed coronavirus cases & hospitalizations continue to rise in nearly every state across the country as the US reports fresh record one-day spikes in cases.  Average daily new cases are up by at least 5% over the last week in at least 47 states & DC, according to Johns Hopkins University.  Average daily new cases are steady or falling only in Louisiana, Montana & Georgia, but that’s likely due to reporting errors in Louisiana & Georgia.  Montana appears to be the only state truly below that 5% threshold, with an average of 873 new cases each day, 2.1% higher on a weekly basis.  Across the country, the US reported over 143K new cases, setting a new record one-day spike.  That brings the 7-day average to more than 127K, up nearly 35% compared with a week ago.  Over the past 5 days, the US has reported a fresh record in daily new cases on 3 days, Hopkins data shows.  It's not just cases that are rising.  The 7-day average of hospitalized Covid-19 patients is up by at least 5% in 46 states.  Across the country, there are more than 65K people currently hospitalized with Covid-19, more than at any other point in the pandemic.  “We’re piercing the previous records, and ICU admissions are going up quickly, as well, with 12,000 people in the ICUs,” former Food & Drug Administration Commissioner Dr Scott Gottlieb said.  “Hospitalizations right now are rising by about 1,600 people a day, but that’s going to continue to increase, as well.”  Gottlieb said the outbreak across the US is different now than from earlier points in the pandemic in that the virus is spreading rapidly across all of the US rather than just certain regions (hot spots).

Average Covid cases, hospitalizations rise in nearly every state across U.S.

Top Dems in Congress said that a record surge in US coronavirus infections raises the urgency for a new relief bill.  The part of the process that has confounded Washington for months — crafting a bill backed by both Dems & Reps — has become no less of a challenge since Election Day.  House Speaker Nancy Pelosi said she still supports legislation to inject at least $2.2T into the American health-care system & economy.  She cited yesterday's record 143K new Covid-19 infections as reason to stick to a spending demand the GOP has seen as unreasonable.  We’re at the same place, even more so with the pandemic,” she added.  “Because look at those numbers!”  Her comments reflect a fundamental disagreement with Reps over what the US needs to recover from the pandemic.  The gulf has lingered throughout start-&-stop talks between Pelosi & the White House.  Today, Senate Majority Leader Mitch McCommell acknowledged the need for another aid package but said it should resemble the GOP's $500B proposal that Senate Dems blocked before the election.  “I gather [Pelosi] and the Democratic leader in the Senate still are looking at something dramatically larger,” he said.  “That’s not a place I think we’re willing to go. But I do think there needs to be another package. Hopefully we can get past the impasse we’ve had now for four or five months and get serious about doing something that’s appropriate.”

Democrats and Republicans are still far apart on economic stimulus as coronavirus infections surge

Federal Reserve Chair Jerome Powell said he worries about women, children & business owners who face long-term consequences from the coronavirus pandemic.  His chief concerns as the world tries to recover from the Covid crisis, Powell said is “the risk that there is some longer-run damage to the productive capacity of the economy and to people’s lives who have been disrupted by the pandemic.”  “It’s women who are not by choice out of the labor market,” Powell continued.  “It’s kids who are not getting the education they should be getting. It’s small businesses with generations of intellectual capital that is being destroyed, and it’s just workers who have been out of work for a long period of time and losing their connection to the labor force and losing the life that they had.”  Most of the economic data lately has been strong, particularly regarding employment.  Nonfarm payroll growth for Oct was better than expectated & some 12M workers have returned to their jobs following 22M layoffs in Mar & Apr.  Weekly jobless claims fell last week to their lowest level since Mar, the Labor Dept reported today.  However, some economists worry that a slowdown could come as coronavirus cases increase & states implement restrictions on business & personal activities.

Here are the things that scare Jerome Powell the most about the economy right now

Gold prices ended higher today as a strong growth in US coronavirus cases contributed to losses in the US stock market as well as a slide in gov bond yields.  The US reported more than 144K new cases yesterday, up 4K from the day before.  The total number of confirmed cases nationwide topped 10.4M.  Dec gold climbed $11 (0.6%) to settle at $1873 an ounce, following a 0.8% decline yesterday.  Rising yields can undercut appetite for precious metals as can a climb in the greenback, which commodities tend to be priced in.  Gold is off nearly 4% so far this week after its worst daily drop in 7 years on Mon.

Gold settles higher on risk-off trade, fall in bond yields

The US budget deficit totaled $284B in Oct at the start of the new fiscal year, when another large increase in gov debt is expected because of the damage the coronavirus has wrought on the economy.  The US ran a record $3.1T deficit in the most recently concluded fiscal year, reflecting a massive effort  to prop up the economy, save struggling businesses & help Ms of unemployed Americans.  By comparison, the deficit in fiscal year before the pandemic was a much smaller — though still historically large — $984B.  The gov operates on annual budget that runs from Oct 1-Sep 30 instead of using the calendar year more common in the business world.  The current year is fiscal 2021.  In the same month in 2019, outlays were a much smaller at $380B.  Tax receipts registered $238B in Oct, just 3% less than a year earlier.  Most companies have tried to get back to normal & sales & profits have rebounded, but lots of businesses are still hurting, especially smaller ones that rely on face-to-face contact with customers.  The deficit in Oct was somewhat smaller at $222B after adjusting for calendar shifts that affect federal payments for Social Security beneficiaries & other programs.  Congress is likely to approve more financial aid in 2021 to bolster the economy & tax receipts probably won't fully recover to precrisis trends until a vaccine is widespread & the pandemic fades.   That will ensure another huge deficit for at least the next year — & perhaps even longer.  What's made it somewhat easier on the US are historically low interest rates.  Low rates brought on by the pandemic are actually holding down the gov's enormous borrowing costs.

U.S. budget deficit climbs $284 billion in October as coronavirus-tied debt piles up

Oil futures settled with a loss, pressured by an unexpected weekly climb in US crude inventories & lower demand expectations on the back of ongoing COVID-19 concerns.  Prices had traded higher for much of the session on expectations that a potential vaccine for the virus will ease demand worries & on bets that OPEC may take action to extend output cuts.  Dec West Texas Intermediate (WTI) crude fell 33¢ (0.8%) to settle at $41.12 a barrel after tapping an intraday high of $42.19.  Jan Brent crude, the global benchmark, added 25¢ (0.6%) at $44.05 a barrel.  The Energy Information Administration reported that US crude inventories climbed by 4.3M barrels last week.  The data defied expectations for a 3M-barrel decline forecast.  WTI crude prices are still up more than 10% so far this week, while Brent has gained around 10% following a rally Mon & Tues.  The IEA today deepened its forecasted drop in oil demand for 2020 by 400K barrels a day from last month's view.  Total global oil demand is now seen at 91.3M barrels a day this year, down 8.8M barrels a day from 2019.  The IEA cited resurgent COVID-19 infection rates in the US & Europe.  The cut comes after OPEC cut its forecast by 300K barrels a day.  Oil prices settle lower after surprise climb in US crude supplies, rise in coronavirus cases 

Oil prices settle lower after surprise climb in U.S. crude supplies, rise in coronavirus cases

After advancing to record levels early this week, stocks were sold again today.  Bargain hunting into the close trimmed losses.  New cases of Covid keep rising because the virus wants to continue fighting.  A lack of another stimulus package also worries traders.  Investors are still optimistic, but the bulls are having a more difficult time making their case.

Dow Jones Industrials