Friday, April 29, 2022

Markets plummet on worries about a big FED rate hike next week

Dow dropped 938 finishing at session lows with heavy selling in the PM, decliners over advancers better than 4-1 & NAZ retreated 536.  The MLP index was off 5+ to the 206s & the REIT index plunged a whopping 23 to the 461s.  Junk bond funds fluctuated & Treasuries ran into a little selling, although the yield on the 10 Year Treasury remains near 2.9%.  Oil erased early gains to end lower & snap a 3-day winning streak, sliding back 1+ to the 104s, & gold jumped 20 to 1911 ( more on both below).

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]




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Intel (INTC), a Dow stock, CEO Pat Gelsinger said he now expects the semiconductor industry to suffer supply shortages until 2024.  In an interview Gelsinger said the global chip crunch may drag on due to constrained availability of key manufacturing tools, serving as an obstacle to expanding capacity levels required to meet elevated demand.  “That’s part of the reason that we believe the overall semiconductor shortage will now drift into 2024, from our earlier estimates in 2023, just because the shortages have now hit equipment and some of those factory ramps will be more challenged,” Gelsinger added.  The CEO's comments come one day after the chipmaker offered a fiscal 2nd-qtr forecast that was lighter than expected.  Its fiscal Q1 earnings & revenue topped expectations, however. its shares were down.  The need for more semiconductors has been growing for years, as the world becomes more digital & processing chips go into everything from smartphones to automobiles to washing machines.  The Covid pandemic caused an acute shortage, though, as factories were disrupted at the same time demand for consumer electronics took off.  The shortage has had significant economic consequences & has contributed to the US economy experiencing its hottest inflation since the early 1980s.

Intel CEO now expects chip shortage to last into 2024

Denmark has become the first country to halt its Covid vaccination program, saying it is doing so because the virus is now under control.  “Spring has arrived, vaccine coverage in the Danish population is high, and the epidemic has reversed,” the Danish Health Authority said.  “Therefore, the National Board of Health is now ending the broad vaccination efforts against Covid-19 for this season,” it said.  People will not be invited for vaccines from May 15, it said, although everyone will be able to finish their course of vaccination.  Denmark's Covid vaccination campaign began soon after Christmas in 2020.  Some 4.8M citizens have been vaccinated with more than 3.6M people receiving a booster shot.  At the same time, many people have been infected since the omicron variant became the dominant strain of the virus, meaning immunity levels among the population are high.  “We are in a good place,” Bolette Soborg, unit manager at the National Board of Health, commented.  “We have good control of the epidemic, which seems to be subsiding. Admission rates [to hospitals] are stable and we also expect them to fall soon. Therefore, we are rounding up the mass vaccination program against Covid-19.”  Soborg insisted that the public can still be vaccinated over the spring & summer if they want, & that vaccination sites will remain open around the country.  He added that immunization was still recommended to people for whom Covid poses a heightened risk, such as those over the age of 40 & for unvaccinated pregnant women.  “We also continue to recommend that you complete your started vaccination course,” he added.  Denmark's move to suspend its vaccination program comes as the Covid situation around the world remains mixed. Europe & the US have abandoned most Covid restrictions, but China is still imposing (or considering) lockdowns as the virus spreads in major cities like Shanghai & Beijing.  Far from scrapping its vaccination program altogether, however, the Danish Health & Medicines Authority said there will probably be a need to vaccinate against Covid-19 again in the fall as the virus continues to mutate.

Denmark becomes the first country to halt its Covid vaccination program

Treasury Secretary Janet Yellen defended Pres Biden's nearly $2T COVID-19 stimulus bill despite criticism that the burst of gov spending helped accelerate the highest inflation in 40 years.  Yellen has helped the White House sell the $1.9T American Rescue Plan, which pumped money directly to households, businesses & local govs to keep them afloat during the COVID-19 pandemic as the gov ramped up vaccine distribution.  "These responses played major roles in igniting a robust recovery," Yellen said.  "Notably, the American Rescue Plan played a central role in driving strong growth throughout 2021, with the United States real GDP growth outpacing other advanced economies and our labor market recovering faster relative to historical experience."  Her comments come as Americans wrestle with the hottest inflation since 1981, which has quickly eroded consumers' purchasing power & sent Pres Biden's approval rating tumbling.  The White House has identified the Russian war in Ukraine, supply chain bottlenecks & other pandemic-induced disruptions in the economy for the recent price spikes, while GOP lawmakers have pinned it on the pres's massive spending agenda.  But the rising price of everyday goods is eating into worker pay, slowing the US economic recovery & forcing the Federal Reserve to aggressively tighten monetary policy.  Yellen argued that the alternative to huge gov spending was an economic downturn that "could match the Great Depression."  "Given this uncertainty, the recovery packages sought to protect against tail risk," she added.  "They were not just tailored to address the median outcome."

Yellen defends Biden's massive stimulus bill, despite sky-high inflation

Gold futures closed higher, finding support as a surge by the $ relented, but it still booked its worst monthly performance since last Sep.  Gold for Jun rose $20 (1.1%) to settle at $1911 an ounce, handing the yellow metal a 1.2% weekly fall & a 2.1% monthly decline, after briefly topping the $2000 level on Apr 18.  The precious metal’s monthly tumble marked its worst in 7 months & its biggest Apr drop since 2013, when gold futures shed 7.8%.  It also helped that the ICE US Dollar Index a measure of the currency against a basket of 6 major rivals, was down 0.7% today, a day after hitting a 5-year high.  Even so, the index remains up 4.7% in Apr.  Economic data was also in focus, with the personal consumption price index, the Federal Reserve's preferred measure of inflation, advancing 0.9% in Mar to an annual 6.6% rate.  The increase stemmed largely from a surge in the cost of gas, with some signs that intense price pressures could begin to ease.  Today also marked the last trading day in a brutal Apr for stocks & other corners of financial markets.

Gold ends Friday higher, but books worst month since Sept. 2021 on strong dollar

Oil futures snapped a 3-day winning streak, but booked solid monthly gains as supply worries tied to Russia's invasion of Ukraine outweigh concerns over a hit to demand from China's COVID lockdowns. West Texas intermediate dropped 1.21 (1.2%) to 104.15.

Oil prices snap 3-day winning streak but book April rise; diesel prices soar

Dow dropped over 800 this week & about a massive 3350 for the month.  Out of control with no end in sight  summarizes what worries investors.  Note: the Dow Jones Equity REIT Index (INDEX) plunged on fears of what higher interest rates will mean for REITs.

Dow Jones Industrials




 




Markets tumble and head for the worst month since March 2020

Dow sank 436, decliners over advancers 5-2 & NAZ pulled back 240.  The MLP index fell 3 to the 209s & the REIT index dropped 12+ to the 472s.  Junk bond funds hardly budged & Treasuries were hit with a little bit of selling.  Oil rose 2+ to the 107s & gold advanced 21 to 1912.

AMJ (Alerian MLP index tracking fund)

CL=FCrude Oil 107.30
   +1.94  +1.8%


















GC=FGold       1,909.40
+18.10  +0.9%

















 

 




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A key measure of annual inflation that is closely watched by the Federal Reserve continued to run hot in Mar as the Russian war in Ukraine, widespread supply disruptions, extraordinarily high consumer demand & worker shortages fuel rapidly rising prices.  The personal consumption expenditures (PCE) price index, which measures costs that consumers pay for a variety of different items, showed that core prices – which exclude the more volatile measurements of food & energy – soared 5.2% in the year thru Mar, according to the Bureau of Economic Analysis.  That measurement is the Fed's preferred gauge to track inflation; it marks the 12th consecutive month the measure has been above the central bank's target range of 2%.  However, it was slightly below the Feb measurement of 5.3%, which was the highest recorded since 1983.  In the one-month period between Feb & Mar, core prices soared 0.3% – matching the level recorded in Feb suggesting prices are leveling off, but are not yet falling.  Including food & energy, the inflation gauge jumped 6.6% in Mar from the previous year, beating out last month's measurement of 6.3% to become the fastest pace since 1981.  On a monthly basis, the headline gain shot up by 0.9%.  The inflation spike largely reflected surging energy costs, which rose 33.9% from a year ago & food costs, which were up 9.2% over that same time period.  The PCE report was accompanied by data on household spending, which showed that consumers shopped at a rapid pace in Mar, with personal spending climbing by 1.1% before accounting for inflation & 0.2% after adjusting for price increases.

The Fed's favorite inflation gauge rose 5.2% in March

Shares of Exxon Mobil (XOM), a Dow stock & Dividend Aristocrat, slid on after the company took a $3.4B after-tax charge related to its Sakhalin-1 operation in Russia.  Earnings were $5.5B during Q1, up from $2.7B in the same period during 2021.  However, results were down from the $8.9B earned during the Q4-2021.  Revenue came in at $90.5 B during the latest period.  The forecast called for the company to generate $92.7B in revenue.  During the same qtr in 2021, revenue was $59.1B.  “Earnings increased modestly, as strong margin improvement and underlying growth was offset by weather and timing impacts,” CEO Darren Woods said.  “The absence of these temporary impacts in March provides strong, positive momentum for the second quarter.”  Results come amid a surge in oil & gas prices.  Prices have seen retreated, but remain above $100 per barrel, boosting the companies' operations.  “First-quarter cash increased by $4.3 billion compared to the fourth quarter of 2021, as strong cash flow from operations more than funded capital investment, additional debt reduction, and shareholder distributions in the quarter. Free cash flow in the quarter was approximately $11 billion,” the company said.  The stock fell 58¢.
If you would like to learn more about XOM click on this link:
club.ino.com/trend/analysis/stock/XOM_aid=CD3289&a_bid=6ae5b6f

Exxon Mobil’s first-quarter profit rises, even after $3.4 billion Russia charge

Chevron (CVX), a Dow stock & Dividend Aristocrat, profit more than quadrupled during Q1 as higher oil & gas prices boosted company results.  The oil giant reported $6.3B in earnings during the period up from $1.3B during the same qtr in 2021 & revenue rose to $54.4B, up from $32B during Q1-2021.  “Chevron is doing its part to grow domestic supply with U.S. oil and gas production up 10 percent over first quarter last year,” CEO Michael Wirth said.  The stock dropped 3.08.
If you would like to learn more about CVX click on this link:
club.ino.com/trend/analysis/stock/CVX_aid=CD3289&a_bid=6ae5b6f 

Chevron’s profit quadruples in the first quarter as higher oil boosts operations

The 2 big energy (the word oil is now obsolete to describe their businesses) reported big earnings, but there is more to the stories than the headline numbers tell.  Nervous investors are buying gold with everybody expecting a 50 basis point increase in the treasury rate at a minimum next week.  Mar has been a brutal month for the stock market with the Dow down a hefty 1200 so far.

Dow Jones Industrials

 






Thursday, April 28, 2022

Markets rally after its recent selloff

Dow bounced back 614 (with a little selling into the close), advancers over decliners about 4-1 & NAZ jumped 382.  The MLP index went up 3+ to the 212s & the REIT index jumped 7+ to the 484s.  Junk bond funds fluctuated & Treasuries saw more selling.  Oil advanced 3+ to the 105s & gold rose 5 to 1893 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Live 24 hours gold chart [Kitco Inc.]




3 Stocks You Should Own Right Now - Click Here!




Caterpillar's (CAT), a Dow stock, sales surged 14% in Q1 as the construction machinery & equipment company saw strong demand from higher end-users & increased inventories from dealers compared with the same period a year ago.  Adjusted EPS rose to $2.88, topping estimates of $2.60.  Total revenue totaled $13.6B, beating expectations of $13.4B.  Revenue was $11.9B a year-ago.  "I’m proud of our global team’s performance as they achieved double-digit sales growth despite ongoing supply chain challenges,"  CEO Jim Umpleby said.  "We remain focused on supporting our customers and executing our strategy for long-term profitable growth."  The construction industries segment sales grew 12% year over year to $6.1B.  The segment's higher sales volume in the US was driven by demand for equipment & aftermarket parts from improving nonresidential construction, as well as continued strength in residential construction & the impact of changes in dealer inventories.  The resource industries segment saw sales jump 30% year-over-year to $2.8B, driven by the impact of changes in dealer inventories & higher end-user demand for aftermarket parts.  The energy & transportation segment's sales rose 12% to $4.5B.  The company dealt with rising costs in the qtr.  Costs & expenses totaled $11.7B, up 13% from a year ago.  Higher manufacturing costs primarily reflected more expensive material & freight costs.  Operating profit margin was 13.7% for Q1, compared with 15.3% for Q1-2021.  The stock fell 1.59.
If you would like to learn more about CAT click on this link:

club.ino.com/trend/analysis/stock/CAT_aid=CD3289&a_bid=6ae5b6f

Caterpillar sales surge on strong construction equipment demand

Russia's Pres Vladimir Putin has warned the West of a “lightning fast” response to any country that intervenes in its war against Ukraine war & creates what he called “strategic threats for Russia.”  “We have all the instruments [to respond] that no one can boast of ... we’re going to use them if we have to,” he said, in what has widely been seen as an allusion to Russia's arsenal of intercontinental ballistic missiles & nuclear weapons.  Russia shocked the European community by halting gas supplies to Poland & Bulgaria because they had refused to pay for the gas in Russian rubles, as Moscow demanded.  The move comes as tensions remain high between Western allies & Russia after Foreign Minister Sergey Lavrov on Mon said the threat of a nuclear war is very significant & the risks should not be underestimated.  Pres Biden has asked Congress to approve $33B in additional money for the Ukraine war, which includes funding for US military support to the embattled nation & a mix of direct cash & supplies for Ukraine.

Biden requests $33 billion for Ukraine war; Putin threatens ‘lightning fast’ retaliation to nations

Merck (MRK), a Dow sock, sold $3.2B of its oral antiviral treatment for Covid in Q1, fueling strong revenue growth for the company.  Results beat profit & revenue forecasts, reporting EPS of $2.14 on $15.9B in revenue.  The company raised its 2022 earnings guidance to $7.24-7.36 per share on $56.9-$58.1B in revenue.  It previously projected EPS of $7.12-7.27 on revenue of $56.1-$57.6B.  Its Covid treatment, molnupiravir, has sold well since the Food & Drug Administration authorized the pill in Dec.  It made up 20% of Q1 revenue.  However, MRK lowered its 2022 sales guidance for molnupiravir to $5-5.5B, down from its previous outlook of $5-6B.  Pharmaceutical sales grew 50% to $14.1B compared with Q1-2021.  Keytruda, an antibody treatment used against several types of cancer, booked sales of $4.8B, up 23% over the same qtr last year.  CEO Rob Davis said Keytruda is growing rapidly as a treatment for triple negative breast cancer in the metastatic setting & as an adjuvant therapy to reduce the risk of the disease returning.  The stock rose 4.20 (5%).
If you would like to learn more about MRK click on this link:
club.ino.com/trend/analysis/stock/MRK_aid=CD3289&a_bid=6ae5b6f

Merck sold $3.2 billion of its Covid oral antiviral treatment in first quarter

Oil futures finished higher after a report said that Germany had dropped its opposition to a EU ban on purchases of Russian oil provided that Berlin is given time to find alternative sources of supply.  Berlin had been seen as a primary hurdle to an EU-wide ban.  West Texas Intermediate crude for Jun rose $3.34 (3.3%) to close at $105.36 a barrel.

Oil ends higher after report Germany prepared to end Russian crude purchases

Gold futures eked out a modest gain, after ending the previous session at a 2-month low, as a surging $ kept pressure on the precious metal & other commodities.  Gold for Jun rose $2 to settle at $1889 an ounce, after ending yesterday at its lowest since late Feb.  The precious metal has struggled with headwinds provided by the $.  The ICE US Dollar Index a measure of the currency against a basket of 6 major rivals, rose to a 5-year high as the Japanese ¥ plunged after the Bank of Japan pledged to buy unlimited amounts of 10-year fixed-rate Japanese Gov bonds to defend a 0.25% yield level.  The € also remained under pressure, slipping below $1.05 for the first time in 5 years.  A stronger $ makes it more expensive to users of other currencies to buy dollar-priced commodities.  Investors also have been gearing up for the Federal Reserve to embark on a quicker pace of rate hikes this year to help cool high inflation, potentially by greenlighting a 50-basis-point rate increase at the central bank's next policy meeting on May 3-4, & at subsequent meetings.  Gold found some support after data showed the US economy contracted in Q1, with the $ coming off is highs versus major rivals.  The US economy shrank at a 1.4% annualized pace in Q1.  But the decline mostly stemmed from a record intl trade deficit, lower gov spending & declining inventories, while robust consumer spending & businesses investment signaled the economy was still steadily expanding. 

Gold ends at modest gain after hitting two-month low amid dollar’s surge

Today the earnings were good enough & stocks were heavily oversold .  Buyers returned in force during midday trading.  But the stock market is still facing headwinds.. For starters the Fed meets next week & a ½ point rate increase is widely expected.  It could even be bigger.  The chart below shows the Dow continues to hover around 34K where it has been for more than a year.

Dow Jones Industrials