Markets rise as Saudi Arabia and Russia are expected to slash oil

Dow jumped up 186 (well off early highs), advancers over decliners 2-1 & NAZ gained 62.  The MLP index advanced 8+ to the 97s & the REIT index inched up 1 to the 288s.  Junk bond funds had modest gains & Treasuries edged higher in price.  Oil surged 4+ to the 24s on word of production cuts (more below) & gold rose 36 to 1627.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

22.06

+1.75

+8.6%

GC=F

Gold

1,630.90

+39.50

+2.5%

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The number of Americans filing claims for unemployment benefits surged to more than 6.6M last week, breaking a record high for the 2nd week in a row as more states & cities enforced strict stay-at-home measures in an attempt to stop the coronavirus pandemic.  Claims blew past the previous week's record of 3.3M, according to the weekly jobless claims report from the Labor Dept.  The previous week's total was revised higher by 24K.  That brings the total number of Americans who filed for unemployment over the past 2 weeks to nearly 10M, a stunning sign of the colossal economic damage inflicted by the outbreak.  The report, which provides the most up-to-date evidence on the labor market & the health of the economy, likely reinforces views that the US has already entered a recession, bringing to an end a historically long, 11-year economic expansion.  The jobless numbers will likely continue skyrocketing in the coming weeks as mandated social distancing policies remain in place.  The 4-week moving average was 2.053M, up 327K from a week ago.  It's the highest since Jan 2017.  Before the coronavirus forced large swaths of the economy to shut down, the highest jobless claims reported was 695K in 1982.  The peak during the last recession was 665K in 2009.  The data dates back to 1967.  Every state reported an increase in claims last week.  Restaurants, bars, hotels, airlines, cruise lines, automakers & entertainment venues have been hit hard by the pandemic as a growing number of jurisdictions have ordered the closure of nonessential businesses & directed residents to stay at home.  Lawmakers are looking to provide relief to laid-off workers with a $2T stimulus package, the largest relief bill in recent memory, that Pres Trump signed last week.  In addition to giving adults who earn less than $99K annually up to $1200 checks, the bill expanded unemployment benefits.

Jobless claims surge to new high as virus yanks millions out of work

Pres Trump expects Russian Pres Vladmir Putin & Crown Prince of Saudi Arabia Mohammed Bin Salman to announce a deal on a production cut.  Trump is expecting a cut of 10M barrels, although the cut could be as high as 15M barrels.  US West Texas Intermediate (WTI) crude surged more than 30% to trade at $25.36 per barrel, putting it on track for its best day on record & intl benchmark Brent jumped 24%.  The Pres later tweeted that a production cut would be “great for the oil & gas industry!”  But WTI is still down more than 40% over the last month as oil prices have been hit on both the demand and supply side.  Demand has evaporated as the coronavirus outbreak has halted travel worldwide & slowed business activity.

Trump tells CNBC he spoke to Putin, MBS and expects Saudis, Russia to announce 10 million barrel cut

Consumers flocked to pickup trucks with 0% financing offers & deferred payments amid the coronavirus pandemic, even as overall auto sales plummeted last month. The Big Three Detroit automakers took their biggest share of the market last week since 2006, according to JD Power.  The combined market share of General Motors (GM), Ford (F) & Fiat Chrysler (FCAU) was 51% to end the week.  The Detroit automakers typically represent about 39-40% of the US retail market, which excludes sales to fleet customers such as the gov & businesses.  While the growth in market share is expected to be temporary, it’s a “good win” for the Detroit automakers in a very challenging market, according to Tyson Jominy, VP of data & analytics at JD Power.  “It’s certainly helpful from a health perspective for the time being,” he said.  “They’re certainly moving a lot of high-profit trucks even if the incentive load is fairly high.”  Incentives on pickup sales reached a record average of $7200 heading into the final days of last month, according to JD Power.  That's up $500 from the pre-coronavirus high.  Despite the rising discounts, such pickups carried net transaction prices of $42K & are among the most profitable vehicles sold by automakers.  GM, FCAU & Ford this week reported overall sales declines for Q1, however they're sales were better than many rivals without pickup trucks & special financing offers.  Light-duty pickup sales heading into the final 2 days of Mar were down 27% compared to a 61% for the overall industry.  “Of course, it is on a very low volume basis, so it’s not as impactful as if it were a market share gain under normal circumstances, but nonetheless … the Detroit 3 are doing pretty well, relatively speaking,” said Thomas King, pres of the data & analytics division & chief product officer at JD Power.  FCAU's Ram pickup was able to stay in the black with sales rising 7% in Q1.  GM's truck & SUV sales were up 6.7% in the qtr, led by a 27.3% increase in sales of its highly profitable full-size Chevy Silverado & GMC Sierra pickup trucks.  Ford reported sales of its F-Series pickup, including F-150, declined 13.1% in the qtr.

Detroit automakers take market share as consumers flock to pickup trucks amid coronavirus outbrea

A production cut by Saudi Arabia & Russia was to be expected after all the negative stories about the global economy.  However, production cuts are only a small part of uncertainties investors have to deal with.  The unemployment data was dreadful (as expected) & more bad news lies ahead.  The Dow soared in the first hour of trading, but pulled back over 200 from the highs.  Additionally, high yielding stocks are stumbling in this environment.  These times remain challenging for investors.

Dow Jones Industrials

Markets plunge on growing worries about the coronavirus pandemic

Dow sank 973 (finishing near session lows), there were only 199 gainers on the NYSE & NAZ sank 339.  The MLP index fell 2+ to a very depressed 89 & the REIT index continued to be sold, down 21 to the 287s.  Junk bond funds were sold along with stocks & Treasuries remained in heavy demand.  Oil inched higher holding above 20 & gold crawled up 1 to 1597 (more on both below).

AMJ (Alerian MLP Index tracking fund)

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The US continues to pump near record amounts of oil, but US gasoline demand continues to drop as the whole world sees less need for fuel.  The latest weekly data from the Energy Information Administration showed the US oil industry was still pumping 13M barrels of crude oil per day, just under record production highs.  At the same time, demand for gasoline fell to 6.7M barrels a day from 8.8M the week earlier.  This time last year, drivers were using about 9.2M barrels a day of gasoline.  US gasoline demand translates to the equivalent of 10% of global oil demand.  In the past week, the US also added another 13.8M barrels of oil to inventories, a record amount, which only exacerbates the global struggle with a lack of storage space.  US gasoline inventories rose 7.5M barrels last week.  West Texas Intermediate was down 1.3% yesterday, at just over $20 per barrel as many in the US industry struggle to stay solvent.  US production has been at the crux of the global price war, launched by Russia & Saudi Arabia early last month when Russia broke off its agreement with OPEC to limit production, & Saudi Arabia vowed to pump as much oil as it could to flood the world market.  In the past month, Brent prices fell by 54% & some analysts say they will fall more as the world shuts off oil demand & producers continue to pump large volumes of oil.  Pres Trump said yesterday that he discussed the oil market with Russian Pres Putin, & he is considering a 3-way discussion that would include Saudi Arabia Crown Prince Mohammed bin Salman. Trump also has a scheduled meeting with 7 US industry CEOs at the White House Fri to discuss ways the gov could help the industry.  The US in the past week also continued to send a large amount of oil onto the world market, with exports of 3.2M barrels a day.  The world is seeing much less need for oil, as govs in Europe, India & elsewhere shutdown activity, even as China's demand recovers.

U.S. oil industry pumps near record volumes even as demand and prices collapse

Boston Federal Reserve Pres Eric Rosengren said the central bank moved rapidly to address deterioration across multiple parts of the financial market that were crippled due to the coronavirus crisis.  “At the central bank we’re focused on addressing, and blunting, the economic effects of the pandemic,” Rosengren said.  “The Federal Reserve has acted quickly to address spillovers from the economic disruption.”  However, he said more will need to be done, particularly in Congress, which recently passed the $2T rescue CARES Act.  “I think we are probably going to have to do more than what was jut in the CARES Act, but I think it was a very good start in trying to mitigate some of the costs,” Rosengren said in later remarks.  He expressed particular worry about some of the more vulnerable members of society at the lower end of the economic spectrum.  Legislative action should focus on “simplicity and speed” in getting help to those who need it, he added.  He also said he thinks future federal steps will have to direct aid directly to states while small business also will need more help.  In addition to the gov aid, he also encouraged a general community focus on nonprofit organizations like food pantries & homeless shelters.  “I’m hopeful that as we are thinking about other legislative remedies that future legislation really thinks hard of how we can mitigate the effects of the pandemic on our must vulnerable populations,” Rosengren said.  Even with help from Congress & the Fed, Rosengren said  the coronavirus will still hit the economy, particularly employment.  The Fed has taken a bevy of measures unprecedented even considering the intervention it took during the financial crisis.  The moves include taking benchmark short-term interest rates to near zero, adding a new round of unlimited asset purchases, creating multiple programs aimed at keeping financial markets moving & getting money to businesses & individuals in need.  One such small business lending initiative is under the direct auspices of the Boston Fed.  “It was proving a challenge for the funds to sell high‐quality debt of even the strongest companies and states,” Rosengren said.  “The Boston Fed opened a facility that lends money to banks, so they can buy these highly-rated assets from money market funds.”  Economic activity has sputtered as public health officials instituted social distancing practices to help slow the coronavirus spread.  While providing an important public service, the practice also is “distorting the credit & liquidity flows that underpin our economy, threatening the greater pain of a full‐blown financial crisis,” Rosengren said.  Like other Fed officials, he predicted that the economy will suffer as the efforts to contain the virus continue.

Fed’s Eric Rosengren says the central bank ‘acted quickly’ as markets froze

Pres Trump warned Americans to brace for a "hell of a bad two weeks" ahead as the White House projected there could be 100-240K deaths in the US from the coronavirus pandemic even if current social distancing guidelines are maintained.  Public health officials stressed that the number could be less if people across the country bear down on keeping their distance from one another.  "We really believe we can do a lot better than that," said Dr Deborah Birx, the coordinator of the White House coronavirus task force.  That would require all Americans to take seriously their role in preventing the spread of disease, she said.  Added Dr Anthony Fauci, the gov's top infectious disease expert,  "This is a number that we need to anticipate, but we don't necessarily have to accept it as being inevitable."  Trump called it "a matter of life and death" for Americans to heed his administration's guidelines & predicted the country would soon see a "light at the end of the tunnel" in a pandemic that in the US has infected about 190K & killed about 4K, according to figures compiled by Johns Hopkins University.  "I want every American to be prepared for the hard days that lie ahead," Trump said.  "This is going to be one of the roughest two or three weeks we've ever had in our country," Trump added.  "We're going to lose thousands of people."  The jaw-dropping projections were laid out during a grim, 2-hour White House briefing.  Officials described a death toll that in a best-case scenario would likely be greater than the more than 53K American lives lost during World War I.  And the model's high end neared the realm of possibility that Americans lost to the virus could approach the 291K Americans killed on the battlefield during World War II.

'Hard days' ahead in coronavirus pandemic as Trump extends guidelines

Gold futures started the month with a loss, stretching their decline to a 4th straight session, as traders cast a wary eye on the latest US economic data amid the spread of the COVID-19 pandemic, which has helped to partly support gold buying or at least limited downside for the precious metal.  US economic data came in better than expected, but analysts said they don't include much of the impact from the COVID-19 pandemic.  Earlier today, a report on private-sector employment from Automatic Data Processing helped give gold prices a modest push higher.  The report found that 27K jobs were lost in the month, smaller than forecasts for a decline of 180K, but likely a harbinger of what is to come after jobless claims last week produced a record.  Separately, the ISM manufacturing index fell to 49.1% in March from 50.1%.  The forecast had called for the index to drop to 44%.  Jun gold fell $5 (0.3%) to settle at $1591 an ounce, marking a 4th decline in a row for the contract.  Based on the most-active contracts, gold futures rose 1.9% in Mar & gained 4.8% for the qtr.  Moves for gold came as global stocks were under renewed pressure amid growing concerns about the economic implications for the epidemic which are hard to fathom for investors.  Yesterday, Pres Trump warned that a “very, very painful” 2 weeks lies ahead as the COVID-19 pandemic continues.  The White House released new projections for 100-240K deaths in the US from the coronavirus pandemic even if current social-distancing guidelines are maintained.  Meanwhile, the number of COVID-19 cases world-wide have risen to 862K, while the number of deaths have climbed to 42K, according to data from Johns Hopkins University.

Gold down 4th straight session as traders cast a wary eye on economic data amid coronavirus spread

Today was another dreary in what has become common in the last few weeks.  To win the war with coronavirus there will be more pain over the short term.  Meanwhile an exploding population of the unemployed has the potential to drag the economy into a severe recession.  Matters are made worse by the crash in the oil market which impacts all economies.  Oil prices are essentially at record lows, but that has been unable to boost demand which indicates how severe a recession can become.  Now there is talk about a super infrastructure spending bill.  Longer term, conditions will improve.

Dow Jones Industrials

Markets drop on fears coronavirus will worsen

Dow tumbled 470, decliners over advancers a massive 9-1 & NAZ dropped 144.  The MLP index fell 2+ to the 88s & the REIT index plunged 22 to the 285s.  Junk bond funds slid lower & Treasuries were heavily purchased.  Oil inched up pennies, holding above 20, & gold recovered 4 to 1601.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

20.22

-0.26

-1.3%

GC=F

Gold

1,599.20

+2.60

+0.2%

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US manufacturing activity contracted in Mar as the more than 800K cases of coronavirus have been confirmed.  The US is the country with the most confirmed cases, with over 189K.outbreak continues to pressure the economy, data from the Institute for Supply Management (ISM) showed.  The ISM manufacturing index fell to 49.1 last month from 50.1 in Feb.  Activity was driven down by a steep decline in new orders & production, the data showed.  Prices within the sector also contracted.  “The coronavirus pandemic and shocks in global energy markets have impacted all manufacturing sectors,” said the Institute for Supply Management, in a statement.  More than 800K cases of coronavirus have been confirmed around the world, according to Johns Hopkins University.  The US is the country with the most confirmed cases, with over 189K.

March’s ISM manufacturing index falls to 49.1 as virus hits economy

Companies reduced payrolls by 27K in early Mar before the worst of the coronavirus-induced economic freeze, according to a report  from ADP & Moody's Analytics.  Actual losses for the month were far worse as indicated by the Ms who already have filed unemployment claims.  The report covers the period thru Mar 12.  It was the first time the private payroll count had contracted in 10 years & total job losses probably will total 10-5M , said Mark Zandi, chief economist at Moody's.  “It’s been 10 straight years of consistent, solid job growth, and the virus has put an end to that,” Zandi added.  “Much bigger job losses are coming.”  Just 6% of companies indicated they are hiring, a level worse than during the financial crisis & comparable to about 40% for a typical month, Zandi said.  The forecast called for a loss of 125K jobs.  However, the Mar ADP count as well as Fri's nonfarm payrolls report cover periods before the gov instituted social distancing measures that have shut down large parts of the US economy.  The Mar ADP number comes after a Feb gain of 179K, revised lower from the initially reported 183K.

ADP: Companies cut 27,000 jobs before the worst of the coronavirus shutdown hit

Treasury Secretary Steve Mnuchin said he is talking with Congress about a potential infrastructure bill that would help boost the coronavirus-battered economy.  “As you know, the president has been very interested in infrastructure. This goes back to the campaign: The president very much wants to rebuild the country,” Mnuchin said.  “And with interest rates low, that’s something that’s very important to him.”  “We’ve been discussing this for the last year with the Democrats and the Republicans. I’ve had ongoing conversations with Richard Neal on this. And we’ll continue to have those conversations,” he added.  The secretary's comments came a day after Pres Trump called for the US to spend $2T on a massive infrastructure package.  In a tweet, he wrote that “this is the time” to craft an infrastructure overhaul with US interest rates at zero during the crisis.  “It should be VERY BIG & BOLD, Two Trillion Dollars, and be focused solely on jobs and rebuilding the once great infrastructure of our Country! Phase 4,” the pres said, referring to 3 pieces of emergency legislation lawmakers have already passed to help American workers deal with the COVID-19 contagion.  Any such infrastructure bill would follow an unprecedented, $2T relief package Congress passed last week.  That legislation includes one-time payments to individuals, strengthened unemployment insurance & additional health-care funding in an effort to blunt the toll the virus is taking on the economy.  Trump has long been a fan of revamping American roads, bridges & airports, declaring throughout his 2016 campaign that he'd make infrastructure reform a priority during his time in office.  “The only one to fix the infrastructure of our country is me - roads, airports, bridges,” Trump tweeted in 2015.  “I know how to build, [politicians] only know how to talk!”

Treasury Secretary Mnuchin says he’s having ongoing discussions about infrastructure

The bears have taken command of the stock market after last week's rally.  The Dow has recovered more than 200 from selling at the opening, but selling sentiment is strong.  Trump has signaled that Apr will be a very tough month for the economy while the country is fighting Coronavirus.  Even though spending on a massive infrastructure program sounds good, it will also add to inflation.  The first economic reports for Mar indicate times will continue for investors.

Dow Jones Industrials