Markets edge higher as stimulus talks continue in DC

Dow rose 126, advancers over decliners 3-2 & NAZ went up 11.  The MLP index crawled up to 129 & the REIT index advanced 5 to the 359s.  Junk bond funds climbed higher & Treasuries were purchased as lawmakers in DC debate a new stimulus bill (more below).  Oil climbed over 41 & gold jumped 24 to 2010, another record.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

41.03

+0.02

+0.1%

GC=F

Gold

1,999.20

+12.90

+0.7%

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Chinese state media labeled the US a “rogue country” & dubbed the potential sale of social media firm TikTok to (Microsoft (MSFT), a Dow stock, as “theft,” adding that Beijing could retaliate if a deal is sealed.  MSFT announced plans on Sun to acquire TikTok’s business in certain markets— the US, Canada, Australia & New Zealand.  Pres Trump said that buying only part of the app will be “complicated”— but he still gave MSFT CEO Satya Nadella the go ahead.  Trump added that some “key money” would have to be paid to the Treasury Dept for making the deal possible.  Hu Xijin, the outspoken editor-in-chief of the state-backed Global Times, called the move an “open robbery” & said “President Trump is turning the once great America into a rogue country.”  TikTok has been under fire from the US which has accused the Chinese-owned app of collecting data on Americans & sending it to the Chinese gov.  TikTok has repeatedly denied this.  The Trump administration first threatened to ban TikTok.  On Sun before MSFT announced its intention to acquire TikTok, Secretary of State Mike Pompeo said that Trump will take action “in the coming days” on the app.  China Daily, another state-backed publication, highlighted these comments as being “tantamount to inviting potential US purchasers to participate in an officially sanctioned ‘steal’ of Chinese technology.”

Chinese state media slams U.S. as a ‘rogue country’ for its planned ‘smash and grab’ of TikTok

Treasury yields fell as investors awaited for details over the next stimulus deal with top lawmakers remaining divided.  The yield on the benchmark 10-Year note dipped 2 basis points to 0.539% & the yield on the 30-Year bond also fell to 1.211%.  Yields move inversely to prices.  US lawmakers have been discussing a new round of fiscal stimulus as the coronavirus pandemic continues to take a toll on the economy.   Policymakers in Congress seemed to agree that a 2nd round of stimulus checks is needed, but have not yet reached a deal over the details, including on how much dependents should get.  The Senate is set to leave on a break Fri, when the key Jul jobs report is released.  About 1.26M new jobs are expected, well below the 4.8M added in Jun & the unemployment rate is expected to fall to 10.6% from 11.1%.

Treasury yields fall as lawmakers remain divided over new virus relief deal

Nike (NKE), a Dow stock, after disclosing a rare Money-losing qtr in Jun, announced layoffs that will eliminate at least 500 jobs at the world headquarters in Oregon.  Kim Lupo, a VP sent to 3 local officials, Lupo wrote that NKE "will be permanently reducing its workforce by at least 500 employees at its World Headquarters."  The letter informs the officials that the "expected date" to begin the layoffs will be Oct 1 & will include "members of NIKE's corporate leadership team and some corresponding executive assistants."  The company added that 192 of the laid-off employees will come from one of 3 childcare centers.  The number of layoffs worldwide will be higher than the 500 near Beaverton losing their jobs.  Those cuts will result in termination costs of $200-250M.  Like many other corps, NKE has suffered during the coronavirus pandemic.  Total revenue was down 38% to $6.3B from $10.2B a year ago.  The stock fell 1,06,
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Nike eyes massive layoffs at company’s world headquarters

There is plenty of excitement coming out of DC.  All eyes are watching for a new stimulus package, but that needs a lot more work.  US-China relations continue to be touchy, but traders are not worried,  Maybe that's because they are buying gold which is trading above 2K.  At the same time, NAZ, led by sexy tech stocks, is also at a new record & the bulls are hoping to push NAZ above 11K shortly.

Dow Jones Industrials

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Markets rise as data shows US manufacturing improves in July

Dow shot up 236 (near session high), advancers over decliners about 2-1 & NAZ gained 157.  The MLP index added 1+ to the 128s & the REIT index fell 4 to the 354s.  Junk bond funds remained mixed & Treasuries were sold all day while stocks rallied.  Oil went up to nearly 41 & gold added 5 to 1990 (more on both below).

AMJ (Alerian MLP Index tracking fund)

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US mmanufacturing improved again in Jul with a key gauge of activity rising further into expansion territory.  The Institute for Supply Management, an association of purchasing managers, said that its manufacturing index rose to 54.2 last month, up from a Jun reading of 52.6.  Any reading above 50 signals that US manufacturing is expanding.  The index dipped below 50 in Mar, indicating a recession in manufacturing as the coronavirus pandemic shut down factories.  The overall economy fell into a recession in Feb & the gov reported last week that GDP plunged at an annual rate of 32.9% in the Apr-Jun qtr, the biggest drop on records going back to 1947.  While it was the 2nd straight month that the index has been above the 50 threshold, indicating manufacturing is expanding again, the outlook is clouded by spreading infections in the US in the South, West & Midwest. 

US manufacturing improves in July, outlook clouded by virus

Clorox (CLX), a Dividend Aristocrat, reported a 21.9% gain in sales for the latest qtr as consumers stocked up on cleaning goods & personal-care items due to the Covid-19 pandemic & said that it will promote Linda Rendle, the company's pres, to CEO in Sep.  The household-supplies producer posted fiscal Q4 sales of $1.98B, up from $1.63B last year.  The forecast was expecting $1.87B.  Sales in the health & wellness segment, which includes its namesake disinfecting products as well as vitamins, rose 33%.  Sales in its household segment grew 17% & its lifestyle segment saw its sales rising 16%.  Sales outside the US rose 12%.  EPS rose to $2.41 compared with $1.88 in the year-ago period.  Analysts were looking for $1.99.  The company expects a mid-single-digit decrease to mid-single-digit increase in full-year EPS.  The stock dropped 4.51.
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Clorox posts higher sales as consumers stock up on disinfectants

Coronavirus outbreaks that have torn through Sun Belt states such as California, Florida, Texas & Arizona for weeks have started to decline, although deaths across the nation are still on the rise, data compiled by Johns Hopkins University.  Across the nation, daily new Covid-19 cases have declined in recent days, driving the 7-day average of new cases down more than 5% compared with a week ago, according to Johns Hopkins data.  Health officials have struggled for weeks to halt outbreaks in the American South & West, shuttering businesses & pleading with residents to follow social distancing guidelines & wear face coverings.  As of yesterday, cases in Texas have fallen more than 8% over the previous week, hitting 7723 daily new cases based on a 7-day moving average.  Gov Greg Abbott has warned that while the state has made some strides, it has not yet “conquered” the coronavirus and it’s “going to take a little while” to eliminate.  Meanwhile, Florida reported a more than 14% drop in its 7-day average of new Covid-19 cases & Arizona reported a more than 10% drop.  California's cases are also slowly starting to trend down, reporting a more than 8% drop.  California, Texas & Florida now lead New York, the nation's epicenter earlier this year, in total number of infections.  Although cases appear to be descending, Covid-19 deaths have been on the rise since early Jul.  Coronavirus deaths typically lag behind reported cases because it can take someone infected with the coronavirus weeks to fall seriously ill & potentially die.  The US reported an additional 1047 deaths based on a 7-day average, a near 15% increase compared with a week ago

Coronavirus cases ease in Sun Belt states as nationwide deaths climb

Gold prices eked out a slight gain, but enough to finish at a fresh record, with a bounce higher in the $ muting some of the rally that had taken bullion temporarily a psychologically significant level near $2K.  Dec rose pennies at $1986 an ounce, after touching a fresh intraday peak at 2009.  Last Fri, bullion posted a weekly climb of 4.7%, while the 10.3% gain in Jul marked the best monthly rise since Feb of 2016.  The yellow metal has enjoyed a rally to all-time records amid concerns about the economic impact of COVID-19 & the actions taken by govs & central banks to help mitigate the harm to businesses in attempting to curtail the spread of the pathogen.  The global tally for infections from the disease caused by the novel strain of coronavirus stands at more than 18M & almost 690K death.  Still, equity markets were rising higher amid global manufacturing data that suggests some rebound from weakness is under way.  NAZ reached an intraday record high above 10,900 today, which may be reflective of tapering appetite for gold over other assets.

Gold prices eke out record high, but pull back from intraday peak near $2,010 as U.S. dollar firms

Oil futures ended solidly higher following a round of upbeat readings on manufacturing activity, though some traders see upside limited as OPEC & its allies relax curbs on output & the number of COVID-19 cases continue to rise.  West Texas Intermediate (WTI) crude for Sep added 74¢ (1.8%) to settle at $41.01 a barrel while Oct Brent crude rose 63¢ (1.5%) to finish at $44.15 a barrel.  Oil added to early gains after the Institute for Supply Management said its manufacturing index rose to 54.2 in Jul from 52.6 a month earlier, its highest level in 15 months & above the consensus forecast of 53.6.  A reading above 50 indicates an expansion in activity, but senior execs warned that production remains well below pre-pandemic levels & that many jobs won’t be coming back soon. OPEC & its allies (OPEC+) agreed in early Jul to relax output curbs beginning in Aug.  OPEC+ pledged to cut output by 9.7M barrels a day beginning in May, easing to 7.7M barrels a day this month & running thru the end of the year.  Oil ended last week on a positive note, leaving WTI with a monthly rise of around 2.6% for Jul, while Brent rose more than 5% for the month. 

Oil prices end higher as upbeat readings on manufacturing activity outweigh jitters over coronavirus, OPEC+ output boost

The bulls came back & bought stocks, although, as has been the case for a couple of months, their interest was mainly in tech & bio tech stocks on the NAZ bringing it to another record.  An extension for a stimulus bill from DC is cloudy with the Reps & Dems far apart on what it should include.  The prospect for more gov spending is keeping interest in gold which is pretty much at 2K.  More Jul economic data is coming this week & that may stimulate those guys in DC.

Dow Jones Industrials

Markets climb higher on hopes for stimulus talks

Dow went up 56, advancers over decliners 4-3 & NAZ  jumped 121 to another new record.  The  MLP index was about even in the 126s & the REIT index fell 5+ to the 353s.  Junk bond funds fluctuated & Treasuries were sold.  Oil rose. heading for 51, & gold added 5 to 1968 as it closes in on 2K.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

40.80

+0.53

+1.3%

GC=F

Gold

1,960.30

-2.50

-0.1%

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The Trump administration is considering taking "a number of options" without congressional approval as negotiations on the 4th coronavirus stimulus relief package are stalled between the White House & lawmakers.  A senior administration official said that the administration is weighing taking unilateral action to quell the economic repercussions of the COVID-19 pandemic.  "As the negotiations continue to progress as a snail's pace, the administration is considering a number of options that might be available without congressional legislative action," the official said, it is unclear what item the administration could attempt unilateral action on, but much of the negotiations on Capitol Hill have come to a stalemate with regards to unemployment benefits.  “Those that are counting on enhanced unemployment need to be gravely concerned about the lack of progress,”  White House chief of staff Mark Meadows said.  “My recommendation would be for them to call their members of Congress and their senators and ask them why they are not willing to compromise when obviously the White House is willing to compromise.”  Meadows added: “There are two things standing in the way to a deal on enhanced unemployment benefits continuing. One is Sen. [Chuck] Schumer and Speaker [Nancy] Pelosi and the other is a negotiating tactic that puts people at risk.”  Enhanced unemployment benefits, which provided an additional $600 per week to those without work, expired at the end of Jul.  Dems want the next package to continue the $600 weekly payments, but Reps are concerned that in some cases this results in people collecting more money than they earned from their jobs, disincentivizing them to return to work when possible.  The Rep HEALS Act – which bears a $1T price tag compared with $3T for the Dem HEROES Act – provides an extra $200 per week.  In the meantime, Reps offered to continue the $600 payments for one more week while lawmakers negotiate, but Dems, who proposed their bill in the House back in May, rejected this.

White House mulls unilateral actions with coronavirus relief bill stuck in Congress

Despite the largest quarterly drop in history, the US economy has "one bright spot" despite the coronavirus pandemic — an increase in the personal savings rate, Minneapolis Fed Pres Neel Kashkari said.  "The U.S. personal savings rate has taken off," Kashkari said.  "Before the crisis, it was around 8%. Now it's around 20%. Now, let me tell you what's going on."  "Those of us who are fortunate enough to still have our jobs, we're saving a lot more money because we're not going to restaurants or movie theaters or vacations," he explained further.  "That actually means we have a lot more resources as a country to support those who've been laid off. And so while historically we would worry about racking up too much debt, we're generating this savings ourselves."  The US economy shrank at a dizzying 33% annual rate in the Apr-Jun qtr — by far the worst quarterly plunge ever — when the viral outbreak shut down businesses, throwing 10s of Ms out of work & sending unemployment surging to 14.7%, the gov said.  The Commerce Dept's estimate of Q2 decline in GDP, the total output of goods & services, marked the sharpest such drop on records dating to 1947.  The previous worst quarterly contraction, a 10% drop, occurred in 1958 during the Eisenhower administration.

Fed president identifies 'one bright spot' in miserable GDP report

Drugmaker Eli Lilly (LLY) said it is beginning a late-stage trial to study whether one of its experimental COVID-19 antibody treatments can prevent the virus’ spread in residents & staff in US nursing homes.  The phase 3 trial will test LY-CoV555, a treatment developed in partnership with Canadian biotech AbCellera, is expected to enroll up to 2400 participants who live or work at a facility that have had a recently diagnosed case of COVID-19.  “COVID-19 has had a devastating impact on nursing home residents,” LLY's chief scientific officer Daniel Skovronsky said.  “We’re working as fast as we can to create medicines that might stop the spread of the virus to these vulnerable individuals.”  LLY is already testing the drug in hospitals to study whether it can work as a treatment in patients who have the disease.  This trial will test whether it works prophylactically. 
It is launching the phase 3 trial in partnership with several long-term care facility networks across the country as well as the National Institute of Allergy & Infectious Diseases (NIAID).  In order to speed the study LLY has created mobile research units including retrofitted recreational vehicles that can be deployed in response to outbreaks of the virus at nursing homes across the US.  The stock rose 2.25.
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Lilly starts late-stage study of coronavirus drug in nursing homes

Investors are hoping for another stimulus package soon.  Jul economic data is coming this week & it is expected to show the economy is still struggling.  The big jobs report on Fri will likey not show much improvement from last month's numbers.  NAZ & gold keep flying higher to new records while the Dow remains about 10% under its records reached before the virus dragged down the economy.

Dow Jones Industrials

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