Markets struggle while lawmakers work on a stimulus bill

Dow went up 23, decliners slightly ahead of advancers & NAZ added all of 1.  The MLP index fell 1+ to 131 & the REIT index edged up  to the 358s.  Junk bond funds did little while Treasuries rose in price.  Oil was steady in the 42s & gold skyrocketed ahead once again, jumping 22 to 2072 for another record.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

42.26

+0.07

+0.2%

GC=F

Gold

2,076.70

+27.40

+1.3%

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The number of Americans applying for unemployment benefits fell to the lowest level since the  coronavirus pandemic started in mid-Mar.  The latest jobless claims figures from the Labor Dept show that more than 1.18M workers sought aid last week, pushing the total number since the shutdown began to more than 55M.  The forecast called for 1.4M new claims.  The report comes amid escalating fears that a flare-up in COVID-19 cases & a fresh round of business closures will derail the economy's early recovery just as the supplemental $600 in unemployment benefits expired.  But the figure -- the lowest since Mar 14, just as the pandemic brought the economy to a grinding halt -- indicates there's still some driving power behind the job market's turnaround, even as employers continue to slash jobs.  It marks the 20th consecutive week that jobless claims came in above 1M; before the pandemic, the record high was 695K, set in 1982.  Continuing claims, the number of people receiving benefits after an initial week of aid fell by 844K to 16.1M.  The Labor Dept's Jul jobs report, to be released tomorrow will shed light on whether a fresh round of business closures amid a spike in COVID-19 cases is dampening the nation's economic & jobs market recovery.  It's expected to show the economy added 1.6M jobs last month, down from Jun's gain of 4.8M, a record high.  Analysts anticipate unemployment will edge lower to 10.5% from 11.1%.

Weekly jobless applications fall to lowest level since start of pandemic

The 2 most powerful lawmakers in DC believe Congress will strike a coronavirus relief agreement.  But both said that negotiators have major differences to resolve during an increasingly bitter process.  “Exactly when that deal comes together I can’t tell you, but I think it will at some point in the near future,” Rep Senate Majority Leader Mitch McConnell said.  Speaking after McConnell, House Speaker Nanci Pelosi, also said she expects an agreement to boost an economy & health-care system devastated by the pandemic.  Negotiators have struggled to craft an aid bill that could pass both chambers of Congress as Dems & Reps try to hash out a bevy of disputes.  The sides have to decide how to extend extra federal unemployment insurance, continue a moratorium on evictions from federally backed housing, help schools educate students safely & offer relief to cash-strapped state & local govs.  Pelosi & Senate Minority Leader Chuck Schumer have repeatedly cited progress after a series of meetings with Treasury Secretary Steve Mnuchin & White House chief of staff Mark Meadows.  But they have so far failed to reach an accord.  The 4 officials plan to meet later today.  “Will we find a solution? We will,” Pelosi said.  “Will we have an agreement? We will.”

McConnell and Pelosi think there will be a coronavirus relief deal — but huge differences remain

Job cuts announced by US-based employers jumped in Jul to 263K, the 3rd-largest monthly total ever, according to global outplacement firm Challenger, Gray & Christmas.  The Jul total is 54% higher than the 170K job cuts announced in Jun.  Last month's cuts bring the yearly total so far to 1.85M, more than triple the 592K cuts at this time last year, Challenger said.

Job-cut announcements surge 54% in July to third highest level on record: Challenger

The jobless claims data remains  mediocre when compared to the low numbers around 0.2K early this year.  More importantly, stocks meander while those guys in DC try to figure out how to throw around Bs of $s.

Dow Jones Industrials

Markets climb as Congress works on Coronavuris relief

Dow shot up 373, advancers over decliners 2-1 & NAZ jumped 57, flirting with 11K.  The MLP index went up 2+ to the 132s & the REIT index was off 2 to the 357s.  Junk bond funds continued in demand & Treasuries were sold today, bring higher yields.  Oil rose to the 42s & gold soared 31 to 2052 to another record (more on both below).

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Federal Reserve Vice Chair Richard Clarida expects the economy to continue to recover thru the year & likely return to its pre-pandemic level by the end of the 2021.  The central bank's director of bank supervision said he hasn't changed his forecast despite a swell in Covid-19 cases that has caused a general slowing in resumption of activities.  “The economy took a huge hit in the spring,” Clarida  said.  “My own personal forecast is that we’ll see a rebound in economic activity in the third-quarter data. The course of the economy is going to depend on the course of the virus, and it’s a complex picture.”  “It will take some time I believe before we get back to the level of activity we were at in Feb before the pandemic hit,” he said.  “My baseline view is that we could get back to the level of activity perhaps towards the end of 2021. There are a lot of moving parts with the virus and the global outlook.”  One factor causing Clarida to hold to his forecast is the expectation for more rescue funding from Congress.  Though an impasse between congressional Dems & the White House allowed extended unemployment compensation benefits to expire, talks are ongoing & leaders in DC have expressed a likelihood that some compromise will be reached.  “The longer this drags on, the greater risk there is to long-term damage to the economy,” Clarida added.  “I don’t think we’re at that point yet.”

Fed Vice Chair Clarida still sees the economy staging a comeback this year

The move to get displaced workers back to their jobs slowed sharply in Jul, with private payrolls increasing by just 167K, according to ADP.  That total was well below the 1M expected & represented a tumble from the 4.3M created in Jun, according to the report.  One bright spot was that the Jun total was revised sharply higher from the approximately 2.4M in the initial estimate.  However, that month, combined with May's 3.3M increase, still leaves the jobs market well short of the 19.7M positions lost in Mar & Apr as the U.S. economy went into shutdown mode to stem the coronavirus pandemic.  The ADP tally & the gov's official count can differ widely, & jobs numbers during the pandemic have been volatile & subject to substantial revisions.  Businesses with 50-499 employees reported an outright decline of 25K.  Big business brought back 129K jobs while firms with fewer than 50 workers added just 63K.  All but 1K of the jobs came from the services sector, as professional & business services led with 58K.  Education & health services added 46K & trade, transportation & utilities contributed 41K.  The battered hospitality sector, which took the brunt of the closings as bars & restaurants shuttered across the nation, saw an addition of 38K.  However, financial activities lost 18K & information services dropped by 3K.  On the goods-producing side, manufacturing added 10K, but construction lost 8K & mining & natural resources fell by 1K.  “The labor market recovery slowed in the month of July,” said Ahu Yildirmaz, VP & co-head of the ADP Research Institute.  “We have seen the slowdown impact businesses across all sizes and sectors.”

ADP private payroll growth at 167,000 in July

Dems & Reps have finally started to yield as painstaking coronavirus relief talks drag into their 10th day, as the White House appeared to make concessions in the bargaining over extended unemployment benefits.  Even so, a range of issues remained unresolved as the sides belatedly try to stave off economic ruin for Ms of Americans & give a jolt to an overburdened health-care system.  House Speaker Nancy Pelosi., Senate Minority Leader Chuck Schuer, Treasury Secretary Steve Mnuchin & White House chief of staff Market Meadow plan to meet about pandemic aid sshortly.  It follows a huddle yesterday during which both parties made “concessions,” according to Schumer.  The Trump administration team offered to extend extra federal unemployment insurance into Dec at $400 per week.  The White House had floated keeping the previous $600 a week benefit for a week while negotiators hashed out a broader deal.  Senate Reps have proposed a plan that would set the insurance at $200 per week thru Sep, then change the benefit to 70% wage replacement.  Mnuchin & Meadows also offered to extend a moratorium on evictions from federally backed housing into Dec.  Dems cut their request for Postal Service funding to $10B from $25B.

White House appears to make concessions on unemployment benefit offer in coronavirus relief talks

Johnson & Johnson (JNJ), a Dow stock & Dividends Aristocrat, announced that it will develop & deliver 100M doses of its coronavirus vaccine for the US in a deal totaling more than $1B.  The company's experimental vaccine is currently in early stage human trials & is expected to begin late-stage human trials in Sep, execs have previously said.  The deal gives the US the option to order an additional 200M doses.  “We are scaling up production in the U.S. and worldwide to deliver a SARS-CoV-2 vaccine for emergency use,” said Dr Paul Stoffels, chief science officer at JNJ.  The US earlier this year JNJ $456M to develop its vaccine.  The company said its goal is to supply more than 1B doses globally thru 2021.  The doses will be provided to Americans at no cost if they're used in a Covid-19 vaccination campaign, the Dept of Health & Human (HHS) services said.  However, health-care professionals could charge for the cost of administering the vaccine, HHS said.  “Today’s investment represents the next step in supporting Janssen’s vaccine candidate all the way through manufacturing, with the potential to bring hundreds of millions of safe and effective doses to the American people,” HHS Secretary Alex Azar said.  The stock rose 1.17.
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J&J reaches deal with U.S. for 100 million doses of coronavirus vaccine at more than $1 billion

Gold prices ended sharply higher, extending a record run for the precious metal that has helped it log gains for 4 straight days & eclipse a historical milestone above $2K.  The yellow metal has soared over 34% in 2020, surpassing the YTD 22.5% rally in the NAZ, composed of highflying technology stocks that has led to the overall equity market rally.  Gains for gold today helped it notch its 7th record close in 8 sessions, representing the most record closes over such a span since Apr of 2011.  Bullion's buoyancy has been supported by central-bank monetary easing during the COVID-19 pandemic that has led to superlow interest rates in the US & subzero rates in parts of the developed world that have helped to stoke appetite for gold which doesn't offer a coupon.  A weaker-than-expected reading in private-sector payrolls from ADP didn't deflate the rally for gold.  ADP said only 167K private sector jobs were created in Jul, far short of the estimate for a gain of 1M jobs.  The report comes ahead of the more closely followed Fri jobs number.  Dec surged $34 (1.4%) at $2049, after a similar gain yesterday.  Gold prices have gained already about 3.3% so far this week.

Gold logs fresh record high near $2,050

Oil futures posted the highest close in 5 months, but ended off session highs, after data confirmed a large drop in crude inventories while also showing an unexpected rise in gasoline stocks that undercut notions of a pickup in demand.  West Texas Intermediate (WTI) crude for Sep rose 49¢ (1.2%) to finish at $42.19 a barrel, after rising as high as $43.52 immediately after the data.  The global benchmark, Oct Brent crude, closed at $45.17 a barrel, up 74¢ (1.7%), the highest since Mar 6 for both benchmarks.  The Energy Information Administration (EIA) said US crude stocks fell 7.4M barrels last week ended July 31, while gasoline inventories rose 419K barrels & distillate supplies increased by 1.6M barrels.  Analysts had looked for EIA crude inventories to show a fall of 4.1M barrels.  Gains for crude were stoked late yesterday when the American Petroleum Institute (API) said US crude-oil inventories fell 8.6M barrels last week, according to sources.  API said gasoline stocks fell by 1.7M barrels, while distillate supplies rose by 3.8M barrels.  On the supply side, 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.  Countries that exceeded the earlier curbs are supposed to further curtail output, which means output is targeted to rise by around 1.5M barrels a day beginning this month, though skeptics doubt that past violators of such agreements will fully comply.

Oil ends at 5-month high after data shows drop in crude supplies but rise in gasoline inventories

The Dow was bid higher at the open & traders did not look back all day.  It finished near the high, well above 27K & which is pretty much the high 2 months ago.  Before that, it was at that level (on the way down) in late Feb.  Those guys in DC look to be anxious about throwing more money at the struggling economy.  Work on coronavirus vaccine seems like it will pay off soon.  Treatments for those afflicked are showing progress.  However, the gold bugs are taking gold to new heights while NAZ is setting records & the Dow is not far from the records reached 6 months ago.

Dow Jones Industrials

Markets rise as stimulus talks continue

Dow went up 164 with buying in the last hour, advancers over decliners 3-2 & NAZ gained 38.  The MLP index added 1+ to 130 & the REIT index rose 4+ to 359.  Junk bond funds rose along with stocks & Treasuries  remained in demand.  Oil climbed into the 41s & gold rocketed ahead 37 to 2024 for another record (more below on both).

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Dem leaders & Trump administration officials expect to meet again today as they attempt to hash out a pandemic aid package.  The sides appear to have resolved few of the thorny issues at stake in the talks, even though more than a week has passed since Reps unveiled a counteroffer to the legislation Dems passed in May.  House Speaker Nancy Pelosi, Senate Minority Leader Chuck Schumer, Treasury Secretary Steve Mnuchin  White House chief of staff Mark Meadowns will meet later.  Prior to the huddle, the Trump administration officials attended the Senate Rep policy lunch.  The parties have come close to a consensus in only a few areas, such as extending funding for Paycheck Protection Program loans for small business, an administration official said.  Mnuchin has said Dems & the GOP agreed on the need to send another direct payment of up to $1200 to Americans.  But neither side has budged on plans for extending extra federal unemployment insurance or offering relief to budget-crunched state & local govs, among other topics.  Negotiators have failed to crack the impasse even after the $600-per-week jobless benefit & a moratorium on evictions from federally backed housing expired.  The end of both policies puts Ms of Americans at risk of poverty or homelessness during an economic collapse.  As the stalemate drags on, it appears unlikely Congress can pass a rescue package before the end of next week.  Pelosi told Dems yesterday she does not expect an agreement until next week, according to a leaker.

Congress, White House struggle to break coronavirus aid stalemate

A senior Fed official said that Congress is in the drivers seat for getting the economy going & central bank interest-rate policy is in the passenger seat, at least for now.  “The ball is in Congress’ court,” Charles Evans, the Chicago Federal Reserve pres, said.  “Fiscal policy is really fundamental for getting us going,” he added.  Fed officials are watching with baited breath as White House officials & congressional Dems seek to compromise on another stimulus package.  Already the talks have dragged on so that federal unemployment benefits of $600 per week have expired, as has a federal moratorium on evictions.  Failure to reinstate this support for unemployed workers & their families would damage the economy, he said.  “If we go very long without somehow addressing the reduction and evaporation of that support, I think it is going to show up in lower aggregate demand and that would be very costly for the economy,” Evans continued.  In a separate interview, St Louis Fed Pres James Bullard was optimistic a deal could be reached.  “My sense is that nobody in Congress wants to go face an electorate this fall having failed to come to a deal,” Bullard said.  Fed Chairman Jerome Powell stressed last week that the path ahead for the economy depends on the course of the coronavirus.  Evans & Bullard echoed this remark.  “Anything that helps us avoid...second wave scenarios is just absolutely crucial,” Evans said.  The Chicago Fed pres said there has been a flattening in the economic data & some economists think the US economy is stalling.  “This is a very challenging time,” he added.  A less optimistic path for the economy is just as likely as the baseline forecast for a steady improvement in the economy, he noted.  For now, Evans said he sees the unemployment rate falling from 11.1% in Jun to 9.5% by the end of 2020 & to 6.5% by the end of 2021.

Fed’s Evans says the power to get the economy going lies with Congress

US factory orders rose 6.2% in Jun to mark the 2nd increase in a row, pointing to a steady rebound after widespread shutdowns in the early stages of the pandemic.  The forecast  predicted a 4.6% increase.   Even after a spike in coronavirus cases since Jun, the early evidence suggests that manufacturers made further strides in Jul as well.  A survey of industry execs rose to a 15-month high, according to a closely report produced by the Institute for Supply Management.  Orders for durable goods rose a revised 7.6% in Jul,  the gov said, a bit higher than the initially reported 7.3% increase.  Orders for non-durable goods such as oil, chemicals & textiles & advanced 5%, the Commerce Dept said.  The manufacturing side of the US economy strengthened further in Jul even as some states reimposed restrictions to combat the latest coronavirus spike.  Yet production remains well below precrisis trends & businesses say they are still plagued by uncertainty.  Factory orders are off 10% from a year earlier.  Until the virus is brought under control, American factories are expected to produce fewer goods with fewer workers, making it harder for the economy to fully recover.

U.S. factory orders climb 6.2% in June, signaling steady manufacturing recovery

Home Depot (HD), a Dow stock, said it will open 3 distribution centers in the Atlanta area over the next 18 months to keep up with those expectations, which have only been amplified since the pandemic. “We like to say that retail has changed more in the past four years than in our 40-year history,” said Stephanie Smith, senior VP of supply chain.  “Covid has even brought this more to light. Customers expect to shop whenever, wherever, however they want.”  Smith said the pandemic has underscored the importance of a strong & flexible supply chain.  During the spread of the coronavirus, customers have gravitated even more to online shopping.  HD has raced to meet customer demand for speed & convenience.  It began rolling out curbside pickup in late Mar, & the service is now available at most stores.  Before late Mar, customers had to go inside to pick up online purchases.  Online sales grew by 80% year over year in Q1.  About $4.2B (roughly 15%) of its net sales came from online.  More than 60% of the time, customers picked up those online orders at a store.  HD wants to offer same-day & next-day delivery to 90% of the US population.  In Dec, it said about 50% of the US population had one-day delivery options.  The stock rose 1.68.
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Home Depot to speed up deliveries with new distribution centers as pandemic fuels home

Gold futures powered higher, gathering momentum late in the session to finish at a fresh record as gov bond yields headed lower & as the $'s recent rebound receded somewhat, allowing the precious metal to make an assault on a record close above the $2K threshold.  The sustained rally in gold has come as govs across the world have flooded their economies with financial aid to combat the COVID-19 pandemic. .And investors are betting that the uptrend for the yellow metal continues as the $ weakens & interest rates remain around 0% in many parts of the world.  Dec gold rose a whopping $34 (1.7%) at $2021 an ounce, after settling about even yesterday and starting out with meager gains today. 

Gold ends above $2,000 for the first time in history as U.S. dollar and bond yields recede

Oil futures reversed early losses, ending higher as traders awaited data on US crude inventories.  West Texas Intermediate crude for Sept rose 69¢ (1.7%) to finish at $41.70 a barrel, after trading as low as $40.14.  Oct Brent crude ended with a gain of 28¢ (0.6%) at $44.43 a barrel.  US crude inventories fell 10.6M barrels last week, the largest drop of the year.  The American Petroleum Institute, an industry trade group, is expected to release its weekly estimate later today, while the Energy Information Administration’s more closely watched data is due tomorrow.  Analysts are looking for EIA crude inventories to show a fall of 4.1M barrels.  Meanwhile, worries remain about overall demand as the COVID-19 pandemic continues.  The global tally of confirmed cases climbed above 18.3M, according to Johns Hopkins University, & the death toll rose to 694K.  However, the number of new US cases of COVID-19 was below 50K for a 2nd day, with some of the most hard-hit states showing a slowdown in infections.  Worries about the continued spread of the virus in the US & elsewhere have been seen as a negative for refining margins, which could crimp demand for crude.

Oil finishes higher ahead of U.S. supply data

Stocks were higher on hopes for a new relief package out of DC, even though those guys don't seem interested in getting the work done.  New economic data is encouraging & the macro story on fighting the virus has been looking better in the last few days.  At the same time, gold continues to be in heavy demand by nervous investors, among others.

Dow Jones Industrials