Markets gain while McConnell and Pelosi talk about a stimulus package

Dow rose 85, advancers over decliners better than 3-2 & NAZ went up 27.  The MLP index jumped 7 to the 148s (an almost 6 month high) & the REIT index rose 3 to the 370.  Junk bond funds inched higher & Treasuries continued to be sold.  Oil advanced in the 45s & gold climbed 13 to 1843 (more on both below).

AMJ (Alerian MLP Index tracking fund)

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OPEC members & allies reached a deal to begin easing oil production cuts next year.  The group will increase output by 500K barrels per day beginning in Jan & then hold monthly discussions about how quickly production will return to the market thereafter.  Brent crude oil, the intl standard, traded up 61¢ at $48.86 per barrel while West Texas Intermediate crude oil added 47¢ to $45.75 per barrel.  The decision is the latest easing of the supply cuts that were implemented in the wake of the COVID-19 pandemic.  The OPEC+ group said in Aug it would taper its production cut by 2M barrels per day to 7.7M.  Members in Apr slashed production by a record 9.7M barrels per day in an effort to stabilize the market after lockdowns aimed at slowing the spread of COVID-19 resulted in global demand declining by 25-30M barrels per day.  The sharp drop in demand resulted in Brent falling below $20 per barrel & WTI plunging below zero for the first time on record.  Lower prices have taken a toll on energy companies including majors Exxon Mobil (XOM) & Chevron (CVXI, both Dow stocks.  This week, both scaled back their spending plans thru 2025.

OPEC+ agrees to ease coronavirus-driven oil supply cuts

Nov bankruptcy filings in the US hit a 14-year low, driven by a decline in individuals filing for protection from creditors as they continue to enjoy the benefits of eviction moratoriums & other gov assistance stemming from the coronavirus pandemic.  Total bankruptcy filings amounted to 34K for the month, the lowest monthly total since 2006, according to data from legal-services provider Epiq Systems.  Commercial chapter 11 filings for Nov were up 40%, with 654 new cases compared with 449 over the same period in 2019, according to Epic.  On the other hand, noncommercial chapter 13 filings, which enable individuals to restructure their debt, were down 45% from a year earlier to 138K filings, according to Epiq.  Noncommercial chapter 7 filings, which enable individuals to liquidate their assets so as to escape their debt burden, declined by 21% in Nov.  One factor for the decrease in personal filings is the uncertainty about the state of the economy recovery.  Even though markets have been buoyed recently by positive developments regarding Covid-19 vaccines, many individual borrowers are still unsure about their near-term financial prospects, leading them to delay making a major personal decision such as filing for bankruptcy under chapters 7 or 13. 

November bankruptcies hit 14-year low with steep drop in personal filings

Gold futures climbed for a 3rd day in a row to mark their highest settlement in almost 2 weeks.  Persistent weakness in the $ & growing hope that an impasse among entrenched parties in DC on another coronavirus relief deal will be broken, provided support for the precious metal.  House Speaker Nancy Pelosi & Senate Minority Leader Chuck Schumer issued a joint statement calling on a bipartisan effort to achieve another round of COVID-19 relief measures, on the back of a proposed $908B plan.  On top of that, Senate Majority Leader Mitch McConnell said reaching a compromise on another coronavirus fiscal package was possible, as long as Dems moved toward Rep positions.  Still, doubts remain about progress being made to strike a pact before year-end, but investors are starting to bet that a deal, which would be bullish for gold, pointing to more gov spending, can be achieved at some point.  Investments in gold have been viewed as a hedge against fiscal stimulus plans that have the potential to revive inflation & increase debt & devalue currencies.  The COVID financial relief talks come as the one-day total of deaths from the pandemic in the US hit a record in the US at 3157 Wed, & newly reported infections were at their 2nd-highest level, surpassing 200K for the 2nd time in less than a week.  Against this backdrop, gold has achieved some newfound buoyancy after hitting a roughly 5-month nadir earlier this week.  Feb gold  rose $12 (0.7%) to settle at $1842 an ounce, the highest finish for a most-active contract since Nov 20.  Prices for the metal surged 2.1% on Tues, marking the biggest one-day climb in 3 weeks.  Prices on Mon had touched their lowest settlement since Jul 1.

Gold prices settle at a nearly 2-week high, mark 3rd gain in a row

The US reported a record 2800 deaths caused by Covid-19, the highest single-day death toll ever reported, according to data compiled by Johns Hopkins University.  The US previously reported over 2600 deaths on Api 15, during the first phase of the Covid-19 surge this spring.  Those were clustered mostly in the Northeast & other cities around the country.  The bleak record on yesterday came with other signs that the nationwide outbreak is growing more severe.  The country reported more than 200K cases of the virus yesterday, the 2nd highest daily number, according to Hopkins data.  And more than 100K people are currently so sickened by the virus that they require medical attention in hospitals.  However, coronavirus data has become challenging to interpret following the Thanksgiving holiday, as states work to resume normal reporting schedules, so the single-day figures may be at least partially a result of delayed reporting.  The trends, though, all point to an outbreak that is growing more severe by the day. 

U.S. reports record 2,800 Covid deaths in a single day, hospitals under stress

Oil futures ended higher, even though major producers agreed to a gradual increase in crude production starting in Jan, defying earlier expectations for an extension of current output cuts.  OPEC & allies, OPEC+, announced that they will pare current production cuts of 7.7M barrels per day to 7.2M barrels per day, starting in Jan.  That represents a production increase of 500K barrels per day.  OPEC+ said it will hold monthly meetings starting next month to “assess market conditions and decide on further production adjustments for the following month, with further monthly adjustments being no more than 0.5 mb/d.”  The group also extended the amount of time that certain countries can compensate for overproduction.  They now have until the end of Mar 2021 to make up for past production over their allotted quotas.  Before today's meeting, the group was expected to extend current production cuts of 7.7M barrels a day.  Without a new agreement, it was due to relax those reductions by about 2M barrels a day in Jan.  West Texas Intermediate crude for Jan rose 36¢ (0.8%) to settle at $45.64 a barrel.  Feb Brent, the global benchmark, added 46¢ (1%) at $48.71 a barrel.

Oil prices end higher as OPEC+ agrees to a gradual increase in output for 2021

The jobless claims data was reasonably good, although far from spectacular.  However the talks in DC are getting the most attention & it looks like those guys could come up with a package fairly soon although selling in the last hour suggest there are more stumbling blocks.  The popular stock averages are at or close to record highs.

Dow Jones Industrials

Markets climbed higher after jobless claims top estimates

Dow went up 159, advancers over decliners about 3-1 & NAZ gained 47.  The MLP index rose 3+ to the 145s & the REIT index advanced 3+ to 371.  Junk bond funds were mixed & Treasuries rose along with stocks.  Oil was up pennies in the 45s & gold inched up 1 ti 1831.

AMJ (Alerian MLP index tracking fund)

CL=F Crude Oil 45.19  -0.09  -0.2%

GC=F Gold    1,839.10 +8.90 +0.5%

 

 

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The number of Americans applying for state unemployment benefits dropped last week, even as a surge in coronavirus cases & colder weather continue to threaten the labor market's recovery from the pandemic.  The latest jobless claims figures from the Labor Dept show that 712K workers sought aid last week, about 3 times the pre-crisis level.  Still, it's well below the peak of nearly 7M in late Mar, when states first implemented lockdown measures to curb the spread of COVID-19.  The estimate  called for 775K new claims.  It marked a decrease from the upwardly revised figure of 787K one week ago.  Close to 68M Americans ‒ roughly 40% of the nation's labor force ‒ have applied for aid since the coronavirus lockdowns began in mid-Mar.  The number of people who are continuing to receive unemployment benefits fell for the 10th consecutive week to 5.52M, a decline of about 569K from the previous week.  The decline suggests that employers are calling their workers back.  Still, some of the drop in continuing claims may represent workers who have used up the maximum number of payments available thru state unemployment programs (typically about 6 months) & are now receiving benefits thru a separate federal program that extends the aid by 13 weeks.  Congress created the extra federal benefits earlier this year with the passage of the CARES Act.  But those key federal jobless aid programs created in Mar are slated to expire at the end of the year, leaving about 12M workers with no income on Dec 26.

Another 712,000 Americans filed for unemployment benefits last week

House Speaker Nancy Pelosi & Senate Minority Leader Chuck Schumer embraced a bipartisan $908B coronavirus relief deal as the starting point for negotiations with Reps, a major concession that comes as Congress struggles to send aid to Americans before the end of the year.  In a joint statement, the Dem leaders, who for months have refused to go below $2.2T, signaled they were open to a smaller bill as outside pressure builds on lawmakers to strike a deal.  "In the spirit of compromise, we believe the bipartisan framework introduced by Senators yesterday should be used as the basis for immediate bipartisan, bicameral negotiations," they wrote.  "Of course, we and others will offer improvements, but the need to act is immediate and we believe that with good-faith negotiations we could come to an agreement."  The $908B framework, unveiled by a bipartisan group of senators, allocates about $300B in funding for small businesses thru the Paycheck Protection Program, $240 B in aid for state & local govs, $180B to extend boosted unemployment benefits at $300 per week thr Mar a temporary moratorium on COVID liability lawsuits to allow states enough time to design their own laws.  It would also funnel $16B into vaccine distribution, testing & contact tracing, put $82B into education & give $45B for transportation.  The deal notably does not include a 2nd stimulus check.  Senate Majority Leader Mitch McConnell quickly rejected the plan on Tues & stood by his "highly targeted" $500B proposal.  He also said that a spending bill needed to avoid a gov shutdown on Dec 11 & pandemic relief provisions will "all likely come in one package.”  “We just don’t have time to waste time,” he said.

Pelosi, Schumer endorse $908B COVID relief deal as basis for negotiations

Treasury Secretary Steve Mnuchin said that he has spoken with Janet Yellen, Pres-elect Biden's pick to lead the dept next year, as part of the White House transition process.  Mnuchin told the House Financial Services Committee during his 2nd day testifying on Capitol Hill that he discussed with Yellen, the former chair of the Federal Reserve, the impending expiration of several central bank lending programs that have been used since their inception in the Mar CARES Act to stabilize the nation's pandemic-stricken economy.  His decision to allow the programs the end on Dec 31 has emerged as a source of controversy in recent weeks.   Dem lawmakers accused Mnuchin this week of trying to sabotage the incoming Biden administration by prematurely stopping the funding & denying them a vital tool to rehabilitate the economy.  But Mnuchin has maintained that he does not have the authority to extend the programs, citing portions of the law that indicate they are intended to lapse on Dec 31.  Reps have applauded the move, arguing the programs were designed "to be temporary, to provide liquidity, and to cease operations no later than the end of 2020."  The unspent money, about $455B, will be placed in the Treasury Dept's General Fund.  That means if Mnuchin's successor — Yellen, if she is confirmed by Congress — wants to access that money, she will need to receive Congress' blessing.  Shifting the money to the General Fund leaves just under $80B available in the Treasury's Exchange Stabilization Fund.

Yellen, Mnuchin have spoken as part of White House transition process

It looks like those guys in DC are getting serious on the relief bill which has been languishing for months.  Investors are happy & buying stocks.

Dow Jones Industrials

 

Markets edge higher on renewed hopes for a virus relief package

Dow added 59, advancers over decliners 3-2 & NAZ was off 5.  The MLP index jumped 4+ to the 141s & the REIT index fell 3+ to the 367s.  Junk bond funds were mixed & Treasuries continued weak.  Oil remained above 34 & gold advanced 13 to 1832 (more in both below).

AMJ (Alerian MLP Index tracking fund)

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Dem & Rep party leaders in the Senate are at odds over the aid they would give unemployed Americans in any upcoming coronavirus relief package, according to outlines of their legislative proposals.  Their positions, which have endured despite months of negotiations over the contours of more stimulus, suggest it may be hard to reach a compromise.  Meanwhile, key aid programs for the jobless are set to expire by the end of Dec.  That would leave Ms without unemployment benefits at the same time that protections for renters & student-loan borrowers would end.

McConnell, Schumer far apart on unemployment benefits, stimulus proposals

The UK became the first Western nation to grant emergency-use authorization for a COVID-19 vaccine, clearing a shot developed by Pfizer (PFE) of the US & BioNTech (BNTX) of Germany to be distributed in limited numbers within days.  The 2-shot vaccine is also being reviewed by the Food & Drug Administration (FDA) in the US, where a similar authorization could come later this month & a rollout before the end of the year.  The UK green light punctuates a monthslong sprint by the 2 drugmakers, which teamed up earlier this year & then pulled ahead of 2 other Western pharmaceutical giants, each with its own promising shot.  Vaccines typically take years to bring to market.  It also marks a key milestone in efforts to translate a promising new vaccine technology into a widely available shot.  It was developed, tested, authorized & is now poised to be distributed amid a pandemic that has sickened tens of Ms of people.  The UK has ordered 40M doses, enough to vaccinate 20M people.  The gov said in early Nov it expected to receive 10M doses before year-end.  People familiar with the matter said the US might only get 4-5M does this year, but the number is in flux & will depend on production & other potential regulatory authorizations.  PFE stock climbed 1.38 & BNTX gained 7.08.
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Pfizer and BioNTech’s Covid-19 vaccine wins UK authorization -- first in the West

Gold futures ended higher for a 2nd straight session, with bullion buoyed by the revival of talks on a new US coronavirus relief package, even as a rise in Treasury yields looks to offset the metal's price gains.  Bullish buyers have also made the case that physical gold tends to be bought during the holiday period between Nov & Dec which is helping to buck up prices in recent trade.  The House Majority Leader, Steny Hoyer, said he hopes to see a deal on another coronavirus fiscal stimulus package worked out in principle as soon as this weekend.  Feb gold climbed by $11 (0.6%) to settle at $1830 an ounce, the highest for a most-active contract since Nov 23.   Prices for the metal surged 2.1% yesterday & marked its biggest one-day climb in 3 weeks after prices on Mon had touched their lowest settlement since Jul 1.  Gold prices briefly added slightly to the day’s move up after a reading from Automatic Data Processing showed a rise of 307K US private-sector jobs in Nov, below forecast for 420K jobs.  Gold's more than 2% rise yesterday came as the $ sank to its lowest level in 3 years.

Gold posts a second straight gain, buoyed by hopes for another U.S. fiscal stimulus package

Oil futures finished higher as reports suggested that OPEC & allies will announce an agreement to extend current production cuts into the new year.  Meanwhile, with the UK approving a COVID-19 vaccine & reports that House Speaker Nancy Pelosi & Treasury Secretary Steve Mnuchin held discussions on a coronavirus stimulus package.  Jan West Texas Intermediate crude rose 73¢ (1.6%) to settle at $45.28 a barrel. 

Oil futures settle higher with OPEC+ expected to reach a deal to extend current output cuts

The relief bill in congress will likely sputter for another couple of weeks before being finalized a little before Christmas (i.e. the last minute).  Approvals for the vaccines are beginning (& other vaccines in the wings) which should bring cheer to investors.  Even with all the confusion in DC, the popular stock averages are holding near record levels (shown below in the Dow chart).

Dow Jones Industrials