Markets climb as jobless claims fall and on earnings

Dow rose 186, advancers over decliners better than 2-1 & NAZ gained 83.  The MLP index added 1+ to the 177s & the REIT index went up 3+ to the 464s.  Junk bond funds inched higher & Treasuries were sold while stocks rallied.  Oil crawled higher in the 68s after recent selling & gold fell 9 to 1804.

AMJ (Alerian MLP index tracking fund)

CL=F Crude Oil 68.56 +0.41  +0.6%

GC=F Gold    1,805.00  -9.50   -0.5%

 

 

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The number of Americans filing for unemployment benefits fell last week as the expiration of supplemental benefits drew nearer.  The Labor Dept said that 385K Americans filed for initial jobless benefits, below the prior week's downwardly revised 399K.  Analysts expected 384K filings.  Continuing claims, meanwhile, fell to 2.93M filings, a pandemic-era low, down from the prior week's upwardly revised 3.3M.  Analysts had anticipated 3.26M filings.  A historically elevated 12.9M Americans are still receiving some form of jobless assistance.  The $300 per week in supplemental unemployment benefits are set to expire in Sep.  About ½ of the states ended or announced plans to end the benefits ahead of their expiration.  Concerns over the health of the jobs market surfaced yesterday after the ADP report showed private-sector payrolls slowed sharply in Jul.  The private sector added 330K jobs last month, down from the 680K jobs gained in Jun.  Analysts were expecting the addition of 695K jobs.  Investors will get a deeper look into the health of the labor market when the Jul jobs report is released tomorrow.

Jobless claims dip ahead of benefit expiration

Moderna (MRNA) said its Covid-19 vaccine booster shot produced a “robust” antibody response against the highly contagious delta variant, according to details of a study released with the company’s Q2 earnings report.  In a phase 2 trial, MRNA is testing a 50-microgram dose of t3 vaccine booster candidates in previously vaccinated individuals.  The booster shots produced a promising immune response against 3 variants, including delta, with antibody levels approaching those seen in previously unvaccinated people who received 2 100-microgram doses.  The data has been submitted to a peer-reviewed journal for publication.  Q2 financial results beat expectations on earnings & revenue.  EPS was $6.46 versus $5.96 expected & revenue of $4.35B beat $4.2B expected.  The new data on boosters comes as the delta variant spreads across several countries, including the US.  MRNA expects the variant will lead to an increase in breakthrough infections, which occur in vaccinated individuals.  “While we see durable Phase 3 efficacy through 6 months, we expect neutralizing titers will continue to wane and eventually impact vaccine efficacy,” the company said.  “Given this intersection, we believe dose 3 booster will likely be necessary prior to the winter season.”  The company aims to produce 800M to 1B Covid vaccine doses this year.  It has signed vaccine contracts worth $20B in sales this year & has agreements worth $12M in 2022. The stock rose 2.32.
If you would like to learn more about MRNA, click on this link:
club.ino.com/trend/analysis/stock/MRNA?a_aid=CD3289&a_bid=6ae5b6f7 

Moderna says Covid booster shot produced ‘robust’ immune response against delta

Roughly 7.5M workers who've relied on pandemic-era unemployment benefits will be cut off from jobless aid altogether when they are set to expire on Sep 6, according to estimates from he Century Foundation, a left-leaning think tank.  As of mid-Jul, roughly 9.4M people were drawing benefits from Pandemic Unemployment Assistance (PUA), which covers those not traditionally eligible for aid, including freelancers & gig workers, & Pandemic Unemployment Emergency Compensation (PEUC), which extends aid to those who've exhausted their state's benefits period.  Workers drawing from either of these programs make up more than 72% of Americans collecting unemployment insurance, according to the Dept of Labor.  The programs, which support people who’d normally fall through the cracks of the unemployment system, were established in the Mar 2020 CARES Act & extended until Labor Day 2021 thru the American Rescue Plan.  When pandemic unemployment was last extended in Mar 2021, it kept an estimated 11.4M people from falling off the “benefits cliff.”

Millions will lose pandemic unemployment in September, if they haven’t already

Investors liked the jobless claims report, although it fell short of spectacular.  Earnings have been pretty good & the Dow is flirting with 35K once again.

Dow Jones Industrials

 

Markets slide as private sector hiring slows in July

Dow dropped 206, decliners over advancers 2-1 & NAZ was off 4.  The MLP index fell 1+ to the 178s & the REIT index was off 1+ to the 462s.  Junk bond funds slid lower & Treasuries were sold following the recent rally.  Oil gave back 1+ to the 69s & gold inched up 1 to 1815.

AMJ (Alerian MLP index tracking fund)

CL=F Crude Oil 69.22    -1.34 -1.9%

GC=F Gold    1,828.30 +14.20 +0.8%

 

 

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US private sector job growth slowed sharply in Jul amid an uptick in new COVID-19 infections.  The economy added 330K private sector jobs last month, a decline from the downwardly revised 680K jobs gained in Jun, according to the ADP National Employment Report.  The forecast called for the addition of 695K jobs.  "The labor market recovery continues to exhibit uneven progress, but progress nonetheless," said Nela Richardson, chief economist at ADP.  "Bottlenecks in hiring continue to hold back stronger gains, particularly in light of new COVID-19 concerns tied to viral variants."  The service sector added 318K jobs last month.  Within services, the leisure & hospitality sector continued to pace the gains, adding 139K new workers last month.  However, that was down from the 332K jobs added in Jun.  Hiring in education & health services (+64,000); professional & business services (+54K); & trade, transportation & utilities (+36K) remained strong, while job losses in information services (-1K) continued.  Goods-producing sectors added a total of 12K jobs, led by manufacturing (+8K).  Last month, goods producers hired 68K new workers.  Job growth was pretty evenly distributed across small-, medium- & large-sized businesses.

Private sector hiring slows sharply in July amid an uptick in COVID infections

General Motors (GM) earned a pretax profit of $4.1B on $34.2B in Q2 revenue in the face of the ongoing chip shortage that has hampered production this year.  The automaker said it has booked $8.5B in earnings thru H1 & is revising its full-year outlook upward from $10-11B to $11.5-13.5B.  However, the new guidance assumes it will have cleared its inventory of incomplete vehicles awaiting chips, which stands at $1.4B worth of product.  In a letter to shareholders, CEO Mary Barra credited GM's pivot to focus on "highest-demand, capacity-constrained products," namely its large trucks & SUVs, as a driving force behind the stronger-than-expected performance.  "The credit for our strong first half goes to our employees and extended team, including suppliers and dealers, who have collectively demonstrated strength, agility and resilience," Barra wrote.  GM has gone to extreme lengths to keep production of its profitable truck lines going this year, even removing some features to conserve its available supply of chips.  However, it finally had to idle its 3 full-size pickup plants for the last week in Jul & will be suspending production at them for another week starting Mon.  Overall production was higher in May & Jun than initially projected, with the arrival of some chip supplies coming earlier than expected.  Strong demand for used cars also delivered record profits of $1.6B for the GM Financial arm.  GM's positive outlook for the rest of the year follows similar guidance from other automakers. The stock fell 4.58 (9%).
If you would like to learn more about GM, click on this link:
club.ino.com/trend/analysis/stock/GM?a_aid=CD3289&a_bid=6ae5b6f7 

GM shares fall despite $4.1B profit, boosted forecast

Treasury Secretary Janet Yellen will warn that enacting Pres Biden's economic agenda is critical to maintaining America's status as the world's top economic superpower, according to a copy of her remarks.  She will deliver the address as part of a White House messaging blitz designed to rally the public behind the T$ bipartisan infrastructure bill & Dems' even bigger $3.5T spending plan.  It will be her first domestic trip & a reflection of her increasingly visible role as one of the administration's champions for expansive investments in “human capital.”  “We’ve grown used to America as the world’s pre-eminent economic power. We aren’t destined to stay that way, but with these investments, I believe we will,” Yellen said in her remarks.  “We have a chance now to repair the broken foundations of our economy, and on top of it, to build something fairer and stronger than what came before.”  Her comments come at a critical moment in negotiations with Capitol Hill.  The Senate is haggling over the final details of the infrastructure bill, while Dems are trying to unify their own party around the broader spending package.  Yellen will urge lawmakers not to lose sight of their ambition, arguing that the nation’s economic recovery “did not happen by default.”  Instead, she credits the rapid rebound from recession as the direct result of the Biden administration's policy decisions.  Long-term secular problems — declining labor force participation, wage polarization, climate change — are also choices, not inevitable outcomes.  “Fiscal policy can help unwind them. Or the lack thereof can intensify them,” Yellen said.

Yellen: Pass Biden agenda to keep U.S. the world’s top economic superpower

The new jobs report was disappointing & may be followed by more indications of a slowdown in the recovery.  Yellen is clearly behind more spending & believes that higher inflation will take care of itself.  I don't know about that.

Dow Jones Industrials

 

Markets push higher with Dow reaching a new record

Dow advanced 278 for a new record, advancers over decliners 4-3 & NAZ climbed 80.  The MLP index stayed in the 179s & the REIT index was little changed in the 462s.  Junk bond funds inched higher & Treasuries were mostly flattish.  Oil dipped under 71 & gold was off 9 to 1813 (more on both below).

AMJ (Alerian MLP Index tracking fund)

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Household debt rose by its highest $ amount in 14 years during Q2, thanks mostly to a surge in the housing market that brought the collective American IOU to just shy of $15T, the Federal Reserve reported.  Total debt balances jumped $313B in the Apr-Jun period, the sharpest rise since the same period in 2007.  As a share of debt, that represented a 2.1% increase, the fastest pace since 2013.  Most of the gain came from mortgage originations, both initial purchases & refinances, which have been on fire as the Federal Reserve has kept benchmark borrowing rates anchored around historic lows.  Mortgage balances increased $282B for the period, up 2.8% rise from Q1 & 6.7% from a year ago, for a total of $10.4T.  Over the past 4 qtrs, mortgage originations have totaled close to $4.6T, amounting to 44% of all outstanding home loan balances.  But the swelling debt numbers weren't just about mortgages, with non-housing balances up $44B.  Credit card balances increased by $17B, while auto loans were up $33B.  Student loan debt actually decreased for the period, falling $14B to $1.57T as forbearance programs have kept education-related balances in check.  Indeed, gov efforts overall at getting consumers through the Covid-19 pandemic resulted in low delinquency numbers across the board.  In the aggregate, some 2.7% of debt was in some form of delinquency, a 2-percentage point drop from Q4-2019, just before the pandemic hit.  However, those breaks are expiring in the coming months, posing challenges to borrowers who now will have to get current on their loans.

Household debt jumps by the most in 14 years to nearly $15 trillion

The Institute for Supply Management, a trade group of purchasing managers, said that its index of manufacturing activity declined by 1.1 percentage points to a reading of 59.5.  The index had also slowed in Jun, dropping to 60.6 from a reading of 61.in May.  Any reading above 50 indicates growth in the manufacturing sector.  Jul was the 14th consecutive month manufacturing has grown after contracting in Apr 2020 when the coronavirus triggered nationwide business shutdowns.  But the Jul reading showed slower growth in new orders & production.  Manufacturers have struggled in recent months with supply-chain bottlenecks that have made it difficult for them to get computer chips & other necessary components for their products.  “As we enter the third quarter, all segments of the manufacturing economy are impacted by near record-long raw-material lead times, continued shortages of critical basic materials, rising commodity prices and difficulties in transporting products” said Timothy Fiore, chair of the ISM manufacturing survey committee.  

US manufacturing expands again in July, but pace slows

Gold futures finished lower as equity markets tilted higher & Treasury yields & the $ edged up.  The decline in bullion prices was also attributed to some consolidation of profits by investors after a run above $1800 for the precious metal.  The decline for gold came as stocks took a leg higher, with the Dow gaining altitude, while the yield for the 10-year Treasury note was up slightly at around 1.18% & the $ was inching higher, up around 0.05%, measured by the ICE U.S. Dollar Index.  Against that backdrop, Dec gold closed $8 (0.4%) lower at $1814 an ounce, following a 0.3% gain to start the week & the first session in Aug.  Price action for the precious commodity may ultimately be dictated by the monthly US labor-market data due Fri which could help investors better gauge the economic recovery from the COVID pandemic against the backdrop of the spread of the highly transmissible delta variant.  Commodity investors continue to key in on comments from Federal Reserve members, with some policy makers offering a more hawkish stance on monetary policy since the conclusion of the Fed's rate-setting meeting last week.

Gold futures end lower Tuesday as yields, dollar perk up

Oil futures gave up early gains to finish lower, extending a sharp decline from the previous session blamed on worries about the impact on demand from the spread of the delta variant of the coronavirus that causes COVID-19.  West Texas Intermediate crude for Sep fell 70¢ (1%) to close at $70.56 a barrel.  Oct Brent crude, the global benchmark, declined 48¢ (0.7%) ending at $72.41 a barrel.  Both benchmarks fell more than 3% yesterday.  Investors will also be paying attention to weekly data on US crude & product inventories this week.  The forecast is for crude inventories to show a drop of 4M barrels last week.  Gasoline stocks are expected to show a drop of 1.1M barrels, while distillate supplies are seen down 600K barrels.

Oil ends lower, extends drop as COVID spread stokes demand worries

Investors were a little cautious in the first hour of returning.  But they returned & took the Dow over 35K to a new record.  The rise is difficult to understand with DC so dysfunctional & so much that is needed to get done.  Recently the Dow has been trending sideways.  During the last 3 weeks, the Dow has been up a relatively modest 120.  The bulls may be away on holiday.

Dow Jones Industrials