Markets drop as coronavirus fatalities rise

Dow sank 169, decliners over advancers better than 2-1 & NAZ fell 61.  The MLP index retreated 3+ to the 207s & the REIT index fell 1+ to the 414s.  Junk bond funds did little today & Treasuries were bid higher while stocks were being sold.  Oil was off 1 to the 52s & gold rose 8 to 1584.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

52.33

-1.00

-1.9%

GC=F

Gold

1,583.30

+7.30

+0.5%

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The US economy maintained a steady pace of growth in Q4, according to new data.  GDP, a measure of how much the US produces in goods & services, grew at a 2.1% annualized rate during the 3-month period from Oct-Dec, according to the Commerce Dept.  That matched the 2.1% growth rate in Q3.  For the full year, the economy grew 2.3%, below the 2.9% from 2018 & the 2.4% gain in 2017, amid fading fiscal stimulus from Pres Trump's 2017 Tax Cuts & Jobs Act & an 18-month trade war between the US & China that rattled global financial markets.  Consumer spending, which accounts for more than 2/3 of GDP, continued to boost the now $21.7T economy.  Still, it rose a modest 1.8% in the final months of 2019, sharply below the 3.2%  increase in Q3.  Net exports also contributed to growth, rising 1.4% in Q4.  Imports fell 8.7 %, caused by a drop in consumer goods & motor vehicles, as the US has made strides to reduce its global trade imbalance.  The US & China recently signed a partial trade deal, easing tensions, though the trade war continued to impact businesses & investment.

US economy expanded at 2.1% rate in fourth quarter

Commerce Secretary Wilbur Ross said the rapidly spreading coronavirus will bring jobs back to North America.  He added that it gives businesses "another thing to consider" when they review their supply chain & it could help accelerate the return of some jobs to the US & Mexico.  US companies that operate in China have begun closing some locations due to the outbreak.  Airlines have grounded Los Angeles flights to & from Shanghai & Beijing.  Ross said that along with the outbreak of the SARS that impacted nearly 5000 on China's mainland & claimed 329 lives in the early 2000s, & the African swine virus, a recent epidemic that killed a vast number of pigs in China, the coronavirus is another “risk factor” that companies need to take into account.  Head of the Centers for Disease Control & National Institute of Health's Infectious Disease are expected to brief house lawmakers today on the spread of the virus in the US & the World Health Organization will also meet in Geneva to discuss whether to issue a public health emergency.  The death toll from the virus has reached 170, with 7711 confirmed cases in China.  5 cases were reported in the US & officials are urging citizens to avoid unwarranted travel to China.

Coronavirus will help return jobs to North America: Wilbur Ross

Pres Trump signed the historic US-Mexico-Canada Agreement (USMCA), replacing the Clinton-era North American Free Trade Agreement that he called a "disaster."  The USMCA, which is the biggest trade deal of all-time, covers more than $1.3T of commerce & is the 2nd major trade deal secured by the Trump administration this year.  The agreement has already been ratified by Mexico, but not yet by Canada.  "You're going to see more jobs all across the economy, in the automobile sector, in the agricultural sector and of course in the energy sector as well," Energy Secretary Dan Brouillette said.  The USMCA requires 75% of automobile components be manufactured in the US, Canada or Mexico in order to avoid tariffs.  By 2023, some 40-45% of automobile parts must be made by workers who earn at least $16 an hour.  The agreement is expected to create 80K new jobs tied to the auto industry & bring in up to $30B of new investment in the sector.  The pact will also open new markets for American wheat, poultry and eggs, among other things.  "This is a colossal victory for our farmers and ranchers," Trump said at the signing ceremony.  "Everybody said this was a deal that could not be done," he added, "but we got it done."  Once fully implemented, the USMCA is expected to lift US GDP by as many as 1.2 percentage points & create up to 589K jobs, according to the Intl Trade Commission. After the trade deal was approved by the Senate on Jan 16, by a vote of 89 to 10, Sen Charles Grassley hailed it as a "major achievement for President Trump and a very big win for the American people."  The signing of the USMCA comes nearly 2 weeks after Trump inked an initial trade deal with China.  Combined, the 2 agreements encompass more than $2T worth of trade & could add as much as 1.7 percentage points to US economic growth.  The US economy expanded at a 2.1% pace in the 3 months thru Sep.  “We’re restoring America’s industrial might like never before,” Trump declared Tues.  “They’re all coming back. They want to be where the action is.”

Trump signs USMCA, paving way for job market boom

News from the GDP data & USMCA being signed was encouraging for investors, but the coronavirus story is very threatening.  More updates are coming later today.  The Dow was in the red at the opening & then rose to about breakeven.  However sellers took command in the last hour with heavy selling.  Without favorable word about the coronavirus scare, the short-term outlook for stocks is gloomy.  However this is good news for those investing in safe haven gold & Treasuries.

Dow Jones Industrials

Markets finish marginally higher after Fed leaves rates unchanged

Dow rose 10 (session lows), advancers over decliners about 5-4 & NAZ added only 4.  The MLP index  was fractionally lower to 211 (about even in the last week) & the REIT index fell 1+ to the 415s,  Junk bond funds crawled higher & Treasuries rose in price.  Oil slid lower in the 53s & gold went up 4 to 1574 (more below).

AMJ (Alerian MLP Index tracking fund)

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The Federal Reserve voted unanimously to hold interest rates steady during its first policy meeting of the year, reaffirming its wait-and-see approach despite growing concerns about China's widening coronavirus outbreak.  In a move that was widely expected, the FOMC, during its 2-day meeting this week, kept the benchmark federal funds rate on hold at 1.5-1.75%, where it has been for the past few months.  In their statement, policymakers at the central bank cited low unemployment, solid job growth & inflation below their preferred 2% level as the reason for pressing pause on rates.  "The Committee will continue to monitor the implications of incoming information for the economic outlook, including global developments and muted inflation pressures, as it assesses the appropriate path of the target range for the federal funds rate," the Fed said.  Job creation averaged 176K per month last year, while unemployment is currently at 3.5%, a ½-century low.  Still, the manufacturing sector has continued to slow.  In Dec, it contracted to its lowest level in over 10 years, spurring concerns about the strength of the economy.  Policymakers adjusted their statement to say the current stance of monetary policy is appropriate to support "inflation returning to the committee's symmetric 2 percent objective."  That modified the previous language, which said the Fed was looking to get inflation "near" the benchmark it considers healthy.  It marked the 2nd straight month where the US central vote made no changes to rates, following 3 modest consecutive cuts last year, part of what Chairman Jerome Powell described as a "mid-cycle adjustment."  Some economists noted the rapidly spreading coronavirus — more than 130 have died from the mysterious illness, while Chinese officials confirmed more than 6K cases — had emerged as an unexpected risk to the global economy.  Multiple companies & countries are limiting travel to & from mainland China, evacuating citizens & scaling back operations, raising concerns about the health of the world's 2nd-largest economy.

Fed keeps interest rates steady, maintains wait-and-see approach

France has confirmed a 5th case of the coronavirus — the daughter of an 80-year old man already hospitalized with the disease, according to French health minister Agnes Buzyn.  France confirmed its first 3 cases of the Wuhan coronavirus on Fri & a 4th case yesterday.  A first flight to repatriate French nationals from the Chinese town of Wuhan, the epicentre of the virus, was leaving France last night & a 2nd flight would occur tomorrow, she said.  Boeing (BA), a Dow stock, raised concerns about the outbreak as airlines cut back service to China.  Global air traffic growth in Nov rose by just 3.3% from a year earlier, reflecting “the continuing influence of slower economic activity, geopolitical tensions and other disruptions,” according to the Intl Air Transport Association.  Boeing (BA), a Dow stock, CFO Greg Smith noted the slower-than-usual growth, saying the “impact of the coronavirus on near-term traffic growth is clearly a watch item this year.”  The coronavirus outbreak is driving up demand for some of Dow's cleaning products that are used in household cleaning items, CEO Jim Fitterling said.   Fitterling added that Dow’s cleaning products are seeing increased demand due to the rapidly spreading virus.  “We’ve seen some demand pull from coronavirus on things like cleaning materials for disinfectants, like you would use in household cleaners; non-wovens for masks and wipes and those kinds of things,” Fitterling added.  “And I think as you see people stay at home and use more food from the grocery store, you’re going to see a pull on packaging as well.”

Coronavirus live updates: Outbreak is ‘grave concern’ as infections spread beyond China

The US trade deficit in goods jumped 8.5% in Dec as tensions with China eased & imports surged, potentially signaling somewhat softer GDP in Q4.  The gap in goods climbed to $68.3B in the final month of 2019 from $63B in Nov, the gov said.  The wider deficit could spur tradeers to trim forecasts for GDP in the 4th quarter below 2%.  Bigger deficits subtract from GDP.  Advance figures for wholesale trade, meanwhile, slipped 0.1% while retail inventories were unchanged in Dec.  They were also weaker than expected.  Exports of goods rose 0.3% in Dec, but imports shot up 2.9% to break a string of 3 straight declines.  Imports fell in the fall after the US raised tariffs again on China in Sep & companies sought to time future shipments based on the prospects of even higher tariffs.  Imports of consumer goods made in China were particularly hard hit.  The easing of trade tensions between the 2 large economies in Dec, however, led to a snapback in imports in the month.  Imports could also rise again in Jan in the wake of the Phase One deal with China that was signed on Jan 15 & that's been seen as a truce of sorts.  The US gov will release overall trade numbers for Dec next week, but the size of the deficit is closely tied to changes in the exports & imports of goods.  The larger trade deficit in Dec prompted some  forecasters to trim estimates for US economic growth in Q4.  Yet it doesn't show any fundamental change in an economy that's growing around 2% a year & shows little sign of faltering.

U.S. trade deficit in goods jumps 8.5% in December, points to softer 4th quarter GDP

Gold futures finished with a modest gain, as traders weighed the spread of coronavirus cases & its potential impact on the global economy.  In electronic trading today, prices held ground near the day’s settlement as the Federal Reserve left its benchmark fed-funds interest rate unchanged in at a 1.50%-1.75% range.  Gold for Feb delivery settled at $1570 an ounce, essentially flattish.  In electronic trading shortly after the decision, prices traded at $1572.

Gold ends slightly higher as traders eye economic impact of coronavirus

The markets were strong until the last 2 hours of trading.  Sellers took over & the Dow dropped about 150, closing near its lows for the session.  Earnings are coming in reasonably good.  However the virus which started in China is gaining importance.  Already many companies have been affected & matters will likely get worse.  Meanwhile the FOMC had its big meeting which hardly got any notice, partially because no major changes in interest rates were expected.

Dow Jones Industrials

Markets rise on earnings & the forthcoming signing of USMCA

Dow shot up 135, advancers over decliners 3-2 & NAZ gained 23.  The MLP index went up 1+ to the 212s & the REIT index fell 1 to the 415s.  Junk bond funds rose in price & Treasuries were bid higher,  Oil was steady in the 53 & gold was flattish at 1570.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

53.16

-0.32

-0.6%

GC=F

Gold

1,571.00

+1.20

+0.1%

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Energy Secretary Dan Brouillette said he expects the US-Mexico-Canada Agreement (USMCA) to boost the American workforce by creating about 600K jobs.  "You're going to see more jobs all across the economy, in the automobile sector, in the agricultural sector and of course in the energy sector as well," Brouillette said.  "We're looking at approximately 600,000 jobs being created by this deal."  Pres Trump is scheduled to sign USMCA at the White house shortly, leaving one last hurdle for the deal: Canada.  Canada's Prime Minister Justin Trudeau's opposition party, which controls the House of Commons, could hold up the country's ratification process.  "This is a brilliant deal that the president led to lock in some of the reforms that were undertaken in places like Mexico years ago, around the 2014 time frame," Brouillette added.  "They took very specific steps to open up their markets. The president's taking advantage of that by locking in this deal that's going to mean good news for American workers all across this country."

USMCA to create 600,000 jobs, US Energy Secretary tells FOX Business

Boeing (BA), a Dow stock, lost $1B in the last 3 months of 2019 as the grounding of its best-selling 737 Max jetline stretched toward a full year, crimping airline customers' revenue & forcing out CEO Dennis Muilenburg, who had become the face of the crisis.  Sales dropped 37% to $17.9B as deliveries of commercial airplanes tumbled 67%.  EPS amounted to a $2.33 loss, BA's first since 1997.  "We recognize we have a lot of work to do," said CEO David Calhoun, who took over this month as the 3rd CEO in the last 5 years, following Muilenburg's ouster last month.  "We are focused on returning the 737 Max to service safely and restoring the longstanding trust that the Boeing brand represents with the public."  Calhoun said that he's confident that the single-aisle airliner, the latest iteration of a plane introduced in the late 1960s, can win Federal Aviation Administration certification by Jun.  "There's nothing in the process that scares us with respect to the safety of the airplane and, ultimately, delivery of the airplane," he added.  The company's timetable is "based on the experience that we've had over the course of the past year in working with the FAA."  The company reportedly secured $12B in loans to carry it thru a potential cash crunch after halting deliveries of the 737 Max until regulators approve its return to commercial flight.  Stock holders like the news & the stock rose 7.20.
If you would like to learn more about BA, click on this link:
club.ino.com/trend/analysis/stock/BA?a_aid=CD3289&a_bid=6ae5b6f7

Boeing posts first loss in 20 years as 737 Max grounding grinds on

McDonald's (MCD), a Dow stock & Dividend Aristocrat, reported quarterly earnings that topped expectations as price hikes offset declining foot traffic in US restaurants.  MCD's Q4 was marked by an executive shakeup when Chris Kempczinski, who formerly led the company's US division, was tapped as teh new CEO.  The burger chain has struggled to reverse declining foot traffic to US restaurants as consumers lose their taste for fast food. It is also facing more competition from other chains, particularly in breakfast, the only time of day that is growing customer traffic across the fast-food industry.  “We’re committed to really updating and competing in an aggressive way in the chicken segment,” Kempczsinki said but declined to share more on future plans.  In the US same-store sales climbed 5.1% during the qtr, despite traffic to restaurants falling by 1.9% in 2019.  “Getting U.S. guest count to positive is our number one priority,” Kempczinski told analysts, adding that the focus will be winning over breakfast customers.  MCD's attributed its US sames-store sales growth to price hikes, strong sales of core menu items like the Big Mac & positive impacts from high-tech store renovations that include self-order kiosks.  The company expects to spend about $1.3B on capital expenditures in the US in fiscal 2020, more than ½ of which will be spent on those renovations.  EPS was $2.08, up from $1.82 a year earlier.  Excluding a tax benefit related to new regulations, EPS was $1.97, topping the $1.96 estimate.  Net sales rose 4% to $5.3B, meeting expectations. The company reported global same-store sales growth of 5.9% compared to 5.2% expected.  The stock went up 5.59.
If you would like to learn more about MCD, click on this link:
club.ino.com/trend/analysis/stock/MCD?a_aid=CD3289&a_bid=6ae5b6f7

McDonald’s earnings beat Wall Street estimates, helped by price hikes as US foot traffic declined

Earnings are bringing out stock buyers as shown above.  Signing the USMCA trade deal is making them even more optimistic about the future in these trying times.  The Dow is about 500 below its record, not bad, & the bulls would like to see more records.

Dow Jones Industrials