Markets drift lower as investors consider stimulus proposal

Dow fell 185, decliners over advancers 2-1  & NAZ lost 20.  The MLP index slid lower to 108 & the REIT index pulled back 3+ to the 345s.  Junk bond funds fluctuated & Treasuries found buyers.  Oil dropped 1+ to the 39s & oversold gold rose 11 to 1893.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

39.71

+0.40

+1.2%

GC=F

Gold

1,921.10

+10.50

+0.6%

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House Speaker Nancy Pelosi & Treasury Secretary Steve Mnuchin are set to talk after Dems unveiled a coronavirus stimulus plan designed to restart progress toward a relief deal.  Dems released the $2.2T legislation as they struggle to break a weeks-long impasse with the White House over how to structure a 5th relief bill.  While the Dem-held House passed a $3.4T proposal in May, the Trump administration has offered to inject only $1.3T more into efforts to boost the economy & health-care system during the pandemic.  Pelosi & Mnuchin spoke after Dems unveiled their bill, the speaker's spokesman Drew Hammill said.  While the pair agreed to speak again, it is unclear if they moved any closer to a compromise.  Writing to House Dems, Pelosi said her party is “making good on our promise to compromise with this updated bill” because it cuts more than $1T from their original plan. 

Pelosi, Mnuchin set to talk as Democrats release $2.2 trillion coronavirus stimulus bill

Strong demand from homebuyers in Jul, coupled with rock-bottom mortgage interest rates, caused home prices to accelerate in major markets across the nation.  Nationally, home values rose 4.8% annually, up from a 4.3% gain in Jun, according to the S&P CoreLogic Case-Shiller US National Home Price Index.  The 10-City Composite annual increase showed a 3.3% gain, up from 2.8% in the previous month & the 20-City Composite rose 3.9% annually, up from 3.5% in Jun.  Detroit was not included in the series, due to data collection issues, so it covered just 19 cities.  Phoenix, Seattle & Charlotte reported the highest annual gains among the 19 cities.  Phoenix prices rose 9.2%, followed by Seattle with a 7% increase & Charlotte with a 6% increase.  16 of the 19 cities reported higher price increases in the year ending Jul 2020 versus the year ending Jun 2020.

Home prices rose 4.8% in July, according to Case-Shiller index 

The Conference Board said that its index of consumer sentiment surged to 101.8, up from 86.3 in Aug. The forecast called for the index to rise slightly, to 90.1.  But the prepandemic index reading was 132.6 in Feb.  “The rising exuberance is surprising given the recent moderation in employment conditions, slowing momentum in the overall economy, great uncertainty surrounding the prospect of an additional fiscal stimulus package, and the nationwide uptick in Covid-19 infections,” economists at Oxford Economics wrote in a note.  Lynn Franco, senior director of economic indicators at the Conference Board, pointed to an increase in current & short-term optimism for the index's jump.  “Consumers also expressed greater optimism about their short-term financial prospects, which may help keep spending from slowing further in the months ahead,” she added.  Other readings from the Conference Board's survey:

• The present situation index, based on consumers' assessment of current business & labor market conditions, increased to 98.5 from 85.8.

• The expectations index, based on consumers' short-term outlook for income, business & labor market conditions, increased in Sep to 104.0 from 86.6.

• The percentage of consumers saying business conditions are “good” increased 18.3% from 16%, while those saying business conditions are “bad” decreased to 37.4% from 43.3%.

• The percentage of consumers saying jobs are “plentiful” increased to 22.9% from 21.4%, while those claiming jobs are “hard to get” decreased to 20% from 23.6%.

• The percentage of consumers expecting business conditions will improve over the next 6 months increased to 37.1% from 29.8%, while those expecting business conditions will worsen decreased to 15.8% from 20.7%.

Consumer Confidence Perks Up as Outlook Brightens

After little movement, the Dow dropped 200.  Investors don't believe nuch will come from the stimulus talks in DC because those guys are not serious.  Earnings season begins next week & early thinking is they may not be as bad as feared.  In additioni the consumer confidence data looks good.  However problems with opening the econmy in 50 states & fighting the virus will persist.

Dow Jones Industrials

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Markets rise on renewed stimulus relief bill talks

Dow shot up 358 (closing near the highs), advancers over decliners about 3-1 & NAZ jumped 241.  The MLP index was steady in the 105s & the REIT index rose 5+ to the 341s.  Junk bond funds slipped lower & Treasuries was slightly higher.  Oil was steady, just above 40, & gold fell 7 to 1869 (more on gold below).

AMJ (Alerian MLP Index tracking fund)

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Treasury Secretary Steve Mnuchin said he & House Speaker Nancy Pelosi agreed to resume talks on another coronavirus relief package more than a month after negotiations first collapsed.  “I’ve probably spoken to Speaker Pelosi 15 or 20 times in the last few days on the CR,” Mnuchin told the Senate Banking Committee yesterday, referring to a continuing resolution (CR) to extend gov funding thru the end of the year.  "And we’ve agreed to continue to have discussions about the CARES Act.”  Pelosi also told reporters at the Capitol yesterday that she expected to revive negotiations with the White House shortly.  "We'll be hopefully soon to the table with them," she said.  Their comments come amid a high-stakes impasse between the 2 parties over another round of emergency relief for American workers & families still reeling from the virus-induced crisis.  Although Dems & Reps broadly agree that another bill is necessary to aid the economy's recovery, they sharply disagree over the size & scope of it.  Dems have offered to come down to $2.2T from the roughly $3T HEROES Act, which the House passed in May & insist the legislation needs to include extended unemployment benefits, a fresh round of $1200 stimulus checks & additional funding for state & local govs.  But the White House & Rep leaders want to keep the price tag closer to $1T amid growing concerns among some lawmakers over the ballooning deficit, which is projected to hit a record-shattering $3.3T this year, according to the Congressional Budget Office.  Asked last week whether she was allowing perfect to be the enemy of good by holding out for $2.2T, Pelosi said: "It's not perfect. Perfect is $3.4 trillion."  House Dems are drafting a $2.4T aid package in hopes of jumpstarting negotiations.  The revised measure is likely to include funding for state & local govs; a 2nd $1200 stimulus check; more than $100B in aid for schools to safely reopen & renewed funding for jobless aid.  Economists have urged lawmakers to cut a deal or risk imperiling the nascent recovery from the shutdown earlier this year.   "The CARES Act really did a lot of good in putting money in people's hands and keeping them in their homes and keeping them spending, keeping them in one piece," Federal Reserve Chair Jerome Powell said in congressional testimony this week.  "Going forward, more of that may be needed."  Congress is scheduled to be in session through early Oct.

Mnuchin, Pelosi agree to revive COVID relief talks; Dems draft $2.4T proposal

The US. recession was severe but also short and is now over, said Richmond Fed Pres Tom Barkin.  The US went into a recession on Mar 15 when the economy went into a lockdown to try to stem the outbreak of the coronavirus.  It ended in Jun or Jul, Barkin said.  The US economy sank at a record 31.7% annual rate in Q2.  Economists expect a sharp recovery in Q3.  A committee of economists led by the National Bureau of Economic Research decides the official timing of recessions & this is not known to be a swift process.  A decision could come “like three years from now,” about when the pandemic-hobbled economy slipped in & out of recession, Barkin quipped.  St Louis Fed Pres James Bullard said earlier  the economy could fully recovery on some metrics by the end of this year.  Even if the recession is over, Barkin said he didn-t think the economy would recover fully until 2021 or after.  The US economy “has kind of been in the hospital and we’re out of the hospital now but we’re recovering at home,” Barkin said.  “We’re vulnerable” to another adverse development, he added.  “That could be a lot of things. I mean imagine for a second some big showdown with Iran or China or imagine a terrorist incident on US soil.  Something else that wings in from left field, that's the thing I worry about the most.  “I do think the economy is getting healthier but we’re not healthy,” he said.

U.S. economy is out of recession but still vulnerable, Fed’s Barkin says

A rising tide worldwide of new cases & deaths from the coronavirus-borne disease COVID-19 has prompted calls for new shutdown measures overseas & more political wrangling in the US, but also reignited efforts to produce a stimulus bill to fend off a renewed pandemic-induced economic slowdown.  The global case tally reached 32M today as deaths grew to 984K, according to Johns Hopkins University.  In the US, the case toll climbed to nearly 7M & the death toll reached 203K.  There were 45K new cases reported in the US today, up from 41K yesterday.  That was close to the daily average of 42K over the past week, which was up 17% from the average 2 weeks earlier.  There were 885 new coronavirus deaths over the past day, down from 1091 a day before. 

U.S. cases rise toward 7 million, after jumping by more than 45,000 in a single day

Gold futures ended with a loss, with bullion booking its 4th decline in 5 sessions, prompting the asset to suffer its worst weekly slide in about 6 months.  Dec gold fell $10 (0.6%) to settle at $1866 an ounce, sending the metal to its lowest finish in 2months.  It saw a 4.9% weekly drop—the steepest for a most-active contract since mid Mar.  The chance for a 2nd Congressional stimulus package, which the stock market has been craving, remains slim.  This should also support the gold price.

Gold ends lower to suffer worst weekly slump since March

Stocks were around breakeven until midday when the announcement was made that talks resumed on another stimulus bill.  Stocks jumped even though the odds for a new bill (or significant bill) are weak.  Investors are hoping for the best but the 2 sides are still far apart.  The Dow finished the week down 500 & the NAZ finished up 100 thanks to late day buying today.  They're both in the red in the month.

Dow Jones Industrials

Markets climb on bargain hunting after recent selling

Dow rose 121, advancers over decliners about 5-4 & NAZ advanced 128.  The MLP index fell 1+ to the 104s (100 was the starting value 24 years ago) & the REIT index added 1+ to 337.  Junk bond funds pulled back & Treasuries were purchased.  Oil slid back to 40 & gold was off 11 to 1865.

AMJ (Alerian MLP Index tracking fund)

CL=F

Crude Oil

39.75

-0.56

-1.4%

GC=F

Gold

1,856.50

-20.40

-1.1%

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White House economic adviser Larry Kudlow said the administration had relief $s left over from the CARES Act that it could put toward other stimulus measures.  When asked whether he thought a new stimulus package could possibly pass Congress now that the Supreme Court vacancy has become a key issue, Kudlow indicated he didn't think the administration's relief plans would be affected by the judicial situation “at the moment.”  “Our side has an efficient targeted assistance package, stuff we think is necessary,” Kudlow said, adding that there is money left over that could be “repurposed” toward those efforts.  During the first round of PPP relief, the Small Business Administration said more than 5.2M loans were approved, valued at a cumulative $525B.  There is about $130B that has not been used.  Reps have proposed a more targeted 2nd round of PPP loans intended to help businesses that have been most severely impacted by the pandemic.  A proposal in Jul called for $190 B worth of PPP funding to be made available to business owners with 300 employees or fewer whose revenue declined by at least 50% as a result of the coronavirus pandemic.

White House has money to ‘repurpose’ for additional coronavirus stimulus, Kudlow says

House Dems are preparing a new, smaller coronavirus relief package expected to cost about $2.4T as they try to forge ahead with talks with the Trump administration.  The bill would include enhanced unemployment insurance, direct payments to Americans, Paycheck Protection Program (PPP) small-business loan funding & aid to airlines, among other provisions.  To reach the price tag, Dems would chop roughly $1T from their previous proposal for a 5th pandemic aid plan.  The party aims to restart stimulus negotiations with the White House after talks fell apart last month.  House Speaker Nancy Pelosi has repeatedly pushed Treasury Secretary Steve Mnuchin & White House chief of staff Marl Meadows to boost the administration’s roughly $1.3T offer by another T $s.  Pelosi directed Dem committee chairs to draft legislation.  The House could vote on a bill as soon as next week, but Dems have not yet decided on a plan.  Dems & Reps have failed to come to agreement on more aid to combat the health & economic damage from the crisis, even after a $600 per week supplemental unemployment benefit, a federal moratorium on evictions & the window to apply for PPP loans lapsed.  Hopes for more legislation dwindled in recent weeks as Reps grew wary of spending & election-year politics infiltrated the process.  The GOP put together a scaled-back bill after a measure costing about $1T that they released in Jul failed to lead to a bipartisan breakthrough.  The discussions about a relief proposal come as concerns grow about the potential for the US economic recovery, boosted by the Ts in relief Congress has passed this year, appears to falter.  Federal Reserve Chair Jerome Powell, among other economic experts, has warned the economy could take a hit without more fiscal stimulus.

House Democrats prepare new $2.4 trillion stimulus plan with unemployment aid, direct payments

New orders for key US-made capital goods increased more than expected in Aug & demand for the prior month was stronger than previously estimated, suggesting a rebound in business spending on equipment was underway after a prolonged slump.  The upbeat report from the Commerce Dept, however, did not change views that the economy's recovery from the COVID-19 recession was slowing as gov money to help businesses & tens of Ms of unemployed Americans runs out.  New coronavirus cases are rising in some parts of the country.  That could crimp consumer spending, with retail sales already slowing.  Federal Reserve Chair Jerome Powell this week stressed the need for more fiscal stimulus, telling lawmakers that it could make the difference between continued recovery & a much slower economic slog.  Another rescue package appears unlikely before the Nov 3 presidential election.  Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 1.8% last month, the Commerce Dept said.  Data for Jul was revised up to show these core capital goods orders increasing 2.5% instead of 1.9% as previously estimated.  The forecast called for core capital goods orders gaining 0.5% in Aug.  Core capital goods orders last month were boosted by increased demand for machinery, primary metals, computers & electronic products.  But orders for fabricated metal products & electrical equipment, appliances & components fell.  Shipments of core capital goods increased 1.5% last month.  Core capital goods shipments are used to calculate equipment spending in the gov's GDP measurement.  They advanced 2.8% in Jul. Business investment tumbled at a record 26% annualized rate in Q2, with spending on equipment collapsing at an all-time pace of 35.9%.  Investment in equipment has contracted for 5 straight qtrs.  Economic activity rebounded sharply over the summer as businesses reopened after mandatory closures in mid-Mar to slow the spread of the coronavirus.  GDP is expected to rebound at as much as a record 32% annualized rate in Q3 after tumbling at a 31.7% rate in the Apr-Jun period, the worst performance since the gov started keeping records in 1947.

U.S. core capital goods orders beat expectations; business investment rebounding

Stocks began trading meandering, but bargain hunters are conseratively bidding prices higher.  Efforts to pass another stimulus bill are not getting much done.  GDP growth in Q2 should be dramatic & that will be followed by limited growth in Q3.  Meanwhile Ms of Americans are still looking for work.  Investors are being careful about investing funds after the 6 month rally.

Dow Jones Industrials

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