Markets fall as interest rates climb

Dow dropped 180 from yesterday's record, decliners over advancers 5-2 & NAZ lost a big 185.  The MLP index slid back to the 161s & the REIT index added 1+ to the 396s.  Junk bond funds fluctuated & Treasuries were sold, raising the interest rate on the 10 year Treasury to 1.47%.  Oil was steady in the 63s & gold sank 22 to 1775.

AMJ (Alerian MLP index tracking fund)

CL=F Crude Oil 62.89   -0.33 -0.5%

GC=F Gold    1,774.50 -23.40 -1.3%

 

 

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The number of Americans filing for first-time unemployment benefits unexpectedly dropped last week as the labor market continues its slow recovery from the coronavirus pandemic.  The Labor Dept reported that 730K Americans filed first-time jobless claims last the week, lower than the 838K forecast.  The number of Americans applying for aid has remained stubbornly high for months, hovering around 4 times the pre-crisis level, although it's well below the peak of 7M that was reached when stay-at-home orders were first issued in Mar.  More than 70M Americans, 40% of the labor force, have filed for unemployment benefits during the pandemic.  There are roughly 10M fewer jobs than there were last year in Feb, before the crisis began.  Continuing claims, or the number of Americans who are consecutively receiving unemployment aid, fell to 4.4M, a decline of 101K from the previous week.  The report shows that roughly 19M Americans were collecting jobless benefits in the latest week, an increase of 701K from last week.  Many more Americans are receiving jobless aid from 2 federal programs that Congress established with the passage of the CARES Act in Mar:  One extends aid to self-employed individuals, gig workers & others who typically aren't eligible to receive benefits, & the other provides aid to those who have exhausted their state benefits.

Another 730,000 Americans filed for unemployment benefits last week

Moderna (MRNA) said it expects to generate $18.4B in sales from its Covid-19 vaccine this year.  In releasing Q4 earnings, MRNA also said its chief medical officer, Tal Zaks, will leave the company in Sep.  The news comes a day after the company said it was expecting to produce at least 700M Covid vaccine doses this year.  It also expects to produce up to 1.4B Covid vaccine doses in 2022.  MRNA has a deal with the federal gov for 300M doses & has shipped about 55M doses to the US.  It expects to complete delivery of the first 100M doses to the US by the end of Q1, the 2nd 100M doses by the end of May & the 3rd by Aug.  MRNA has been rapidly working to meet the demand for shots that hopefully will help bring an end to the pandemic, which has infected more than 112M people & killed at least 2.4M, according to Johns Hopkins University.  The company is in talks with the Food & Drug Administration on a proposal to fill its Covid vaccine vials with up to 5 additional doses to ease a bottleneck in manufacturing.  One vial of its 2-shot vaccine contains 10 doses, enough to inoculate 5 people.  The company also said it is in talks with the World Health Organization-backed COVAX initiative to supply doses this year & in 2022.  The stock rose 10.08 (7%).
If you would like to learn more about MRNA, click on this link:
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Moderna expects $18.4 billion in 2021 vaccine sales, chief medical officer exits

Inflation could quickly rise once more Americans are vaccinated & the central bank should monitor price signals closely, Kansas City Fed Pres Esther George said.  “It is worth recognizing that overall inflation could firm up quickly post-vaccination as demand for hard-hit sectors recovers,” George said.  Fed Chairman Jerome Powell told Congress this week that inflation was “soft.”  The Fed's favorite inflation measure, the personal consumption expenditure price index, has been below the Fed's target of 2% long-term inflation for most of the last decade.  Overall PCE inflation was running at 1.3% over the year ending in Dec.  George said aggregate inflation measures don't mean so much during the pandemic because prices have been moving dramatically both higher & lower.  “While some prices are down, other sectors, particularly durable goods, are recording their fastest price increases in decades,” George added.  Some households would be surprised to hear that overall inflation is subdued, she noted.  “While we would like for overall inflation to reveal the trend in prices across the entire economy, a wide dispersion in inflation across individual sectors makes overall inflation less informative for that trend,” George said.  She said it was too early to discuss pulling back on the central bank's easy policy stance.  The notable rise in longer-term interest rates does not warrant a monetary policy response, she added.  “Much of this increase likely reflects growing optimism in the strength of the recovery and could be viewed as an encouraging sign for increasing growth expectations,” George said.  “If this is indeed the reason that yields are increasing, they are unlikely to rise to the point of smothering the optimism that led to their increase in the first place, and measures of real yields remain deeply negative and only a touch off all-time lows,” she added.

Fed’s George says inflation could ‘firm up quickly’ after vaccinations  

Interest rates & oil prices are rising, which is keeping investors away from stocks.  Meanwhile the Dems are working on the stimulus bill & are already planing for another one.  The jobless claims data remains drab even though it showed improvement this week.

Dow Jones Industrials

 

Markets rally with the Dow reaching a new record

Dow jumped 432 to a new record near 32K, advancers over decliners 2-1 & NAZ rallied 132.  The MLP index added 3+ to the 161s & the REIT index rose 3+ to 395 (an 11 month high).  Junk bond funds remained mixed & Treasuries were hit with selling pressure.  Oil advanced 1+ to the 63s (another 13 month high) & gold was off 5 to 1800 (more on both below).

AMJ (Alerian MLP Index tracking fund)

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The Federal Reserve's 2nd in command said the economy is primed to show big improvement this year owing to more Americans getting vaccinated & Congress approving more stimulus.  “The development of several effective vaccines and the passage by the Congress in late December of a package of fiscal relief measures indicat,e to me that the prospects for the economy in 2021 and beyond have brightened and the downside risk to the outlook has diminished,” Fed Vice Chair Richard Clarida said.  The Biden administration is set to up the ante with another relief package of almost $2T.  The pending bill would extend & expand emergency federal unemployment benefits to $400 a week from $300 & provide up to $1400 in additional stimulus checks for eligible families.  Clarida gave no indication on whether he would prefer the Fed to slow asset purchases before the end of the year.  The central bank has been buying $80B in Treasuries & $40B in mortgage-backed securities each month to keep interest rates low & goose the economy.  Low mortgage rates have help fostered the biggest boom in the housing market in more than a decade.  Clarida said the economy would need to make “substantial further progress” before the Fed began to reduce purchases.  Earlier this year he said he expected the Fed to keep buying $120B a month in bonds at least until the end of 2021.  Clarida also emphasized the Fed's new strategy on controlling inflation will be more flexible & less tied to old rules.  Inflation has been low for years & he expects it to stay that way.  No longer will the central bank raise rates, for example, if the unemployment rate falls to a very low level, as it used to do in the past.  “A low unemployment rate, in and of itself, will not be sufficient to trigger a tightening of monetary policy absent any evidence from other indicators that inflation is at risk of moving” significantly higher, Clarida said.  He doubted that low rates & massive federal spending were fueling a big bubble in stocks or other assets.  Some critics contend gov policies are creating bubbles.

Fed’s Clarida sees brighter economy in 2021, but he’s not worried about inflation

Shares of AstraZeneca (AZN) rose after a company exec testified before Congress that the drug maker expects to deliver 50M of its experimental COVID-19 vaccine in the US in Apr if it's authorized before then.  That would be enough to vaccinate 25M people.  Its COVID-19 vaccine has been authorized for use in some other countries, including the UK; however, it is currently in phase 3 clinical studies in the US.  "Based on current projections, assuming [emergency use authorization], we expect to deliver up to 50 million doses by the end of April," Ruud Dobber, pres of North America business for AZN, told members of the House Subcommittee on Oversight & Investigations.  The trial finished enrollment in Jan but the company has not yet released any clinical data for the US arm of the study.  The stock rose 79¢.
If you would like to learn more about AZN, click on this link:
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AstraZeneca exec tells Congress it could have 50 million doses of its COVID-19 vaccine ready in April 

Gold futures fell for a 2nd session, settling below the key $1800 mark for the first time this week.  Treasury bond yields have risen to their highest levels in about one year.  In his first day of congressional testimony yesterday, Federal Reserve Chair Jerome Powell tried to placate markets that had grown skittish about a rapid rise in bond yields as the economy attempts to recover from the COVID-19 pandemic.  Gold prices fell $8 (0.4%) to settle at $1797 an ounce, marking the first finish below $1800 since Fri.  The precious metal declined $1 in the previous session.  Powell yesterday emphasized the Fed's commitment to keeping easy monetary policies unchanged for the foreseeable future, which helped stem heavy losses among tech companies, a group that tend to be the most sensitive to rising rates & are also seen as richly valued.  Powell held his 2nd day of remarks about the state of the economy & market today to a House committee.  He said Fed wants to see “actual data” showing the Fed moving closer to its goals before it would slow down the pace of bond-buying.  Some commodity dealers said the outlook for gold remained precarious as the asset has been under pressure for weeks, but bullion bulls argue that the prospects for the yellow metal are upbeat given the expectations for further fiscal spending from the US gov & a long recovery for the labor market from the pandemic.

Gold down settles below the key $1,800 mark in 2nd day of losses

Toll Brothers (TOL) reported higher profit & sales for the fiscal Q1 as low mortgage rates, tight housing inventory, favorable demographic trends & the pandemic helped boost homeownership demand.  The luxury homebuilder said net income was $96.5M, up from $56.9M in the same period a year earlier.  EPS were 76¢, compared with 41¢ a year ago.  The forecast expected 46¢.  TOL generated $1.56B in revenue, a 17% increase from the year-ago qtr.  Analysts expected $1.34B.  Revenues from home sales, which represent a majority of its total revenue, rose 8.7% to $1.41B.  Contracted homes rose 60% from a year earlier to 2874 while the contract value increased 68% to $2.51B.  Homebuilding deliveries rose 10% to 1777 from last year   The stock rose 1.72.
If you would like to learn more about TOL, click on this link:
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Mortgage rates help spur Toll Brothers to profit

Oil futures settled at fresh 13-month highs, as data from the US gov showed weekly crude supplies edged up on the back of a sharp decline in distillate inventories.  The inventory changes hinted at larger supply losses in the weeks ahead, amid energy production declines brought on by winter storms that swept across much of the US last week.  West Texas Intermediate crude for Apr rose $1.55 (2.5%) to settle at $63.22 a barrel — the highest front-month contract finish since Jan 6, 2020.  Apr Brent crude climbed $1.67 (2.6%) at $67.04 a barrel, with prices also at their highest since early January of last year.  The most active May Brent contract added $1.70 (2.6%) to $66.18.  The Energy Information Administration (EIA) reported that US crude inventories climbed by 1.3M barrels last week.  That defied expectations for an average fall of 4.8M barrels.  The EIA data also showed crude stocks at the Cushing, Okla, storage hub rose by 2.8M.  The American Petroleum Institute reported a roughly 1M-barrel increase.

Oil prices mark 13-month highs as U.S. data hint at larger supply losses ahead

After 2 days of testimony by Powell, investors are feeling good.  Additionally, the vaccine news is getting better.  The daily number of new cases has fallen 80% from the peaks 6 weeks ago.  The vaccine shots seem to be making the difference.  Meanwhile the stimulus bill is stuck in the mud.  Dow is at a new record & NAZ is 500 below its recent record.

Dow Jones Industrials

Markets trend higher after FDA endorses a third vaccine for the US

Dow recovered 202 after recent weakness, advancers over decliners 2-1 & NAZ gained 30.  The MLP index went up 4+ to the 162s & the REIT index added 3+ to 395.  Junk bond funds fluctuated & Treasuries were sold while stocks rallied.  Oil jumped 1+ to the 53s (another 13 month high) & gold fell 12 to 1793.

AMJ (Alerian MLP index tracking fund)

CL=F Crude Oil 63.13   +1.46 +2.0%

GC=F Gold    1,788.50 -17.40  -0.1%

 

 

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House Dems plan to pass their $1.9T coronavirus relief bill on Fri as lawmakers try to prevent unemployment lifelines from expiring next month.  “The American people strongly support this bill, and we are moving swiftly to see it enacted into law,” House Majority Leader Steny Hoyer said.  The package includes $1400 direct payments to most Americans, a $400 per week jobless benefit supplement & an extension of programs making Ms more Americans eligible for unemployment insurance.  It also puts $20B into Covid-19 vaccinations, $50B into testing & $350B into state, local & tribal gov relief.  The plan as of now would hike the federal minimum wage to $15 an hour by 2025.  The provision may not survive in the final bill.  Dems have moved to pass the legislation on their own thru budget reconciliation, which requires a simple majority in a Senate divided 50-50 by party.  They have argued they cannot wait to ease economic pain while they try to strike a deal with the GOP.  Reps have questioned the need for nearly $2T more in spending as they point to vaccinations putting the country on a path to a broader reopening.  “A lot within this bill is a waste or a wish list from the progressives,” House Minority Leader Kevin McCarthy contended.

House Democrats aim to pass $1.9 trillion Covid relief bill on Friday

The Food & Drug Administration’s endorsed Johnson & Johnson's (JNJ), a Dow stock & Dividend Aristocrat, COVID-19 vaccine for emergency use, a critical step in bringing a 3rd shot to the US marketplace.  The report is meant to brief the FDA's Vaccines & Related Biological Products Advisory Committee, which will meet Fri to review JNJ's request for emergency use authorization.  During similar requests by Pfizer (PFE) & Moderna (MRNA, the agency authorized those companies’ vaccinations one day after the committee of outside medical advisors backed emergency use authorization.  The committee is expected to recommend JNJ's vaccine.  The FDA doesn’t have to follow the recommendation, but it often does.  The FDA staff said it determined that the clinical trial results & safety data were “consistent with the recommendations set forth in FDA's guidance Emergency Use Authorization for Vaccines to Prevent COVID-19.”  JNJ submitted its Covid vaccine data to the FDA on Feb 4.  The vaccine’s level of protection varied by region with the shot demonstrating 66% effectiveness overall, 72% in the US, 66% in Latin America & 57% in South Africa, where the B.1.351 variant is rapidly spreading.  However, the FDA staff documents show the vaccine was 64% effective in South Africa after about a month. The company said the vaccine prevented 100% of hospitalizations & deaths.  The stock rose 2.25.
If you would like to learn more about JNJ, click on this link:
club.ino.com/trend/analysis/stock/JNJa_aid=CD3289&a_bid=6ae5b6f7

FDA staff endorses J&J’s single-shot Covid vaccine — clearing way for third vaccine in U.S.

Sales of newly built homes occurred at a seasonally-adjusted annual rate of 923K in Jan, the Census Bureau reported.  That was 4.3% above the upwardly-revised pace of 885K in Dec.  The forecast called for new-home sales to occur at a seasonally-adjusted annual rate of 850K.  Compared to 2020, Jan's figure was up 19% year-over-year.  Because of the small sample size used in producing the report, it is prone to large revisions from month to month.  New-home sales rose across most parts of the country, led by a 12.6% increase in the Midwest.  The Northeast was the only region where sales declined — there, they dropped by nearly 14%.  Compared to 2020, sales were up in the Midwest & South, but down in the West & Northeast.  Inventory dropped slightly to a 4-month supply.  A 6-month supply of homes is generally considered indicative of a balanced market.  The median price of new homes for sale was $346K, down 2% from Dec.  The trends that propelled the market for new homes last year have so far remained in place.  Demand among home-buyers is still high, particularly as telework makes living further from major work centers more feasible.  Plus, millennials are now in their peak home-buying years, & with growing families, many are taking the plunge to become homeowners.  At the same time, the inventory of existing homes for sale continues to hover around record lows.  This is, in part, a by-product of the many years where home-building activity was depressed following the start of the last recession.  The lack of existing homes for sale is also a reflection of how anxious many would-be sellers are because of the pandemic.  Even with homes fetching record-breaking prices, many sellers have remained on the sidelines.  But that could soon be changing. A new survey from Zillow found that 70% of homeowners said they would feel comfortable moving to a new home if there were widespread vaccine distribution, compared with just 52% who feel that way as things stand now.

New-home sales rise as buyers remain hamstrung by the lack of property listings  

After more than a week of going nowhere, buyers returned  to the stock market.  Another vaccine to fight the virus was welcome news & the housing market remains strong. 

Dow Jones Industrials