Markets rally even though GDP fell short of expectations

Dow climbed 212, advancers over decliners about 3-1 & NAZ added 62.  The MLP index fluctuated in the 185s & the REIT index gained 3 to 467 (another record).  Junk bond funds were mixed & Treasuries saw selling.  Oil went up to 63 & gold jumped 26 to 1826.

AMJ (Alerian MLP index tracking fund)

CL=F Crude Oil 72.74   +0.35  +0.5%

GC=F Gold     1,830.40 +25.80 +1.4%

 

 

Start Using the Leverage of Options and the Power of MarketClub Today!

Four Days, Four Trades, +40% Average Returns
Learn to trade options with MarketClub!

 

The US economy grew less than expected in the 3 months thru Jun as supply-chain disruptions & labor shortages slowed the pace of economic activity while the country reopened from its  COVID-19 lockdowns.  GDP – the broadest measure of economic performance – grew at a 6.5% annual rate during Q2, according to an advance estimate by the Commerce Dept.  The forecast was expecting 8.5% growth.  Q1 GDP was revised down to 6.3% from its previous reading of 6.4%.  The above-trend growth in Q2 reflected the continued reopening of the US economy & gov support via business loans, stimulus checks & extended unemployment benefits.  Businesses have since the economy reopened navigated supply-chain issues caused by factories shutting down to help slow the spread of COVID-19.  They have also struggled to find workers as extended unemployment benefits have encouraged many to stay home.  The issues have combined to lift core personal consumption expenditures, the Federal Reserve's preferred inflation measure, to 3.4% annual growth, the fastest since 1992.

GDP falls far short of expectations as Biden's economic recovery stumbles

Pending sales of existing homes in Jun as measured by signed contracts fell 1.9% from May, according to the National Association of Realtors.  Sales were also down 1.9% compared with Jun 2020.  Pending sales are a forward-looking indicator of closed sales in 1-2 months. “Pending sales have seesawed since January, indicating a turning point for the market,” said Lawrence Yun, Realtors' chief economist.  “Buyers are still interested and want to own a home, but record-high home prices are causing some to retreat.”  Prices in May were up nearly 17% compared with May 2020, according to the latest reading from the S&P Case-Shiller national home price index.  That is the largest annual gain on record.  Prices in Jun could very well top that, given the still tight supply of homes for sale, especially on the low end of the market.  Prices are high because inventory has been so low.  But that is starting to change.  The number of newly listed homes in Jun rose 5.5% compared with Jun 2020, according to Realtor.com.  “With prices at record highs and mortgage rates still hovering near record lows, sellers are recognizing the favorable conditions,” said George Ratiu, senior economist at Realtor.com.  Mortgage rates moved slightly higher at the start of Jun, which only added to affordability issues.  Rates then came down again by the end of the month.  Yun is predicting mortgage rates will rise more steadily toward the end of the year.  “This rise will soften demand and cool price appreciation,” he added.  Sales of newly built homes, which are counted by signed contracts, also fell in Jun, down 6% for the month & nearly 20% year over year, according to the US Census.

Pending home sales drop in June — more evidence of a housing turnaround

The Senate voted to advance a bipartisan infrastructure plan, a critical step toward Dems passing their sweeping economic agenda.  Senators voted 67-32 to push the bill forward; 17 Reps & all 50 Dems voted yes.  The vote opens the process to debate & amend the proposal, which would put $550B into transportation, broadband & utilities.  While senators who backed the procedural motion could oppose a final package, this votes bodes well for its chances of passage.  “Despite the popularity of it and the need for it Washington hasn’t been able to get it done,” said GOP Sen Rob Portman, the lead GOP negotiator of the deal, after the infrastructure vote.  “This time we’re going to get it done.”  The deal came together earlier in the day after Dem & Rep negotiators resolved disputes over transit & broadband funding, among other issues.  The plan was trimmed from the $579B in new spending senators & the White House agreed to last month — a sum many Dems considered paltry.  Senators have not released final legislation.

Senate votes to advance bipartisan infrastructure bill as Democrats forge ahead with economic agenda

Today's rally may be based on hopes for the infrastructure bill although it faces an uncertain future even if it's approved in the Senate.  Some Dems in the House are not happy with.  Meanwhile, the debt limit MUST be increased this week.  Not sure anybody is paying attention to it.

Dow Jones Industrials

 

Markets waver as investors digest the Fed's decision

Dow fell 127, advancers over decliners 3-2 & NAZ gained 102.  The MLP index was off 2 to 195 & the REIT index fell 2+ to the 464s.  Junk bond funds continued mixed & Treasuries were sold.  Oil rose to the 92s & gold went up 6 to 1806 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Free Apple Analysis!

Bring Your Portfolio Into The 21st Century

Four Days, Four Trades, +40% Average Returns
Learn to trade options with MarketClub!

Key senators announced they reached a bipartisan infrastructure deal, but it was unclear if the plan had enough votes to pass as Majority Leader Chuck Schumer prepared to push it thru the chamber.  “We now have an agreement on the major issues,” said Sen Rob Portman, the lead GOP negotiator. “We are prepared to move forward.”  The Dem leading her party's infrastructure effort, Sen. Kyrsten Sinema, also said “we’ve got a deal” with “most” of the bill's text completed.  She said she spoke to Pres Biden, who is “excited to move this forward.”  Biden later said  he feels “confident” about the agreement.  Schumer said the chamber could hold a procedural vote to advance the plan as soon as tonight.  The measure will need 60 votes to advance, or 10 Reps if all 50 members of the Dem caucus back it.  4 other Reps joined Portman in announcing the deal after they met with Senate Minority Leader Mitch McConnell.  It was unclear how many more GOP senators were prepared to advance the plan.

Senators announce a bipartisan infrastructure deal, test vote could come as soon as Wednesday

The Federal Reserve held its benchmark interest rate near zero & said the economy continues to progress despite concerns over the pandemic spread.  As expected, the FOMC concluded its 2-day meeting by keeping interest rates in a target range near zero.  Along with that, the committee reiterated its view that the economy continues to “strengthen.”  “The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered” the post-meeting statement said.  “Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.”  The statement acknowledged that the economy has made “progress” toward the Fed's goals, though it will continue its monthly bond purchases.  With the Fed likely on hold relative to interest rates at least until late-2022, investors have been looking for clues as to when the monthly bond purchases might start to be pulled back.  The central bank currently is purchasing at least $120B a month in bonds, with at least $80B going to Treasuries & another $40B on mortgage-backed securities.  Critics say the Fed's mortgage purchases are helping stoke another housing bubble, with prices at record levels even though sales have tailed off amid tightening supply.  Some Fed officials have said they would be willing to entertain cutting back on mortgages first.  Chair Jerome Powell, though, has said several times that the mortgage purchases are having only a minimal effect on housing.  On the broader economy, the Fed has kept its foot to the accelerator some of the fastest post-World War II growth the US has ever seen   Q2 GDP numbers will be out tomorrow & the estimate is for 8.4% annualized growth for the Apr-Jun period.  That would be the fastest pace since 1983, not counting last year's outsized Q3 growth as the economy reopened from the pandemic shutdown.

Fed holds rates near zero, says economy has gotten better even with pandemic worries

McDonald's posted better-than-expected sales in Q2 as dining rooms reopened & new products like its crispy chicken sandwich brought in customers.  Revenue jumped 57% to nearly $5.9B in the Apr-Jun period topping the forecast of $5.6.  Global same-store sales, or sales at locations open at least a year, rose 40.5% from the same period a year ago.  It was an easy comparison; the Q2-2020 was the low point of the pandemic for the company, when lockdowns shuttered stores & sales plunged 30%.  But even compared with 2019, a year before the pandemic hit the US same-store sales were 7% higher.  Menu price increases, as well as the chicken sandwich & a meal promotion with the South Korean band BTS, fueled US sales gains.  Meal promotions have been a big sales driver over the last year.  Dining rooms at restaurants in the US, also reopened at a rapid clip during the qtr.  Outside the US, the easing of COVID restrictions in markets like the UK & France also boosted sales.  The burger giant had for Q2. adjusted for one-time items, the company had EPS of $2.37, well above the $2.11 forecast.  The stock dropped 4.57
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 sales soar, boosted by BTS promotion, new chicken sandwich

Gold futures ended slightly lower, then extended their decline into the post settlement trading session after the Federal Reserve said the US economy has made progress toward reaching its standards for tapering its bond-buying program.  The Federal Reserve concluded its meeting today.  In a statement about a ½-hour after gold futures settled, it said the economy & job market have continued to strengthened & that higher inflation this year largely reflects transitory factors.  It added that the economy has made progress toward toward reaching the maximum employment & price stability goals it set for starting to slow down its bond-buying program. Not enough progress has been made to start tapering yet, however, & the Fed will “continue to assess progress in coming meetings.  In electronic trading, Aug gold was at $1798 an ounce, down from its ahead of the Fed statement.  The contract fell by a dime to settle at $1799 an ounce today, after gaining pennies yesterday.  The Dec contract, which also among the most-active contracts, tacked on chump change to end today's session at $1804.

Gold prices end slightly lower, extends decline after Fed policy statement 

Oil futures ended higher, with weekly declines in Us crude, gasoline & distillate supplies & strong overall demand for petroleum lifting US prices to their highest finish in 2 weeks.  The report from the Energy Information Administration showed overall US petroleum demand in Jul 2021 is well above the year-ago level and the next several months are likely to remain tight despite growing OPEC+ production.  West Texas Intermediate crude for Sep climbed by 74¢ (1%) to settle at $72.39 a barrel, the highest front-month finish since July.

Oil futures end higher, buoyed by a fall in weekly petroleum supplies and strength in demand

There was a little buying after the Fed announcement   But that enthusiasm faded in the last hour.  The infrastructure bill (filled with pork) will be worked on.  That, along with the companion bill with more pork, faces an uncretain future.  Increasing the debt ceiling also must be done by Sat.  A lot to do for a dysfunctional Congress!

Dow Jones Industrials

Markets were mixed ahead of key Fed decision

Dow slid back 38, decliners ahead of advancers modestly & NAZ shot up 110.  The MLP index was slightly lower in the 182s & the REIT index fell 2+ to 464.  Junk bond funds fluctuated & Treasuries were sold.  Oil went up to 72 & gold was off 1 to 1798.

AMJ (Alerian MLP index tracking fund)

CL=F Crude Oil 72.05 +0.40 +0.6%

GC=F Gold    1,795.50 - 4.30  -0.2%

 

 

Start Using the Leverage of Options and the Power of MarketClub Today!

Four Days, Four Trades, +40% Average Returns
Learn to trade options with MarketClub!

Boeing (BA) a Dow stock, reported its first quarterly profit in almost 2 years, boosted by a surge in deliveries of commercial jetliners as airlines began recovering from a pandemic slump & sales rose in the other divisions.  The plane manufacturer snapped 6 consecutive qtrs of losses, swinging to a profit of $567M for Q2 from a net loss of $2.9B in the qtr a year ago as air travel was plunging early in the pandemic.  Revenue rose 44% to nearly $17B from $11.8B a year earlier, beating the estimate of $16.54B.  Adjusted EPS 40¢ vs a per-share loss of 83¢.  “While we still have a ways to go before a full rebound, it is encouraging to see the commercial market improving, enabled by continued vaccine distribution and increasing travel demand, particularly in domestic markets,” CEO Dave Calhoun said.   “Going forward, we will closely monitor case rates, vaccine distribution, travel protocols & global trade as key indicators for recovery.”  BA said last year it would slash jobs to about 130K employees by the end of 2021, but Calhoun said it will likely remain at the current headcount of roughly 140K people because of the increase in demand.  The stock jumped 11.57 (5%).
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 surprise profit as aircraft demand rebounds from pandemic slump

Pfizer (PFE) sold $7.8B in Covid-19 shots in Q2 & raised its 2021 sales forecast for the vaccine to $33.5B from $26B, as the delta variant spreads & scientists debate whether people will need booster shots.  Q2 results also beat expectations on earnings & revenue.  Adjusted EPS was $1.07 vs 97¢ expected & revenue was $18.98B vs the $18.74B forecast.  PFE expects an adjusted pretax profit in the high 20% range of revenue for the vaccine.  The company now expects full-year EPS of $3.95-4.05, up from its prior range of $3.55-3.65.  It expects revenue in of $78-80B, up from its previous estimate of $70.5-72.5B.  “The second quarter was remarkable in a number of ways,”  CEO Albert Bourla said.  “Most visibly, the speed and efficiency of our efforts with BioNTech (BNTX) to help vaccinate the world against COVID-19 have been unprecedented, with now more than a billion doses of BNT162b2 having been delivered globally.”  “Most visibly, the speed and efficiency of our efforts with BioNTech to help vaccinate the world against COVID-19 have been unprecedented, with now more than a billion doses of BNT162b2 having been delivered globally.”  It expects full approval for its 2-dose vaccine by Jan 2022.  The other business units also saw strong sales growth.  The stock rose 1.09.
If you would like to learn more about PFE, click on this link:
club.ino.com/trend/analysis/stock/PFE?a_aid=CD3289&a_bid=6ae5b6f7

Pfizer sells $7.8 billion in Covid shots in second quarter, raises 2021 guidance on vaccine sales

The popular 30-year fixed mortgage rate fell back to the lowest level since Feb last week & the 15-year fixed set a record low.  That sent borrowers to their lenders, looking to save money on their monthly payments.  Applications to refinance a home loan jumped 9% last week from the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index.  They were still 10% lower than a year ago.  The refinance share of mortgage activity increased to 67.2% of total applications from 64.9% the previous week.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548K or less) decreased to 3.01% from 3.11%, with points decreasing to 0.34 from 0.43 (including the origination fee) for loans with a 20% down payment.  The average rate on the 15-year fixed set a new low of 2.36%.  “The 10-year Treasury yield fell last week, as investors grew concerned about increasing Covid-19 case counts and the downside risks to the current economic recovery,” said Joel Kan, MBA's associate VP of economist & industry forecasting.  Applications for a mortgage to purchase a home fell 2% for the week & were 18% lower than a year ago.  That was the 2nd week of declines & the lowest level since May 2020.  Purchase applications have now been lower on an annual basis for the past 3 months.  “Potential buyers continue to be put off by extremely high home prices and increased competition,” Kan added.

Mortgage rates just dropped to a six-month low, and refinances shoot higher

Traders & investors are waiting for Powell to speak in a few hours.  When he talks, everybody will listen.

Dow Jones Industrials