Stocks Fail to Extend Rally; Oil Flat; JP Morgan, Wells Fargo Declare 1Q Earnings

Last week's furious rally failed to extend over into Monday's trading as news flow trended negatively.

Given the number of new cases and deaths worldwide from COVID-19, the pain and suffering of millions around the world out of work and isolated in their homes, it's surprising that Wall Street can even muster enough capital for any kind of rally.

Conditions have not changed from the onset of COVID-19's spread, only the Federal Reserve's commitment to suspend reality and boost stocks through various band-aids and stop gap measures has. The only reason stocks managed to gain any ground last week was due to trillions of dollars pumped into the hands of primary dealers via repos, debt purchases, foreign debt purchases, and promises from various Fed presidents to keep the currency spigots wide open.

The lunacy of these efforts is astounding. Desperate to save face and completely devoid of any tools to bring the economy back to their stated mandates of full employment and no inflation, the Fed has expanded its own balance sheet to the point at which it needed funding from the US treasury, a backhanded bailout of the central bank, using some $400-500 billion from Treasury's Exchange Stabilization Fund.

Oil prices barely budged after the hurried agreement by OPEC+ and other countries will slash production by as much as 10 million barrels a day, roughly 10 percent of global supply. WTI crude closed Monday at $22.41. Efforts to raise the price of oil worldwide were seen as mostly a publicity stunt, as the problem is more a lack of demand than of oversupply. Producers would be best served to stop pumping as storage facilities are near capacity already and the lockdowns in major countries remain weeks away.

Treasury yields rose on the long end, with the 30-year bond at 1.39% and the 10-year note rising three basis points to 0.76%. The curve steepened slightly to 122 basis points.

JP Morgan Chase (JPM) announced first quarter earnings prior to the opening bell Tuesday that were the lowest since 2013, warned of a fairly severe recession ahead and set aside $8.29 billion for bad loans, the biggest provision in at least a decade and more than double what some analysts expected.

The bank reported EPS of 78 cents on revenue of $29.07 billion. Net interest income was flat at $14.5 billion.

Wells Fargo (WFC) reported EPS of 1 cent per share on revenue of $17.7 billion as a $3.1 billion reserve build accounted for 56 cents per share and a $950 million impairment of securities accounted for 17 cents a share. Net interest income fell 8% to $11.3 billion. This bank is essentially insolvent, as is the Federal Reserve, the ECB, BOJ, PBOC and hundreds of other money center banks.

Other money center banks also report this week. Wednesday Bank of America, Goldman Sachs, and Citigroup release their reports. Morgan Stanley’s announcement is scheduled for Thursday.

(Reuters) - Johnson & Johnson on Tuesday beat analysts' estimates for first-quarter profit on higher sales of its cancer drugs and consumer products including Tylenol, while slashing its full-year forecast due to the coronavirus shutdowns.

Shares of the company, which raised its dividend by 6.3% to $1.01 per share, rose 3% to $144 in trading before the bell.

The company now expects 2020 adjusted earnings per share of $7.50 to $7.90, compared with its prior estimate of $8.95 to $9.10.

Gold and silver posted modest gains on the day. In case anyone was skeptical over Money Daily's call for $100 silver and a 16:1 gold:silver ratio in Sunday's Weekend Wrap (below), perhaps a gander at Mike Maloney's call for $700 silver a few years ago at goldsilver.com, may be in order:



At the Close, Monday, April 13, 2020:
Dow Jones Industrial Average: 23,390.77, -328.60 (-1.39%)
NASDAQ: 8,192.42, +38.85 (+0.48%)
S&P 500: 2,761.63, -28.19 (-1.01%)
NYSE: 10,949.53, -187.08 (-1.68%)

WEEKEND WRAP: Stocks Lower Third Straight Week; Treasury Curve Inverts

Stocks took another turn for the worse, the third straight week in which the major averages shed points. That would constitute a trend, especially considering what happened on the Treasury yield curve, where the two-year note inverted against the 10-year-note, yielding - for a short time - one basis point more than its longer-term counterpart.

Additionally, bonds with negative yields globally moved beyond the $16 trillion mark, with Germany, among other EU countries, having its entire bond complex falling below zero yield.

Those two events in bond-land are going to prove to be crippling to global growth and the effects are already becoming apparent.

Negative interest rates destroy the time value of money. Debt is discarded. Without debt, there is no money, except for that which has no interest or counterparty. That would be gold, silver, hard assets. Gold and silver have been rallying while national central-bank fiat currencies fluctuate against each other in the desperate race to the bottom.

The idea that the country which can devalue its currency fastest and lowest will be the winner in the trade arena is offset by the fact that weak currencies - while great for exporters - are not necessarily good for that nation's consumers, because imports would necessarily become more dear.

The desire to send interest rates into negative territory - a concept launched by the Japanese and quickly taken up by Europe after the GFC - is a marker for the death of currencies, i.e., fiat money.

Negative rates are inherently deflationary, which is exactly what central banks wish to avoid, because it voids their franchise. Fiat money - which is in use globally - will die, not by hyperinflation, but by hyper-deflation.

That has been the working thesis at Money Daily since 2008, and it appears to finally be setting off into a new phase.

Facts must be faced. After the crash in 2008, banks became insolvent and were bailed out by trillions of dollars, yen and euros from central banks, which, by their very nature of money creation out of thin air, are also insolvent. Most governments are either deeply in debt or insolvent, with massive debts to their central banks offset by national resources (see Greece). Most people's finances are in a state of insolvent, with debt far outweighing assets. That leaves corporations, large and small, as the only solvent entities in the world, though many of those corporations are also insolvent, with more debt than equity, and much of their equity accounted for by stock buybacks. When the market takes a meaningful dive, many of these corporations will be prime bankruptcy targets, though the government would almost surely step in - as it did with the banks and General Motors during the crisis - with freshly-minted money to stave off creditors.

All roads lead back to the fiat money system and fractional reserve banking.

We have broken countries undertaking broken trade in broken markets. Mal-investments and wealth inequality are proliferating. Big government, running enormous deficits, carries on the fraud of counterfeiting by central banks. The currencies commonly used in exchange are worth nothing more than the ink and paper upon which are printed the pretty pictures and numbers. They are all debt instruments and negative interest rates extinguish debt. The world is headed for a radical reconfiguration of the monetary system.

At the Close, Friday, August 16, 2019:
Dow Jones Industrial Average: 25,886.01, +306.61 (+1.20%)
NASDAQ: 7,895.99, +129.37 (+1.67%)
S&P 500: 2,888.68, +41.08 (+1.44%)
NYSE Composite: 12,580.41, +170.91 (+1.38%)

For the Week:
Dow: -401.43 (-1.53%)
NASDAQ: -63.15 (-0.79%)
S&P 500: -29.97 (-1.03%)
NYSE Composite: -168.01 (-1.32%)
Dow Transports: -239.89 (-2.35%)