WEEKEND WRAP: Trumps' COVID, Poor Jobs Report Cast Longer Recession Shadow Over Markets And Economy

Friday morning, awakening to news that President Trump and First Lady Melania had tested positive for COVID-19, many Americans - after months of annoyance, disturbance, lockdowns, and social disruption - felt what it was like to be human again.

The news was like being hit with a dull object. Once again, we were able to share pain and sympathy. We put aside the petty arguments, the baseless accusations, the political bias and shared a common grieving for the first couple. Outside of a few insensitive media personalities, there came a moment of peace. Whatever one felt about our boisterous president, he was, for a moment, our president, representative for all of us, and we'd be damned if some invisible virus were to put him down.

Shock permeated even the dullest facades. Even the usual bombast from the canyons of Wall Street were subdued. Making money trading stocks suddenly seems less important. The Dow opened down nearly 350 points. All other markets were similarly in the red.

As the day wore on, stocks recovered somewhat as the news flow began to indicate that the president and Melania would be receiving the best of care and were likely to survive. An understanding that COVID-19 kills very few of those infected and both Mr. Trump and his wife were in good health overall. By the end of the day, only the NASDAQ was damaged badly, losing more than two percent on the day, wiping out some of the gains made earlier in the week.

That was Friday. Most of the week was spent racking up profits. When it was all said and done, the Dow and S&P finished with the first positive weekly close in five weeks. The NASDAQ put in its second straight weekly gain and the NYSE Composite ended with its second weekly plus in the last five.

Despite Friday's dull thud, exacerbated by a poor showing in the September Non-Farm Payroll data, stocks had put in the best week since August, with the gains ranging between 1.48 and 2.12%.

The September employment report was a major disappointment and that may have had an equally depressing effect on Friday's session as the news on the president. Forecast to have added 850,000 jobs, only 661,000 were actually created. The unemployment rate fell from 8.4% to 7.9%, but that improvement was overshadowed by the major miss on the headline jobs number.

Overall, the report deflated hopes for a quick recovery in the economy and brought out fears that the coronavirus-inspired recession could last longer than most were anticipating. Almost all cities remain in some kind of restricted state, with business closures and swelling unemployment the norm. In the countryside, the mood was a little brighter, though many Midwestern states were seeing a rise in COVID-19 cases, and that was troubling to everybody.

Parts of Europe were readying for another round of lockdowns and stay-at-home conditions and the feeling that a second wave of the virus, along with a complicated scenario with the normal seasonal flu, might prompt more restrictions on school, business, travel, and employment. The economy has been put through a wringer and parts of the country and economy have been severely damaged. A longer, more painful recession looms large.

Everything seemed to be deflating at the same time. Oil, which has been under pressure, unable to break out from its recent range, dropped to its lowest level in six months, ending the week badly, down from $40.25 a week ago to $37.05 at Friday's close.

Treasuries were hit, but only slightly. While the short maturities remained tethered to the zero-bound, the 10-year note gained four basis points, from 1.66% to 1.70%. The 30-year added eight basis points, from 1.40% the prior week, to 1.48% on Friday.

Precious metals, prices of which should be heading to the stratosphere, were mired in muck. For the week, gold gained nearly $40 per ounce, though the current level is far below the recent peak. Closing out the week at $1899.84 per ounce, the glorious metal is down eight percent from the August 6 high over $2063.54.

Silver, the undeclared enemy of the state, spent the week pricing off recent lows. On September 25th, spot silver stood at a depressed $22.89 per troy ounce. By Friday, October 2, it had recovered slightly, finishing at $23.74, though that number was hardly representative of physical demand and heightened premiums being charged by dealers amid a prolonged shortage. It was a far cry from the August 10 high of $29.13, a decline of 18.5%, nearing bear market status for spot when indications in the real world are exactly the opposite.

Presented are the most recent prices for common gold and silver items on eBay (numismatics excluded, shipping - often free - included):

Item: Low / High / Average / Median
1 oz silver coin: 29.58 / 44.05 / 34.53 / 34.23
1 oz silver bar: 28.80 / 48.00 / 33.78 / 32.26
1 oz gold coin: 2,000.00 / 2,045.09 / 2,019.52 / 2,014.60
1 oz gold bar: 1,980.00 / 2,023.09 / 2,007.88 / 2,009.45

It is plain to see that premiums for the average or median-priced 1 ounce gold coin or bar are over $100 higher than spot prices and dealers are getting them and more. Silver premiums remain through the roof, with average or median-priced 1 ounce silver coin $10 or more over spot.

The stranglehold that the spot and futures markets have on precious metals is largely unreflected in the physical market. When traders begin to stand for delivery instead of setting in cash, the fraud on the public by the futures traders and spot price-setters will be blown to smithereens and prices for gold and silver will rise parabolically. When that day comes, nobody knows, though it is all but certain that precious metals prices, at least in their relationships to fiat currencies are a far cry from true price discovery.

At the Close, Friday, October 2, 2020:
Dow: 27,682.81, -134.09 (-0.48%)
NASDAQ: 11,075.02, -251.49 (-2.22%)
S&P 500: 3,348.44, -32.36 (-0.96%)
NYSE: 12,749.79, +22.95 (+0.18%)

For the Week:
Dow: +508.85 (+1.87%)
NASDAQ: +161.46 (+1.48%)
S&P 500: +49.96 (+1.51%)
NYSE: +264.41 (+2.12%)

WEEKEND WRAP: Did The BLS Cook The Books On May's Jobs Report?; Despite Stock Euphoria, The Crisis Will Continue

The week was one of consistency on the major indices, with stocks closing higher every day except Thursday, though, of the big four, the Dow was higher every day of the week, culminating in Friday's blow-off rally following the release of May non-farm payroll data from the BLS.

There was a considerable amount of speculation regarding the veracity of the BLS figures, which showed a net gain in May of 2.5 million jobs, the unemployment rate falling to 13.3%, according to the official release.

Most of the nation at least partially shut down during the month, the data provided by the BLS, while good enough for Wall Street's stock enthusiasts, has to be considered at least partially flawed, given that continuing claims for unemployment insurance rose sharply in the most recent week, hitting nearly 21.5 million.

Given that the April non-farm payroll report was a blockbuster all-time record at -20,537,000, revised higher, to -20,687,000, adding in the +2,509,000 would yield 18,178,000 still unemployed at the end of May, a number that does not jibe with the 21,487,000 continuing unemployment claims reported by the US Labor Department.

Also taken into consideration for the discrepancies between the two reports are the differences in reporting schedules and the Labor Department's estimate of more than 42 million initial claims filed over the past 10 weeks. Simply put, a lot of people went back to work in May, but there are still somewhere between 18 and 25 million unemployed. By claiming a record job creation number in its May data, the BLS has likely overstated the case for people returning to work after a brief hiatus due to the lockdowns caused by extreme measures taken to combat COVID-19.

A jump of 2.5 million jobs for the month has to be taken somewhat tongue-in-cheek since these are not new jobs whatsoever. The economy didn't produce 2.5 million new jobs. A better explanation would be that during the month, more people went back to work than were laid off or fired, by about 2.5 million.

Therefore, while the BLS can be accused of massaging their data to produce a positive headline, their methodology and timing remain - as has been the case for a very long time - somewhat suspect. There's still a massive unemployment problem which was manifest by the enormous numbers of protesters that appeared in cities nationwide over the course of the week. Many of these mostly young people were out on the streets during daylight and into the evenings. It would be logical to conclude that the vast majority of them were not holding down full-time jobs.

The protests underscore two things, neither of which have anything remotely to do with the death of George Floyd or police brutality. First, the protests are more about income inequality than anything else. These young people from Generation Z and the last remnants of the Millennials are becoming more and more impatient with the structure of the economy, even though most of them don't recognize that as the overriding factor of their movement.

While the chants of "Black Lives Matter" and "No Justice, No Peace" make for sensationally simple-minded soundbites on the mainstream media's morning and nightly news broadcasts, the root of the frustration is an economy which provides fewer jobs than are needed for fewer hours per week, at low rates of pay while the purchasing power of the dollar continues to decline, especially in some very important areas, those being primarily, housing, education, and health care.

When economists decry that large government deficits will be bourn on the backs of future generations, what we are seeing today is the truth of that dictum as the youthful protesters on the street are the generation now paying for the deficits rung up from the 1970s and '80s. It's a continuing, systemic problem that isn't about to go away. People trying to enter the workforce and engage in meaningful careers are finding it harder and harder to make ends meet. Income has net kept pace with inflation over the past 40-50 years, dating back to when then-President Nixon took the country off permanently off the gold standard in August of 1971.

There are certainly many young people doing fine in their careers. Those with masters degrees or doctorates or well-honed skills make very good money, but at a considerable price. Their cost of eduction can be measured in their student loan debt. Since housing costs have risen to extreme levels with only a slight blip in 2008-09, the affordability of just plain living quarters tests their resolve. Those wishing to start families (a declining number) see health care costs spiraling out of control. And those are the lucky ones with good jobs and dual incomes.

The rest of their generation struggles with all of that at lower pay and onerous debt. Many Millennials and Generation Z youths live four and five to a single home or apartment. Most cannot save anything, much less even dream of owning their own homes. Pity those who have medical conditions. Most cannot afford $300-$600 a month premiums with $5-8,000 deductibles, so they go without. To a lesser degree, the same conditions affect the backend of the Baby Boomers and early Millennials who have lived their lives on the fringes of society.

It's a condition of perpetual decline when roughly half of adult Americans do not have any savings whatsoever, the result of massive, uncontrolled government deficits, fait currency backed by nothing, printed to the hilt causing the purchasing power of the almighty dollar to slide into obscurity. It's not going away. In fact, with the Federal Reserve now in the process of either buying up or backing every stock or bond issued, hoisting their balance sheet by more than three trillion dollars in just the past three months, the US economy has become one of very few haves and very many have-nots, manifesting itself as runaway inflation. Not confined to just the United States, the rest of the world is revolted and revolting. Under current fiscal and monetary policy, the entire planet is rapidly turning into an oversized Venezuela.

Dissatisfaction with the political process is the second tenet of the protesters root causes, dovetailing income inequality and unaffordable living conditions. Federal, state, and local governments are ill-equipped to handle even ordinary stresses. Now that unemployment is on the rise and inflation is taking hold, government resources are stretched beyond their means. When people needed food during the recent lockdowns, government made little effort to step in. Food banks, charities and private citizens stepped up to fill the void. Government is increasingly being viewed with a jaded eye, neither responsive to people's needs nor able to fulfill basic obligations. People are simply tired of paying taxes and getting little to nothing in return. Individual income tax revenues are falling off a cliff while government debt continues to rise at an accelerating pace. Nothing about the current social and political condition is sustainable over anything but the short term, which is why we are seeing one crisis after another, bailout after bailout, emergencies arising on a regular schedule.

The United States and the rest of the world cannot buy or borrow their way out of this situation with policies that only increase debt and the burden to society. President Trump and Wall Street can go giddy over the most recent jobs data, but the underlying problems continue to mount and they're not going away. For all the media hype and government high-fiving in the short term, there's a larger price to be paid down the road. After years of can-kicking of core fiscal and monetary issues, the road is coming to an end. Most people, politicians, and financial planners don't have sufficient knowledge or vision to see where this all leads, preference being given to the present.

The NASDAQ is less than one half of one percent away from breaking to a new all-time high (9838.37).

The S&P 500 is about six percent away from a record close (3393.52).

Stocks are likely to continue climbing to record highs, but a period of stagnation lies just ahead. The bear market which was cut short by the Fed's money-pumping mechanisms and the government's emergency spending bills was the shortest on record, lasting a mere five weeks. Another bear market will be coming, as this one was papered over with currency that has only declining value. Oil prices are back up and by Friday, interest rates on treasuries had exploded. The 10-year note yielded 0.66% on Monday. By Friday, they were at 0.91%. The 30-year yield went from 1.46% to 1.68% over the course of the week. Shorter-dated maturities remained low, steepening the curve.

The final question for economists is this: How can high unemployment and tighter currency (higher rates) co-exist. The answer is very simple. They can't. With business unwilling or unable to expand, few will be hiring. Unemployment will remain elevated until there's a clearing or restructure of debt and businesses see a rosier future.

The Federal Reserve and the federal government has a very big problem on their hands. The pandemic and street uprisings were just the opening chapters of a very long story.

Gold and silver saw gains early in the week, only to be hammered lower on the paper markets.

The latest prices on ebay for one troy once items (shipping - often free - included):
Item: Low / High / Average / Median
1 oz silver coin: 24.95 / 42.50 / 28.47 / 27.75
1 oz silver bar: 24.99 / 45.00 / 29.09 / 27.90
1 oz gold coin: 1,780.00 / 1,882.00 / 1,823.11 / 1,823.69
1 oz gold bar: 1,755.95 / 1,826.92 / 1,792.96 / 1,794.40

Premiums for silver are, on average, ten dollars or more over spot. Gold premiums are $80-100 over spot.

Greg Mannarino expounds upon the jobs number being cooked, market response and his positioning:



At the Close, Friday, June 5, 2020:
Dow: 27,110.98, +829.16 (+3.15%)
NASDAQ: 9,814.08, +198.27 (+2.06%)
S&P 500: 3,193.93, +81.58 (+2.62%)
NYSE: 12,641.44, +354.46 (+2.88%)

For the Week:
Dow: +1727.87 (+6.81%)
NASDAQ: +324.21 (+3.42%)
S&P 500: +149.62 (+4.91%)
NYSE: +838.49 (+7.10%)

Fed Expands MLF Program To States, But Rates Are Too High For Widespread Participation

The Federal Reserve's MLF (Municipal Liquidity Facility) is yet another way the nation's central bank is picking winners and losers in the struggle to survive economic collapse.

By offering fresh currency to struggling states and municipalities, the Fed - having already expanded their balance sheet by more than $3 trillion in just the past three months - says it wants to help out by buying issuance from states, cities and now, public transit, airports, toll facilities, and utilities, becoming the buyer and lender of last resort for everything from your local bus company to your regional energy supplier.

Not that the Fed may have some evil intentions of owning everything in America, they also want to be paid well for it as well, which is why most states won't take the Fed up on their generous offer.

Those states with poor credit ratings, like Illinois (BBB), New Jersey, California, and Kentucky are the likeliest candidates to use the facility, as they are offered better rates by the Fed than they would find in the usual muni bond market.

According to Standard and Poors, only nine states have credit ratings lower than AA, meaning the vast majority of states will not probably need backing from the Fed unless the muni markets seize up and rates skyrocket, a situation that was made somewhat more of a known risk during the coronavirus lockdowns.

Funding needs by the states are generally considered among the safest bonds available. In most cases they can be held tax-free, another reason for their popularity. Thus, most states are going to say "thanks, but no thanks" to the Fed, as their funding needs are going to be largely fulfilled in the open market.

A BofA Global Research report on Wednesday projected borrowing under the MLF with its current terms would only total $90 billion. That's out of $500 billion allocated to the program.

The Fed also said it will support lending to multi-state entities and revenue bond issuers, or RBIs.

"Eligible notes issued by eligible issuers that are not multi-state entities or designated RBIs will generally be expected to represent general obligations of the eligible issuer, or be backed by tax or other specified governmental revenues of the applicable state, city, or county,” the Fed said. “If the eligible issuer is an authority, agency, or other entity of a state, city, or county, such eligible issuer must either commit the credit of, or pledge revenues of, the state, city, or county, or the state, city, or county must guarantee the eligible notes issued by such issuer."

Again, the Fed wants its pound of flesh, in the above instances, via actual tax receipts or guarantees.

Because response to the program has been tepid, the Fed has also lowered the bar for participation, allowing states with smaller populations to make choices for eligibility based upon their own populations.

"A governor that has the ability to designate one designated city or designated county may choose either (i) the most populous city in his or her state that has less than 250,000 residents or (ii) the most populous county in his or her state that has less than 500,000 residents," the Fed said in a statement.

Illinois was the first issuer to access the Municipal Liquidity Facility, with a trade of $1.2 billion of one-year general obligation notes and a rate of 3.82%. That deal is expected to close June 5.

New York's MTA (Metropolitan Transportation Authority), which operates the city's subway and commuter trains, last week asked the Fed for direct access to the program. Legislation is pending.

In their grand scheme to save the world, the Fed may want to own everything or at least have every entity on the planet in debt to them. With interest rates in the toilet, they're going to have to offer better deals to execute their plan. With that knowledge in hand, how long will it be before negative rates become the de facto norm?

---

Stocks ramped higher on Wednesday after ADP released its May private sector employment report. The private firm said the econly lost 2.76 million jobs during the month, far less than expectations of 7.4 to 8.6 million, based on weekly reports of initial unemployment filings.

ADP's figures, so far from expectations, had investors drooling over prospects for a less-substantial number from the government's non-farm payroll data due out on Friday. The thinking is that many firms rehired people in May, offsetting the number of people who lost jobs or were temporarily furloughed. It's just another way for skewed data to shift sentiment away from the prospect of long-term damage done to the economy by the coronavirus and lockdowns and toward the event being a one-off from which the economy will quickly rebound.

With that in mind, gold and silver were slaughtered after making substantial gain in the paper markets. Supply issues remain, however, with premiums for both metals well above the paper prices and normal range. Gold, which was pushing $1750, fell back below $1690 on Wednesday. Silver retreated from as high as $18.30 to $17.64. Both gold and silver were rebounding in overnight trading.

Thursday's release of another round of initial unemployment claims is unlikely to have a material impact on stocks, which will probably take a breather in advance of Friday's May non-farm payrolls.

At the Close, Wednesday, June 3, 2020:
Dow: 26,269.89, +527.24 (+2.05%)
NASDAQ: 9,682.91, +74.54 (+0.78%)
S&P 500: 3,122.87, +42.05 (+1.36%)
NYSE: 12,302.19, +255.79 (+2.12%)

Are Markets Awakening to Reality? Gold, Silver, Bonds Higher; Stocks, Oil Lose Momentum As Argentina Approaches Default, US April Job Losses 20.5 Million

Stocks, bonds, oil and precious metals all had their ups and downs on Thursday, as the focus early was on stocks, which put on impressive gains, only to give half of them back in afternoon trading.

Oil was higher in early trading, spiking to $26.27 a barrel for WTI crude before collapsing all the way down to $23.13.

With a turn right after noon, money began to flow away from riskier assets and into safe havens, with bonds, gold, and silver all being bid as the day wore onward.

Silver started the day at $14.81, languished early, and finished sharply higher, at $15.36. Gold was also cold in the morning, but found its legs later, moving from Wednesday's NY close of $1684.10 to finish at $1718.00.

Treasuries were bought with unusual gusto on the long end. The yield on the 5-year note moved from 0.37% to 0.29% on the day, the 10-year yield went from 0.72% to 0.63%, and the 30-year dropped 10 basis points, from 1.41% to 1.31%. The curve flatted out by 10 basis points, 121 bips covering the entire complex.

All of this activity was against a backdrop of 3.2 million initial unemployment claims, bringing the recent total to 33 million over the past seven weeks.

April non-farm payrolls were also on the mind, with the number - expected to be a record for one month - due out Friday morning.

Argentina (silvery) is about to default on $65 billion of its foreign debt today, Friday, May 8, as bondholders and the government are at loggerheads over a restructuring, though the government appeared to be willing to make some concessions late Thursday. A harder deadline comes May 22, when the country could enter certain default, as a grace period for $500 million of interest payments comes to an end. The clock is ticking for the nation that has defaulted on debt eight times previously.

Argentina could be the doomsday clock the financial world is watching. Other nations are sure to be on the brink of debt default and currency crises after weeks and months of lockdowns, supply chain breakdowns, social unrest, and deaths caused by COVID-19.

Is this the beginning of the end of the stock market rally and a rush to the safety of hard assets? The Dow popped above 24,000 intraday, but it's been unable to surpass the seven-week high of 24,633.66, which is roughly a half retrace of the March pullback. Another failure at this level would signal a short-term selling condition.

Just moments ago, the BLS reported April non-farm payrolls, registering a loss of 20.5 million jobs, pushing the unemployment rate to 14.7%.

With COVID-19 continuing to cause dislocations in everything from meat distribution to pro sports to education, the debate over whether this economic maelstrom will eventually result in a sharp rebound or a long, drawn out recession or even a depression.

Siding with the sharp rebound are those who gave up the ghost back in March with lockdowns, the government, media, and most of the financial community following the lead of the Federal Reserve.

Naysayers, viewing the global economy at a severe breaking point with no good solutions, include James Rickards, Mike Maloney of goldsilver.com, Peak Prosperity's Chris Martenson, Peter Schiff (a fiat money perma-bear and gold perma-bull) and others.

Greg Mannarino, the Robin Hood of Wall Street adds some perspective:



At the Close, Thursday, May 7, 2020:
Dow: 23,875.89, +211.25 (+0.89%)
NASDAQ: 8,979.66, +125.27 (+1.41%)
S&P 500: 2,881.19, +32.77 (+1.15%)
NYSE: 11,121.67, +121.68 (+1.11%)

Dow, S&P Mark Worst 1st Quarters Ever; Stocks Poised for Lower Open; Gold, Silver Markets in Turmoil

Closing out the first quarter of 2020 with a whimper, stocks opened to the downside, briefly turned positive, but the minor rally quickly fell apart sending the main indices to a close near the lows of the day. On the session, the NASDAQ was the best performer of the majors, the Dow the worst, followed closely by the S&P 500.

Thanks to the Wuhan Flu, coronavirus, COVID-19 or whatever one wishes to call the pathogen making its way around the planet, stocks really took it on the chin to start off the year. The major averages were all lower, even after making all-time highs in mid-February.

It was the worst quarter for the S&P since 2008 and the poorest quarterly performance for the Dow Jones Industrials since 1987. Both the Dow and S&P suffered through their worst first quarter ever. The Dow lost more than 23% of its value in January through March, as the S&P 500 fell 20% in the quarter. The NASDAQ didn't set any records but lost more than 14% in the first quarter.

With supply chain issues affecting companies in February and the advance of the virus in March, there's a good chance that GDP has been so negatively affected through first quarter, growth figures may have a minus sign in front of them when the first estimate of GDP will be announced on the fourth Friday of April. Mark your calendars for April 24 to see if the US will be half way to a recession or barely hanging onto some remnant of growth, any of it likely having occurred in January and early February. Any positive number would uplift the markets, but that is still a long way off and first up are employment figures for March. Wednesday, ADP reports private payrolls for the month and Friday the BLS reports on non-farm payrolls for March. Friday's number ought to be a market mover considering the massive job losses over the past week which will be figured into the calculations.

Gold got clobbered again, losing $46.30 per ounce on the day, dipping from $1623.40 Monday to $1577.10 Tuesday. Silver lost eight cents, closing out at $13.92. These prices are for paper contracts on the COMEX and other futures markets and are not aligning with current physical market dynamics. Both gold and silver are in short supply and dealers worldwide are charging severe premiums and assigning minimum purchases in some cases. Silver generally can be had for $20 to $25 per ounce. Gold is selling at roughly the $1800 level, though delivery times are delayed with waiting times up to 45 days in some cases.

As the futures prices and physical market prices diverge and decouple, it's only a matter of time before the fraudulent practices of settling contracts in cash rather than metal at the COMEX will become common knowledge and an open scandal as buyers standing for physical delivery are denied their right. As the coronavirus panic and attendant market turmoil extends, expect precious metals to rise dramatically in price as true owners of the metal divorce themselves from the bogus futures market.

The same is already occurring in the oil market with Saudi Arabia offering steep discounts to the published prices. WTI price continues to trend around $20 per barrel with gas prices across the United States, Canada and throughout Europe (using the Brent crude standard) at multi-year lows.

Experiencing more flattening across the curve, the treasury complex saw yields rise at the short and long durations, with the belly (1-year through 7-year) flatlining. As was the case with equities, bonds were little moved on the day.

ADP announces March private payrolls at 8:15 am ET on Wednesday. Futures are nearing limit down heading toward the opening bell.

At the Close, Tuesday, March 31, 2020:
Dow Jones Industrial Average: 21,917.16, -410.32 (-1.84%)
NASDAQ: 7,700.10, -74.05 (-0.95%)
S&P 500: 2,584.59, -42.06 (-1.60%)
NYSE: 10,301.87, -132.88 (-1.27%)

WEEKEND WRAP: Wuhan Flu Shunting Manufacturing Activity; Credit Woes Overflow

With coronavirus sweeping through mainland China, the country's leaders have imposed draconian quarantines on nearly a third of their entire population of 1.2 billion citizens, and, while factories in Hubei province and elsewhere were supposed to resume normal operations on Monday, February 10, this now seems to be not the case.

The Wuhan Flu is simply not cooperating. With the global hub of international manufacturing and commerce at a standstill, the ripple effects are being felt across the worldwide spectrum.

Apple computer's main assembly operations, FoxConn, has been shuttered for a month, while companies such as McDonald's (MCD), Starbucks (SBUX) and Yum Brands (YUM), owners of the wildly popular Kentucky Fried Chicken franchise, have had many of their stores closed for as long as two weeks presently.

Beyond the human toll the virus is taking in China, where more alarmist estimates range as high as 25,000 dead, the economic toll is just beginning to be felt. China may not be as concerned about taking a hit to their GDP as the rest of the world, which may exacerbate the financial carnage down the supply chain. The Chinese are more concerned about catching up to a virus that they unfortunately were late in detecting and even later in trying to control. Official numbers have the number of infected at 40,573, and deaths at 910, the numbers still climbing.

Stocks, noting that the virus hasn't spread much beyond China's borders (fewer than 400 total cases reported worldwide), took their cues from economic data, especially in the United States, where the major indices marked their best showing since last June. The NASDAQ registered a four percent gain, the Dow and S&P, three percent, and even the laggard NYSE picked up two-and-a-third.

The enjoyment of good economic news, including Friday's January non-farm payroll data which smashed expectations of 160,000 jobs created by totaling 225,000, may turn out to be near the peak for markets as China's economy implodes.

Bond markets, which dwarf stock markets in size by orders of magnitude, are taking the condition more seriously, as the following clips from Doug Noland's Credit Bubble Bulletin present a gloomier outlook:

• January 27 – Bloomberg (Sam Potter and John Ainger): “The global rush for safer assets has fueled a huge jump in the world’s stockpile of negative-yielding bonds, snapping months of decline in the value of subzero debt. The pool of securities with a yield below zero surged by $1.16 trillion last week, the largest weekly increase since at least 2016 when Bloomberg began tracking the data daily. Another injection looked certain on Monday, as investors worldwide ditched riskier assets and piled into bonds amid mounting fears over a deadly virus spreading from China.
• 
  
• January 30 – Bloomberg (James Hirai and Hannah Benjamin): “It sounds like a tough sales pitch: buy this debt to lose money for the next decade. Yet for bankers helping Austria raise money this week, it proved smart business -- investors threw more than 30 billion euros ($33bn) at the country as they vied for a chunk of the world’s first syndicated 10-year government bond to carry a negative yield. The order deluge meant Austria joined the likes of Spain and Italy in setting demand records this month as investors chase the safety of bonds.”
• 
  
• February 3 – Bloomberg (Liz McCormick): “It’s been more than six years since the U.S. bond market’s purest read on the global growth outlook was signaling this much concern. The so-called real yield on 10-year inflation-linked Treasuries fell on Friday to negative 0.147%, its lowest since 2013, when Europe’s sovereign debt crisis was raging. Now it’s the spread of the Wuhan coronavirus that’s fueling worries about the potential hit to the world economy.”

At the Close, Friday, February 7, 2020:
Dow Jones Industrial Average: 29,102.51, -277.29 (-0.94%)
NASDAQ: 9,520.51, -51.64 (-0.54%)
S&P 500: 3,327.71, -18.07 (-0.54%)
NYSE: 13,931.93, -103.07 (-0.73%)

For the Week:
Dow: +846.48 (+3.00%)
NASDAQ: +369.58 (+4.04%)
S&P 500: +102.19 (+3.17%)
NYSE: +317.83 (+2.33%)

Wuhan Flu Can't Stop Stocks; January Added 225,000 Jobs

Stocks made reasonable gains on Thursday in advance of the monthly non-farm payroll data released Friday prior to the market open.

The news was solid for US employment, as the Bureau of Labor Statistics (BLS) reported 225,000 new jobs in the month of January, far outpacing expectations of 165,000.

Entering into the job market in January were 500,000 looking for work, though not all of them found it. The influx of new job seekers boosted the jobless rate to 3.6 percent, from a 50-year low of 3.5 percent in December.

On mainland China, both the death count and number of new cases of coronavirus, or Wuhan Flu, as it is now becoming known more colloquially, continued to rise, but the Chinese government announced that the number of people under observation was declining. This, according to Chinese officials, is an important turning point in efforts to control the spread of the virus. How well that prediction works out for the country of 1.2 billion people remains to be seen.

The roller coaster ride that has recently been Tesla stock abated, at least for a day, with shares of the electric car company settling around a price of $750 per unit. Whether that level proves to be support or resistance is another guessing game. Many are still short the stock, believing that the company is built largely on sand and promises, while rumors of a secondary offering continue to swirl.

President Trump lambasted his foes and praised his friends in a pair of very pubic appearances on Thursday, the day after the Senate voted overwhelmingly (2/3rds vote needed) in favor of acquittal from the charges of impeachment leveled against him by a partisan, Democrat-led House of Representatives. At a prayer breakfast, Trump had no kind words for Speaker of the House, Nancy Pelosi, nor Mitt Romney, the only Republican to cast a vote of guilty against him.

Later in the day, Trump assembled members of the House, Senate, his legal team and others, in a round of congratulations and thanks that lasted well over an hour. Singling out many of his political allies with stories and minutia, Trump laid the groundwork for what is likely to be a counter-attack against the Democrats who tried to have him removed from office and public life, setting the stage for a wide open election campaign that will hold nothing back.

Politics, like money, is a hardball business and the Trump team intends to use the best equipment and the best players to take it to the opposition in the fall.

At the Close, Thursday, February 6, 2020:
Dow Jones Industrial Average: 29,379.77, +88.92 (+0.30%)
NASDAQ: 9,572.15, +63.47 (+0.67%)
S&P 500: 3,345.78, +11.09 (+0.33%)
NYSE: 14,034.95, +10.09 (+0.07%)

January Effect In Force; US Adds 160,000 Jobs In December

Stocks rallied once again, with the Dow jones Industrials popping for a gain of over 200 points. The Dow closed higher for the fourth time in six 2020 sessions for a total rise of 418 points, or about 1.4%.

The Dow, S&P 500, and NASDAQ set new all-time highs on a closing basis, while the NYSE Composite index finished just shy of a record, ending the session at 13,997.65. The prior high of 14,001.13 was achieved on January 2. Any kind of positive return Friday should push the Composite into record territory.

Investors should get their "Dow 30,000" hats ready, because the world's most-watched stock index is about to surge beyond that number, quite possibly today right at the open after the Bureau of Labor Statistics (BLS) reported an additional 145,000 jobs created in December according to the just-released non-fram payroll report for December, 2019.

Even though there's some seasonality to the figures due to holiday hires and a fall-off after November's gains were boosted by striking GM workers returning to their jobs, the number is another sign of strength in the underlying US economy, now, more than ever, the main driver of global growth. As Europe struggles with deflationary trends, negative interest rates, and high unemployment (especially among youths), and China increasingly seems to be bowing to pressure on tariffs and trade from the US, America's clout has become paramount.

Among developed nations, the United States continues to set the agenda, as President Trump's "America First" strategy has emboldened employers and workers alike to share in the positivism of the current environment. While wage growth is still sluggish, job creation in the private sector continues strong. Wednesday's ADP private payroll report found 202,000 new jobs created in December.

While the 145,000 jobs in the non-farm payroll report did come in below estimates of 160,000, the miss was not significant. October was revised 4,000 lower, to 152,000, and payrolls in November were revised down 10,000 to 256,000.

Unemployment remained steady at 3.5%, as expected. By sector, retail and leisure/hospitality led the gains, with bricks and mortar stores adding 41,000 jobs while restaurants, hotels and such added 40,000. Health care was another gainer, picking up 28,000 jobs in December. Construction trades added 20,000 new positions, but manufacturing and transportation declined, by 12,000 and 10,000, respectively. For all of 2019, manufacturing added 46,000, while transportation gained 57,000.

Those two sectors are offering indications that the expansion may have run its course, or at least is slowing significantly. In 2018, manufacturing added 264,000 jobs, transportation gained 216,000. While those figures may cause some anxiety, they also can be interpreted as a sign that these segments of the economy are still integrating the additional employees and that this period is merely a lull, following a robust hiring round.

Overall, despite the small miss and reductions from prior months, the report still comes in as positive for the US economy. Perhaps not the robust growth expected by the most bullish, but stable hiring is a sign that, in such a mature economy, nothing troubling lies directly ahead.

The jobs report was good enough to keep the rally humming along. The major indices should continue their path through record highs for time being.

At the Close, Thursday, January 9, 2020:
Dow Jones Industrial Average: 28,956.90, +211.81 (+0.74%)
NASDAQ: 9,203.43, +74.18 (+0.81%)
S&P 500: 3,274.70, +21.65 (+0.67%)
NYSE Composite: 13,997.65, +63.21 (+0.45%)

Non-Farm Payrolls Up 266,000 In November, Unemployment At 50-Year Low

Since markets stalled out on Thursday in anticipation of the November non-farm payroll report from the Bureau of Labor Statistics (BLS), it's prudent to focus on what that report says about the US economy and prospects going forward.

Released at 8:30 am ET, the report concluded that there was an increase of 266,000 jobs created in November. That was well beyond all expectations, which centered around 185,000. The gain was the largest since January of this year, but is somewhat misleading since it includes 46,000 workers at GM plants in Michigan and Kentucky returning from a 40-day strike.

So, a more reliable, realistic number would be around 220,000, which is still much better than expected, and puts to rest the notion that the US job market had stalled out.

Wall Street is expectedly ebullient over the big surprise number which shows that the US economy is still moving forward and that the labor market remains tight. Unemployment dropped to a 50-year low of 3.5%

Another encouraging sign was wage growth, which shot up 3.1%. This is a strong signal that the economy is in good shape and that the labor market is tight. Employees are asking for - and receiving - pay increases and better benefits from employers.

A main takeaway from the retail sector in the pre-holiday period was that a mere 2,000 jobs were added, but the catch is in the distribution of that small gain. Within the industry, employment rose in general merchandise stores (+22,000) and in motor vehicle and parts dealers (+8,000), while clothing and clothing accessories stores were decimated, losing 18,000 jobs.

Attributable to the "Amazon effect" and to great strides over the years to online merchandising, as well as the overabundance of clothing outlets and their reliance on such a narrow segment, it is not surprising that purveyors of shirts, slacks, dresses, and accessories were hardest hit. Heightened competition in the space and slim profit margins due to heavy discounting also contributed to the demise of a good number of chains.

Among major chains that largely will be turning out the lights - or have already done so - in 2019 were Payless Shoes, Gymboree, Fred's, Charlotte Russe, Shopco.

Forever 21, Dressbarn, and Gap stores also announced a high number of store closings over the past year. The trend will continue, with as many as an additional 75,000 stores potentially lost by 2026, according to investment bank UBS.

The trend is clear. Shop online or at general merchandise retailers. The glory days of single sector retailing are long past.

At the Close, Thursday, December 5, 2019:
Dow Jones Industrial Average: 27,677.79, +28.01 (+0.10%)
NASDAQ: 8,570.70, +4.03 (+0.05%)
S&P 500: 3,117.43, +4.67 (+0.15%)
NYSE Composite: 13,482.30, +24.33 (+0.18%)

Stocks Reverse Course, But Do Not Recover Recent Losses; ADP Jobs Misses Target

After three days of losses, stocks bounced back on Wednesday, though they did not recover all of the ground lost.

Since the close Wednesday prior to Thanksgiving, the Dow is down over 500 points, the NASDAQ has shed 140 points, and the S&P 500 is off 40 points. The bounce on Wednesday, December 4, recovered less than half of the recent declines. Though the losses are nothing serious in the larger scheme of things, they are signaling that at least some of the investment community are not convinced the US economy, or US corporations, are in the best of ways. Thus, profits are being taken off the table. Further declines will feed into more year-end profit-taking and further loss prevention.

Recent movement in bonds also suggests that a countertrend is developing, with money shifting from risk assets into the bond market, where returns are low but widely accepted as safer than stocks. When money flows out of dividend-producing equities into treasuries or corporate debt, it's a sure sign that investors are nervous about the future direction. Last December witnessed massive declines, bordering on sending the stock market into bearish conditions, though at decline was stopped short by Treasury Secretary Steven Mnuchin, whose message to the President's Working Group on Financial Markets (AKA the Plunge Protection Team, or PPT) was clearly designed to rescue the stock market from rampant year-end selling.

Actions taken by the Working Group served to stem the tide of sellers and produce robust gains though the better part of 2019. With the year nearing an end, stocks are once again close to all-time highs, though recent data does not support such lofty valuations. From ISM manufacturing coming in below expectations, to Wednesday's ADP private sector jobs report for November, which reported an increase of just 67,000 jobs. The payroll number was well below the expected 150,000, and was the slowest growth since May.

Analysts are warning that the ADP number may be in stark contrast to what the BLS reports in Friday's non-farm payroll data, because the ADP report did not include General Motors workers returning from strike, whereas the BLS data will include those returning workers as "jobs added." The non-farm report for November is expected to show job gains in the range of 180,000 to 187,000 on Friday, up from 128,000 in October.

It makes reading the tea leaves of market sentiment and data just a little more confusing than it already is, given the daily up-and-down movements prompted by the changing signals regarding a US trade deal with China. The trade war has been and will continue to be the main directional driver of the stock market, probably for longer than most people would entertain. The Chinese appear intent on waiting out President Trump until the 2016 election in November, and it also appears that mr. Trump is fine with that.

A non-deal on trade can only cause more consternation for investors wishing to get a real perspective on the macro side of things, though one doesn't have to look far to see that global trade has been and continues to slip and slide away. Overall, global conditions are not suitable to induce a stock market rally, though they are also not severe enough to cause a crash. A slow grind down may be the path of least resistance, with days and weeks of gains and losses speckling the index charts.

At the Close, Wednesday, December 4, 2019:
Dow Jones Industrial Average: 27,649.78, +146.97 (+0.53%)
NASDAQ: 8,566.67, +46.03 (+0.54%)
S&P 500: 3,112.76, +19.56 (+0.63%)
NYSE Composite: 13,457.97, +91.88 (+0.69%)

WEEKEND WRAP: Fed Delivers, S&P, NASDAQ Make All-Time Highs

With the FOMC decision Wednesday to reduced the federal funds overnight lending rate another 25 basis points, to a range of 1.50-1.75%, stocks took a the rest of decision day and Thursday to digest the news, then ramped stocks on Friday, sending the NASDAQ and S&P 500 to record closings and the Dow Jones Industrials and NYSE Composite near all-time highs.

While the third consecutive rate cut was able to reawaken some of Wall Street's animal spirits, it may be the last one for a while. Changing the wording in some parts of their statement, the Fed took on a more hawkish stance concerning rates going forward. Fed policy will remain data dependent, but not necessarily active. That didn't bother stock traders, who saw the opportunity to ignite what may extend into a holiday rally, and ran with it.

Wall Street's enthusiasm came a day after the US House of Representatives voted along strict party lines to make their impeachment inquiry against President Trump just a little more public than it has been up to this point, wherein Democrats, led by Chairman of the Permanent Select Committee on Intelligence, Adam Schiff, held secret, closed door depositions and heard hearsay testimony from various witnesses in connection with a phone call the president made to Ukraine President Volodymyr Zelensky back in July.

The charges the Democrats have alleged against Mr. Trump may be scurrilous at worst and inconsequential at best, but that hasn't prevented the Democrats to continue to spread stories to their friends in the corrupt mainstream media to smear the president in the run-up to the 2020 election. Not a single Republican voted in favor of the resolution which formally enshrined the inquiry and expanded it to other committees.

Washington being thus rendered impotent as it wastes the taxpayer dime on ridiculous accusations and pointless investigations - along the same lines as the 2+ years of the infamous Mueller probe - it does give Wall Street some relief, understanding that the government will be introducing no new laws or regulations that might impede the current, long-standing bull run.

Elsewhere, outside the United States, the world is burning, either through popular strife in countries and places as diverse as Chile, Hong Kong, and Spain (Catalonia), or by economic policy, especially the brunt instrumentality of negative interest rates, in many European countries.

China's economic slowdown became an issue this week as well, demonstrating that the Chinese hard-line stance on trade negotiations with the United States is a charade. The Chinese government knows full well that it needs cooperation with its main trading partner, but insists on slow-walking any formal agreement. President Trump is well aware of China's condition and has maintained his equally-tough positions through whatever negotiations have been made or planned. China is eventually going to lose its grip and be forced to come to terms with the United States or risk popular uprisings of its own people.

Ignoring the background noise of geopolitics, companies continued to roll out third quarter earnings reports which were modest, but nowhere near disastrous. Additionally, US GDP came in at a stronger-than-expected 1.9% in the first estimate, and October job growth was muted, but well beyond expectations, delivering a non-farm payroll report that saw job gains of 128,000, following an upwardly revised 180,000 increase in September, easily beating market expectations of 89,000. Even though the BLS report is a damaged documentary on true economic growth, the trading community saw this as a positive one and responded accordingly.

Bonds rallied. The yield curve, having un-inverted in early August, continued to steepen, with the 10-year note at 1.69% on Thursday before closing out the week at 1.73%. The longer-duration, 30-year bond, which had fallen under two percent in July, and was being sold off until this week, rallied sharply, with yields falling from 2.34% on Monday to 2.17% on Thursday, settling on Friday at 2.21%.

Gold and silver were also bid, gold regaining the $1500 per ounce level and silver shooting beyond $18 per ounce.

The week ahead features more madness from Washington, a slew of earnings reports, including some popular names like Shake Shack, Uber, UnderArmor, Sprint, Hertz, Groupon, Mariott (Monday), Chesapeake Energy and Newmont Mining (Tuesday), Roku, CVS Health, Square, Humana, Qualcom (Wednesday), Teva, Planet Fitness, AMC Entertainment, Cardinal Health, Stamps.com (Thursday), and Duke Energy and US Concrete (Friday). The Walt Disney Company (DIS), a Dow component, reports Thursday.

Barring any unforeseen negative developments like bank runs (China), riots and street killings (Hong Kong), or desultory commentary on negative interest rates (Denmark), all appears to be smooth sailing through Black Friday, which approaches rapidly, just 19 trading days hence.

Happy Holidays? Too soon?

At the Close, Friday, November 1, 2019:
Dow Jones Industrial Average: 27,347.36, +301.13 (+1.11%)
NASDAQ: 8,386.40, +94.04 (+1.13%)
S&P 500: 3,066.91, +29.35 (+0.97%)
NYSE Composite: 13,300.27, +128.46 (+0.98%)

For the Week:
Dow: +389.30 (+1.44%)
NASDAQ: +143.28 (+1.74%)
S&P 500: +29.35 (+0.97%)
NYSE Composite: +154.03 (+1.17%)

The following is dedicated to California Rep. Adam Schiff:

September Non-farm Payrolls Fall Short; Stocks Brace for Selloff or Liftoff

Thursday's trading was another typical banker-assisted positive close on US indices. Stocks continued their descent from Tuesday and Wednesday's losses at the open, but quickly rebounded into positive territory. This pattern has been a feature for the Dow, S&P and NASDAQ since the late 1980s, when the PPT or President's Working Group was created, buoying stocks when losses appeared to be overwhelming.

Free markets? Probably not now and not in the near future. The Fed can put its fingers on the scales at any time, frustrating short sellers but acting as an artificial booster rocket for stocks. While the blatant manipulation is nearly-universally disliked, holders of 401k or retirement funds find the benefit of a backstop beneficial to the health of their portfolios.

That's why fundamentals really haven't mattered for some time, and especially since the GFC of 2008. The Fed or their proxies step in and stop the losses in their tracks. It's not exactly fair or transparent, but it is effective.

Prior to Friday's opening bell, September's non-farm payroll data was released by the BLS, showing an increase of 136,000 jobs for the month, below expectations of 145,000. August payrolls were adjusted upward to 168,000. Due to July's low numbers, the three-month average for payroll additions between July, August and September fell to 119,000, representing the lowest since 2012.

The jobs report sends a clear signal that the economy is slowing, but not yet going in reverse. The weak September report paves the way for the Fed to cut another 25 basis points from the federal funds overnight lending rate. Mixed signals are being sent as this produces a "bad news is good news" condition, as weaker economic numbers push the Fed to continue lowering rates.

TGIF.

At the Close, Thursday, October 3, 2019:
Dow Jones Industrial Average: 26,201.04, +122.42 (+0.47%)
NASDAQ: 7,872.27, +87.02 (+1.12%)
S&P 500: 2,910.63, +23.02 (+0.80%)
NYSE Composite: 12,685.77, +77.34 (+0.61%)

WEEKEND WRAP: Despite Impeachment Overhang, Wall Street Is Oddly Calm

By midweek, political events had overtaken actual financial news and numbers as House Democrats turned up the heat on yet another attempt to impeach President Trump.

People with intact frontal lobes understand that the Democrats have once again fabricated the "crime" committed by President Trump. Still, the mainstream mass media complex cannot help itself from flailing about furiously at the behest of their liberal handlers. Would the media actually be impartial, this farcical drama - and the Mueller investigation that yielded nothing - would never even see the light of day.

It's further proof that most Democrats in the House have nothing constructive to add to the national debate other than outsized hatred for President Trump and all of his millions of supporters. If there is justice in this insane world, the Democrats will be outed, joe Biden's son, Hunter, will be tried, convicted and imprisoned, and the Democrat party will implode entirely in the aftermath of a massive Trump landslide.

That's for the future to tell. For the present, Wall Street would rather focus on facts, reality, data, and numbers. Third quarter results for traded corporations will begin rolling out next week. Prior to that, September non-farm payroll data will be released on Friday of this week. Whether traders and speculators can divorce themselves from the kabuki theater that is Washington DC long enough to focus on true economic data is the big question. Fast-moving headlines pushing the impeachment narrative will be difficult to ignore in coming days.

For whatever it's worth, the US economy may not be exactly a juggernaut of capitalist endeavor, it is, however, firing on all cylinders, albeit at a slow pace. By the end of October the world will have the first estimate of third quarter GDP, a number that should make headlines, whether it is good (above 2.5%) or bad (below 2.0%). Anything in the range of 2.2-3.0% will be considered a win for the economy (and President Trump), while across the pond, Europe teeters on the brink of recession.

Also on the horizon is quietude from the Federal Reserve, as the next FOMC meeting is scheduled for October 29-30. Thus, the next possible federal funds rate cut will only be under consideration and newsworthy the last two weeks of the coming month. Should economic data and corporate third quarter earnings reports come in positively there would be a rationale for the Fed to just keep rates where they are. The economy isn't struggling, jobs seem to be still plentiful and inflation fears have been kept in check. The few scenarios under which a rate cut could be considered are, at this juncture, unlikely, including a banking blowup, or taking the impeachment folly as serious.

With all that could go wrong, the world continued to turn following the attack on Saudi oil installments a few weeks back. President Trump tactfully pulled the United States back from the brink of escalation against Iran, instead opting for increased sanctions and a peaceful resolution to never-ending mid-East fanaticism and the associated war-mongering by elements in the US and Israel.

Oil, the lifeblood of the global economy, retreated as the situation de-escalated, and may actually fall below $50 per barrel as winter season looms.

Bonds seem to have found a sweet spot, despite the continued inversion of the 3-month:10-year pair, with the 10-year settling into a range between 1.55 and 1.75%. Should that range prevail over the coming weeks and months, clear sailing for the US economy may be a prudent call. While stocks, still somewhat overvalued, continue to flirt with all-time levels, the NASDAQ notably took the brunt of the selling from last week. That's probably a positive, since the NASDAQ contains some of the more pricey shares of tech companies that may need to be tamped down.

Conclusively, the week was far short of either a disaster or a rousing rally. Could it be, for a change, that the most sane place on the planet was lower Manhattan?

These are indeed strange days.

At the Close, Friday, September 27, 2019:
Dow Jones Industrial Average: 26,820.25, -70.85 (-0.26%)
NASDAQ: 7,939.63, -91.03 (-1.13%)
S&P 500: 2,961.79, -15.83 (-0.53%)
NYSE Composite: 12,971.98, -56.72 (-0.44%)

For the Week:
Dow: -114.82 (-0.43%)
NASDAQ: -178.05 (-2.19%)
S&P 500: -30.28 (-1.01%)
NYSE Composite: -121.82 (-0.93%)

Stocks Slammed As Trump Targets Tariffs At China; Gold Bid; Payrolls, Unemployment Steady

Stocks swooned for the second straight session after President Trump announced that he would be adding a 10% tariff on $300 billion of Chinese imports beginning September 1.

The president noted that China had backed down on previous commitments to purchase farm produce from US farmers and to stem the flow of fentanyl into the United States.

Markets reacted with the usual disfavor, erasing earlier gains and slumping deep into negative territory. Apparently, nothing can help the market disengage from negativity. Wednesday's 1/4-point easing of the federal funds rate caused a mini-crash and Thursday's small tariff hike sent dealers to the sell buttons.

On the same news, gold caught a tailwind, rising from a low of $1400 to nearly $1448 in just over seven hours. Silver also gained, but not nearly in the manner of gold. Silver was around $16.30 an ounce as US trading closed and has been trending lower early Friday morning.

WTI crude oil took a nosedive on Thursday, recording its worst one-day performance in four years, with futures dipping below $54 per barrel in late Thursday trading.

As US markets prepare for the final session of the week, Asian and European indices headed lower, with most of the major bourses down more than two percent. After European PMIs all showed contraction - and with the outlook for a "no deal" Brexit a real possibility by the end of October - traders on the continent are voting with their feet, leaving behind a wake of battered stock prices. Europe is most definitely headed for a recession soon, though a US recession is still not an apparent reality.

While the rest of the world struggles to maintain their economies, under the leadership of Donald Trump, the US appears to have a real advantage, the dollar strengthening while the bond market rallies. The US 10-year treasury blasted through the two percent line on Thursday, currently holding with a yield around 1.89%.

In breaking news, July non-farm payrolls came mostly in line with expectations at 164,000 new jobs added during the month. The unemployment rate held steady at 3.7% and year-over-year wages increased at a 3.2% rate.

Us stock futures are trending off their lows as the opening bell approaches.

At the close, Thursday, August 1, 2019:
Dow Jones Industrial Average: 26,583.42, -280.85 (-1.05%)
NASDAQ: 8,111.12, -64.30 (-0.79%)
S&P 500: 2,953.56, -26.82 (-0.90%)
NYSE COMPOSITE: 12,920.82, -145.78 (-1.12%)

Weekend Wrap: The Fed Never Had Control, And What They Now Have Is As Fake As Fake News

What a week it was for equity holders and speculators!

Friday's very minor declines snapped five-day winning streaks for the major indices, with the exception of the NYSE Composite, which continued gaining for a sixth straight session.

Solid for the past three weeks, the current rally has managed to relieve the stress from steep losses incurred in December though the majors still have plenty of distance to travel. For instance, the Dow Jones Industrial Average lost 4034.23 from December 4 through Christmas Eve (Dec. 24), and has since gained 2203.75, nearly half of that amount regained the day after Christmas (Dec. 26), setting a one-day record by picking up 1086.25 points.

The other indices have exhibited similar patterns, with sudden acceleration in the final trading days of December and continuing smaller, albeit significant, positive closes on nine of the twelve sessions from December 26 through January 11.

Catalysts for the post-holiday rally continue to be diverse, the most significant strong data point coming from the BLS, which showed the economy adding 312,000 jobs for December in the most recent non-farm payroll report, released last Friday. So far beyond expectations was that number that it appeared to have kept sentiment positive for a full week after its release.

The week's most important data release was Friday's CPI number, which - thanks largely to the price of gasoline - declined 0.1% in December, and slowed to 1.9% in year-over-year measure. Core was +0.2% (mom) and +2.2% (yoy).

Slowing inflation, or perhaps, outright deflation, is anathema to the Federal Reserve, despite their all-too-frequent suggestions that they exist to keep inflation under check. The entire monetary scheme of the Fed and the global economy would disintegrate without inflation, thus the Fed will be diligent in regards to interest rates going forward. After hiking the federal funds rate at a pace of 25 basis points per quarter for the past two years, the Fed has received warnings aplenty, first from the cascading declines in the stock market, and second, from a squashing of inflation.

That CPI data, for all intents and purposes, killed any idea of a March rate hike, just as the market drop caused Treasury Secretary Mnuchin to frantically call in the Plunge Protection Team just before Christmas. The results from that plea for help have been grossly evident the past three weeks.

While the Fed believes it can control the economy, the truth is that it absolutely cannot. Bond prices and yields point that out in spades. The benchmark 10-year note yield dropped as low as 2.54% (1/3) in the face of all the recent rate hikes. As of Friday, the 2s-10s spread fell to 16 basis points. Already inverted are the 1-year and 2-year notes as related to the 5s. The 1-year closed on Friday with a yield of 2.58%; the 2-year at 2.55%; the 5-year at 2.52%, the 7-year at 2.60, and the 10-year at 2.60%.

The 2s-10s spread is the most cited and closely watched, but the 1s-7s are just two basis points from inversion, the cause, undeniably, the Fed's incessant pimping of the overnight rate.

If bond traders are acting in such a manner that they prefer short-dated maturities over the longer run, the signal is danger just ahead. Talk of an impending recession has tapered off in recent days, but the bond market's insistent buying patterns suggest that the Fed did indeed go too far, too fast with the rate hikes, spurring disinvestment and eventually, a recession.

What the Fed cannot control are human decisions. Noting the sentiment in bonds, the latest stock market gains have been contrived from the start and are certain to reverse course. As has been stated here countless times, bull markets do not last forever and Dow Theory has already signaled primary trend change twice in 2018 (in March-April and October).

The major indices have not escaped correction territory and all are trading below both their 50-and-200-day moving averages. Further those averages are upside-down, with the 200-day below the 50-day. The death crosses having already occurred, stocks will resume their reversion to the mean in the very near future.

Dow Jones Industrial Average January Scorecard:

Date	Close	Gain/Loss	Cum. G/L
1/2/19	23,346.24	+18.78	+18.78
1/3/19	22,686.22	-660.02	-641.24
1/4/19	23,433.16	+746.94	+105.70
1/7/19	23,531.35	+98.19	+203.89
1/8/19	23,787.45	+256.10	+459.99
1/9/19	23,879.12	+91.67	+551.66
1/10/19	24,001.92	+122.80	+674.46
1/11/19	23,995.95	-5.97	+669.49

At the Close, Friday, January 11, 2019:
Dow Jones Industrial Average: 23,995.95, -5.97 (-0.02%)
NASDAQ: 6,971.48, -14.59 (-0.21%)
S&P 500: 2,596.26, -0.38 (-0.01%)
NYSE Composite: 11,848.01, +8.70 (+0.07%)

For the Week:
Dow: +562.79 (+2.40%)
NASDAQ: +232.62 (+3.45%)
S&P 500: +64.32 (+2.54%)
NYSE Composite: +314.67 (+2.73%)

Weekend Wrap: Friday's Big Gains Offset Thursday's Huge Loss, Dow Up Just 105 In 2019

Wall Street's week straddled 2018 and 2019, as Monday's session was the last of the prior year, and Wednesday, Thursday, and Friday starting off the new year.

Thus, the following final closing prices for the major indices, which will be instructive as we plow through the weeks, months, and quarters ahead:

Dow Industrials 12/31/18: 23,327.46
Dow Transports 12/31/18: 9,170.40
NASDAQ 12/31/18: 6,635.28
S&P 500 12/31/18: 2,506.85
NYSE Composite 12/31/18: 11,374.39

Two big trading days happened back-to-back, in opposite directions. Thursday's (1/3) downdraft was largely attributable to Apple's announcement that revenue for its fiscal first quarter (4th quarter) results would come in well below analyst estimates. December PMI from the ISM was also a contributing factor, insinuating a slowdown in the general economy, much of it tied to US-China trade tensions.

A blowout December jobs report was responsible Friday's about-face. Words from Fed Chairman Jerome Powell added fuel to the ascending fire. Powell stated quite plainly that the Fed was going to be flexible about raising rates and drawing down its balance sheet, which is pulling $50 billion a month out of the bond market.

After all was said and done, the week was just so-so, though the bias was obviously trending positive. There's some inkling of manipulation and coordination of and by the PPT, especially since the Fed was so compliant with its dovish commentary. Nobody really wants a bear market, and the data from Friday's release of the December non-farm payroll report (312K actual vs. 122K projected) suggests that the economy is humming right along and President Trump's promise to create more US jobs is being kept.

The Fed's jawboning was well-timed, coming a day after a confidence-shaking 660-point drop on the Dow, but the remarks by Chairman Powell won't be the last time the Fed has moved the goal posts in search of expediency.

Dow Jones Industrial Average January Scorecard:

Date	Close	Gain/Loss	Cum. G/L
1/2/19	23,346.24	+18.78	+18.78
1/3/19	22,686.22	-660.02	-641.24
1/4/19	23,433.16	+746.94	+105.70

At the Close, Friday, January 4, 2019:
Dow Jones Industrial Average: 23,433.16, +746.94 (+3.29%)
NASDAQ: 6,738.86, +275.35 (+4.26%)
S&P 500: 2,531.94, +84.05 (+3.43%)
NYSE Composite: 11,533.34, +342.90 (+3.06%)

For the Week:
Dow: +370.76 (+1.61%)
NASDAQ: +154.34 (+2.34%)
S&P 500: +46.20 (+1.86%)
NYSE Composite: +242.39 (+2.15%)

WEEKEND WRAP: The Week The Wheels Fell Off

Was this the week that everything fell completely apart?

The answer is a matter of perspective and speculation, but it sure looked pretty bad. Stocks, with no significant deviation between the Dow, NASDAQ, NYSE Composite, and S&P 500 companies took a major hit, or, rather, a series of heavy blows. Stocks were bludgeoned with regularity, flogged within an inch of their lives, only to be flayed again the following day without respect to any particular sector or class.

Monday was the only positive day of the week, with all the major indices closing nicely in the green. Tuesday was a nightmare, with the Dow dropping nearly 800 points and the other indices dragged down the same abyss. By virtue of the death of former president George H.W. Bush, current president, Donald J. Trump issued an executive order, closing all federal offices for a day of mourning, thus shutting down not just mail service and other government functions, but the financial markets as well.

After the surprise day off, traders got right back to selling again, whacking away with the same ferocity as on Tuesday, but, by mid-afternoon, a suspicious rally emerged, sending the S&P and NASDAQ into positive territory by the close, leaving the Dow with a minor loss of 79 points after it had been down more than 700 during the session. As many expected, the lift late Thursday was either short-term short covering or some button-pushing by the PPT (President's Working Group on Financial Markets... remember them?), setting up Friday for a major collapse of another 558 points on the Dow with the other indices following the lead lower.

What actually was behind the carnage was difficult to discern, as a convergence of events helped shape the worrying. Wrapping up the G20 meeting in Buenos Aires on Sunday, President Trump and China's president, Xi Jinping, announced a 90-day calling off period on new tariffs that were supposed to go into effect and increasing the percentages on others already in force on January 1. Those changes were postponed until March 31, with the intent of the two leaders to work out a framework for trade policy going forward. Markets were obviously pleased on Monday, but by Tuesday felt that a mere 90 days would not be enough to develop long-term policy for either nation.

Politics also is playing a role in the background, as Special Counsel Mueller's bogus "Russia collusion" investigation drags onward with the expectation that a final report will is forthcoming in the very near term. The corrosive political climate in Washington is not only a worry for those involved or tangentially aligned, but it's also having a somewhat chilling effect on investments. Nobody likes uncertainty, but especially so, Wall Street, and when it involves the highest levels of the federal government, the fear gauge goes bonkers and skepticism reigns.

On top of that, there's still a general perception that stocks are not just fully valued, but some are significantly overvalued. More than a few analysts have maintained that the effects of the Trump tax cuts are wearing thin, the federal government is running enormous deficits and a profits squeeze will be apparent by the end of the first or second quarter of 2019.

A minor inversion of the treasury yield curve occurred - almost without notice - on Monday, when the yield on the three-year bill rose above that of the 5-year note. On Tuesday, the 2-year joined in, and both the 2-and-3-year yields ended the week above that of the five. The 2-year closed out Friday at 2.72%, the 3-year the same, and the five-year at 2.70%. The 10-year note was last seen with a yield of 2.85%, and the 30-year down to 3.14%. Bond vigilantes were out in force, and the flight from stocks sent both short and longer-dated bonds soaring. While not quite the textbook inversion of the 2s-10s that have preceded every recession since 1955, the indications are not at all rosy.

Finally, on Friday, November's non-farm payroll data came in woefully short, with expectations of 198,000 jobs met with the reality of just 155,000 new jobs for the month.

The short explanation is that the bull market is getting awfully long in the tooth, the economy is set to slow down a bit in 2019, and the big money on Wall Street is heading for the hills, i.e., bonds and cash or cash equivalents. Dow Theory is about to signal a bear market. The Dow has already sent the signal with its close at 24,285.95 on November 23. Confirmation will come if the Dow Transports close below 9,896.11. It closed Friday at 9,951.16.

With the Fed's FOMC meeting scheduled for December 18-19, and the widely-accepted view is that the Fed will raise the federal funds rate another 25 basis points, there's more than one good reason to be getting out of stocks and those in the know - or at least those who think they know - have been scurrying like rats off a sinking ship.

With the S&P now in correction and the NASDAQ, NYSE composite and Dow Transports already having been there, only the Dow remains above the magic mark of -10 percent. All the major indices show losses for the year and the Dow is just a few hundred points from correction.

Elsewhere on the planet, the number of countries in which their stock markets are already down more than 10 percent continued to grow, with Germany's DAX just a shade above bear market status. That's a huge issue, since Germany is Europe's strongest economy. Given the angst over Brexit, the unwinding of the ECBs massive balance sheet, and Japan's upcoming announcement about the end of QE measures, the focus could easily be on Europe, as it will almost certainly be headed for a recession in 2019. Since Japan's been in something of a recessionary decline for the past 25 years, any slowing of growth on the island nation will barely elicit more than a yawn.

If Europe is about to fall over, the US will almost certainly follow. So much for Making America Great Again (MAGA). The disassembly of the globalist power structure, the rise of populism (marches and violent riots in France) and a global economy on its knees after 10 years of fake stimulus may all be leading to a recession that will have long-lasting and severe consequences.

So, yes, this was the week the wheels fell off.

Here's how the Traveling Wilbury's see it, with the cheery "End of the Line."



Happy Holidays!

Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51

At the Close, Friday, December 7, 2018:
Dow Jones Industrial Average: 24,388.95, -558.72 (-2.24%)
NASDAQ: 6,969.25, -219.01 (-3.05%)
S&P 500: 2,633.08, -62.87 (-2.33%)
NYSE Composite: 11,941.93, -202.48 (-1.67%)

For the Week:
Dow: -1149.51 (-4.50%)
NASDAQ: -361.28 (-4.93%)
S&P 500: -127.09 (-4.60%)
NYSE Composite: -515.62 (-4.14%)

Buyers Emerge, Sending Stock Rally To Third Straight Day Of Gains; World Markets Higher

Experts had been saying that once the earnings reporting blackout ended, many companies would begin share repurchases, and that seems to be exactly what has occurred, as stocks extended their rally to three days, opening the month of November with a rip higher on all the major exchanges.

This factoid does nothing to explain the rise in stocks around the world, other than perhaps they are following the US lead. Overnight the Hang Seng jumped by more than four percent in Hong Kong and Japan's NIKKEI posted a 2.50% gain, boosting the index by 556 points.

Early trading in Europe has all the major indices higher as well, with Germany's DAX and France's CAC 40 leading the move.

With non-farm payroll data due to roll out at 8:30 am ET, stocks are poised for another big move up at the open. Expectations are for a jobs gain of more than 200,000 in October.

Dow Jones Industrial Average November Scorecard:

Date	Close	Gain/Loss	Cum. G/L
11/1/18	25,380.74	+264.98	+264.98

At there Close, Thursday, November 1, 2018:
Dow Jones Industrial Average: 25,380.74, +264.98 (+1.06%)
NASDAQ: 7,434.06, +128.16 (+1.75%)
S&P 500: 2,740.37, +28.63 (+1.06%)
NYSE Composite: 12,356.50, +148.44 (+1.22%)

October Ends With Gains, But Still Marks Worst Month Of 2018 For Stocks

There was no spooking investors on the last day of October. Instead, stock buyers were treated to steady gains, especially on the beaten-down NASDAQ.

The gains from Tuesday and Wednesday took all the indices away fro the dreaded 10% correction space, though the NASDAQ is still hovering dangerously close, a mere 25 points atop the minus ten percent level (7281.20).

What didn't move much was the Dow Jones Transportation Index, up a mere 15 points and still down 12% from recent highs.

Even with the winnings of the last two sessions, October still turned out to be the worst month of the year for the Dow, which ended down some 1341.55 from the September 28 closing price. That topped the losses from February (-1120.19) and March (-926.09). The October declines left the Dow up just one percent on the year.

With the traditionally bad month of October fading into memory, the market welcomes November and December, two of the better months for stocks. Immediately ahead is the non-farm payroll data for October due out prior to the opening bell on Friday and looking to beat expectations after ADP reported on Wednesday a gain of 227,000 jobs for the month.

Stocks remain under pressure, however, as the recent volatility spread from techs and financials to the rest of the market. There are still questions on valuation and forward guidance that are keeping investors on their toes.

Dow Jones Industrial Average October Scorecard:

Date	Close	Gain/Loss	Cum. G/L
10/1/18	26,651.21	+192.90	+192.90
10/2/18	26,773.94	+122.73	+315.63
10/3/18	26,828.39	+54.45	+370.08
10/4/18	26,627.48	-200.91	+169.17
10/5/18	26,447.05	-180.43	-11.26
10/8/18	26,486.78	+39.73	+28.47
10/9/18	26,430.57	-56.21	-27.74
10/10/18	25,598.74	-831.83	-859.57
10/11/18	25,052.83	-545.91	-1,405.48
10/12/18	25,339.99	+287.16	-1,118.32
10/15/18	25,250.55	-89.44	-1,207.76
10/16/18	25,798.42	+547.87	-659.89
10/17/18	25,706.68	-91.74	-751.63
10/18/18	25,379.45	-327.23	-1,078.86
10/19/18	25,444.34	+64.89	-1,013.97
10/22/18	25,317.41	-126.93	-1,140.90
10/23/18	25,191.43	-125.98	-1,265.88
10/24/18	24,583.42	-608.01	-1,873.89
10/25/18	24,984.55	+401.13	-1,472.76
10/26/18	24,688.31	-296.24	-1,769.00
10/29/18	24,442.92	-245.39	-2,014.39
10/30/18	24,874.64	+431.72	-1582.67
10/31/18	25,115.76	+241.12	-1341.55

At the Close, Wednesday, October 31, 2018:
Dow Jones Industrial Average: 25,115.76, +241.12 (+0.97%)
NASDAQ: 7,305.90, +144.25 (+2.01%)
S&P 500: 2,711.74, +29.11 (+1.09%)
NYSE Composite: 12,208.06, +78.12 (+0.64%)

Dip-Buyers Step In, Send Stocks Soaring; ADP, Non-Farm Payrolls On Tap

Nothing says bear market like wild rallies from out of the blue and Tuesday's late afternoon jacking of stocks was right out of the market maker's textbook with buy the dip the mantra of the day.

At 1:30 pm ET, the Dow Industrials were up a mere 40 points, but bargain hunters stepped up their games, frantically buying up shares at reduced prices. The result was a big rise in all of the indices with the Dow leading the way higher.

Even though stocks avoided falling into official correction, at the end of the day the major indices were still well off their all-time highs, with the Dow nearly 2000 points lower than its close on October 3rd (26,828.39).

The day's action was similar to rallies on the 16th and 25th, when the Dow gained 547.87 and 401.13, respectively, only to meet larger declines in the days ahead.

What should buoy markets for the time being are a pair of employment reports, the first by ADP on Wednesday morning tracking private payrolls, followed by Friday's non-farm payroll data from the Bureau of Labor Statistics (BLS). Both are predicted to show job gains approaching 200,000 for October.

Another potential boost to markets could come from resumption of stock buybacks as the blackout period during earnings reports frees up shares to be repurchased by the companies that normally sell them to the public.

Analysts are calling the buybacks the backbone of the bull market, which begs the question of just how high a price are companies willing to pay for their own stock. While many in the investment community believe stock buybacks are good for companies and investors as they reduce the number of shares available and make earnings per share measurements easier to meet or beat, others point out that spending company money on own stock points up a paucity of creativity at the highest levels of corporate America as well as an unwillingness to expand a company's business.

In other words, if companies aren't interested in expansion of existing business or creation of new business units within the corporate structure, they must feel that their market penetration is fully saturated or that economic conditions are not conducive to growth.

Buybacks, in addition to massive injections of liquidity by the Fed has been the fluid of the nine-plus-year expansion. What is concerning to long-term investors is what happens when the well runs dry.

Dow Jones Industrial Average October Scorecard:

Date	Close	Gain/Loss	Cum. G/L
10/1/18	26,651.21	+192.90	+192.90
10/2/18	26,773.94	+122.73	+315.63
10/3/18	26,828.39	+54.45	+370.08
10/4/18	26,627.48	-200.91	+169.17
10/5/18	26,447.05	-180.43	-11.26
10/8/18	26,486.78	+39.73	+28.47
10/9/18	26,430.57	-56.21	-27.74
10/10/18	25,598.74	-831.83	-859.57
10/11/18	25,052.83	-545.91	-1,405.48
10/12/18	25,339.99	+287.16	-1,118.32
10/15/18	25,250.55	-89.44	-1,207.76
10/16/18	25,798.42	+547.87	-659.89
10/17/18	25,706.68	-91.74	-751.63
10/18/18	25,379.45	-327.23	-1,078.86
10/19/18	25,444.34	+64.89	-1,013.97
10/22/18	25,317.41	-126.93	-1,140.90
10/23/18	25,191.43	-125.98	-1,265.88
10/24/18	24,583.42	-608.01	-1,873.89
10/25/18	24,984.55	+401.13	-1,472.76
10/26/18	24,688.31	-296.24	-1,769.00
10/29/18	24,442.92	-245.39	-2,014.39
10/30/18	24,874.64	+431.72	-1,582.67

At the Close, Tuesday, October 30, 2018:
Dow Jones Industrial Average: 24,874.64, +431.72 (+1.77%)
NASDAQ: 7,161.65, +111.36 (+1.58%)
S&P 500: 2,682.63, +41.38 (+1.57%)
NYSE Composite: 12,129.94, +187.42 (+1.57%)