Showing posts with label Markets. Show all posts
Showing posts with label Markets. Show all posts

Aug 26, 2020

News | Business | Markets |Exchange Traded Funds: What we learnt from fixed-income ETFs during the Covid sell-off

Dave Baxter

While equity exchange traded funds showed no obvious signs of stress during this year’s sell-off, the picture looked vastly different in the bond space. In March, some of the biggest corporate bond ETFs’ shares traded at discounts of more than 5 per cent to net asset value (NAV), having not exceeded discounts of 0.1 per cent in January.
Investors wishing to raise cash in the teeth of a crisis may well have balked at the prospect of such deep discounts. But the official explanation asserts that the problems lie with the underlying fixed-income market and how it arrives at prices, rather than ETFs, which appear to have worked as a price discovery tool and a pressure valve for an illiquid market.
The Investment Association (IA), the UK trade body for asset managers, draws a stark contrast between the underlying bond market and bond ETFs in a policy briefing on the subject. It notes that price discovery for fixed-income securities can be difficult because the bond market itself is fragmented and not standardised, with no closing auction period. Bonds are traded over the counter (OTC), or via a network of dealers and brokers, rather than on an exchange.
As such, the NAVs for underlying holdings that ETFs (and open-ended bond funds) refer to are often based on a theoretical bond price that is “indicative, reasonably estimated and as close as possible to a fair value”. The theoretical price might not be what a bond actually trades for, especially in times of stress when valuations are fluctuating rapidly.
This article was previously published by Investors Chronicle, a title owned by the FT Group.
Research suggests enormous volumes of bond ETF shares successfully changed hands in March, with exchanges allowing investors to buy and sell ETF shares without actually trading bonds. A white paper from Invesco, an ETF provider, states that US-listed bond ETFs traded a total of $738.8bn on exchange in March, with just $19.8bn redeemed in the primary bond market over the period.
This means that $719bn of fixed-income ETF shares changed hands without a real bond actually being sold — a strong defence of ETF liquidity. High trading volumes also occurred on the back of market improvements: on April 9, the day the US Federal Reserve announced additional stimulus plans, trade in the iShares $ Corporate Bond Ucits ETF (LQDE) was more than nine times its average daily volume, according to figures provided to the IA.
Even with investors able to trade fixed-income ETF shares in bulk, the discounts on show may have seemed alarming. However, the argument runs that the theoretical prices achieved in the underlying bond market were stale and unrealistic, while the prices on ETF shares reflected actual trading activity.
This view is not limited to ETF cheerleaders. The Bank of England, in its Interim Financial Stability Report for May, states that prices on bond ETFs “appear to have provided information about future changes in underlying asset markets, offering evidence that they incorporated new information more rapidly than the NAV of assets held within their, and equivalent, funds”.
In its own assessment the Bank for International Settlements adds: “Compared with the relative staleness of bond prices and NAVs, ETF prices can be useful tools for market monitoring and valuable inputs to risk management models that require up-to-date assessments.”
In other words, ETFs provided an element of price discovery that was lacking in the underlying market. It is also “entirely possible that the cash bond market would have collapsed” had ETFs not been around to relieve the selling pressure, Invesco argues.
The official argument also deals with claims that the arbitrage mechanism was found wanting. Normally arbitrage can prevent ETF share prices from diverging too wildly from NAVs. If an ETF's shares trade at a discount to NAV, for example, market participants should be able to buy the shares cheap and separately sell its constituent parts at a higher price for a risk-free profit.
$719bn value of ETF fixed-income shares that changed hands in March without a real bond actually being sold
While some of the discounts looked steep at the time, the IA has argued that there was “no obvious arbitrage opportunity” because market participants agreed that the ETF prices were based on actual tradeable bond values.
By contrast, ETF shares trading at premiums or discounts to NAV can sometimes reflect other developments, such as when a UK-listed ETF trades at different hours to its underlying market (and misses some price movements). High transaction costs can also sometimes lead to slight premiums and discounts.
Invesco has argued that now is the time to focus on improving how bonds are priced. The asset manager notes that more over the counter (OTC) markets should have central reporting of trades and prices, with this data distributed to market participants with minimal delay. Pricing should also have more emphasis on traded prices rather than “stale” quotes. The events of March, they add, should provide “ammunition” for a change.

Aug 25, 2020

News | Business | Markets | Europe: European stocks lifted by signs of recovery in Germany’s economy

Naomi Rovnick and Thomas Hale 

European equities climbed and Wall Street was set to build on its record highs after data showed Germany’s historic economic collapse was less severe than feared and business sentiment has continued to brighten.
The rise across Europe’s stock bourses echoed gains in New York on Monday, with the benchmark S&P 500 index rising to a new record.
German GDP contracted 9.7 per cent in the second quarter, which was the height of the coronavirus pandemic in Europe, as private consumption, investments and exports collapsed. An earlier reading had shown the economy shrinking by 10.1 per cent between April and June, however.
Meanwhile, a survey by Germany’s highly regarded Ifo Institute showed sentiment among business leaders in Europe’s biggest economy improved to its highest level since February. The research group’s business climate index rose to 92.6 for August, up from 90.4 in July.
The data boosted the euro, which rose 0.4 per cent against the dollar to purchase $1.1830. The Europe Stoxx 600 index rose 0.6 per cent, Germany’s DAX was 0.8 per cent higher, while France’s CAC 40 gained 1 per cent.
Equities in peripheral European economies followed the trend, with Spain’s Ibex gaining 1.1 per cent and Italy’s MIB adding 0.7 per cent.
S&P 500 futures advanced 0.5 per cent, suggesting the index will add to its 4.9 per cent rise so far in August. Shane Oliver, head of investment strategy and chief economist at AMP Capital, said that while shares were “vulnerable” in the “seasonally weak months” leading up to the US election in November, various positive factors could push them higher.
He pointed to “good progress in developing vaccines, the downtrend in the US dollar [and] signs of recovery and low interest rates”.
The German GDP data were a “final glance in the rear view mirror,” Carsten Brzeski of ING wrote, predicting a recovery in the July to September quarter because of a reduction in VAT and summer domestic tourism. “The economy will have one of its best quarterly performances ever in the third quarter,” he said.
Shamik Dhar, chief economist at BNY Mellon, added that while coronavirus cases were once again rising across Europe, hospitalisation and death rates did not appear to be heading back towards the levels seen in March and April. “The course of the disease remains hugely uncertain and this latest spike may lead to more regional lockdowns,” he said. “But my essential view is that Germany will bounce back,” he added, in part because of pent-up consumer demand.
In London the FTSE 100, which has lost almost a fifth of its value during 2020 as fears over the economic impact of Covid-19 and Brexit mount, rose 0.6 per cent. In Asia-Pacific, shares across the region rose for a second day, with MSCI’s benchmark up 0.4 per cent.
Asian markets were buoyed by positive signs from the US and China regarding the countries’ trade deal after a meeting between China’s vice-premier Liu He, US trade representative Robert Lighthizer and Steven Mnuchin, secretary of the treasury.
“Both sides see progress and are committed to taking the steps necessary to ensure the success of the agreement,” said the office of the US Trade Representative in a statement.
Brent crude, the international oil benchmark, added 0.2 per cent to $45.24 a barrel. Gold added 0.4 per cent to $1,932 per troy ounce.

Aug 24, 2020

News | Business | Markets | Asia: Chinese managers apply to launch first Hang Seng Tech index ETFs

Echo Huang

Two Chinese managers have applied to launch exchange traded funds that will track the newly launched Hang Seng Tech Index, according to records from the China Securities Regulatory Commission.
China Asset Management and Dacheng Fund Management have made applications to list the new ETFs, which will be aimed at mainland Chinese investors and will use the fund managers’ qualified domestic institutional investors quota.
Depending on the approval time, these could be the first ETFs introduced in either the mainland or Hong Kong markets tracking the Hang Seng Tech Index, which was launched on July 27.
The new index incorporates 30 constituent stocks, including heavyweight Chinese tech giants such as Tencent, Alibaba and Meituan.
This article was previously published by Ignites Asia, a title owned by the FT Group.
Hong Kong managers have been relatively slow to roll out any fund product aimed at capturing potential growth of the index. Hang Seng Investment Management, a subsidiary of Hong Kong-listed Hang Seng bank, said in late July that it was still researching the possibility of launching a fund product based on the index.
China Fund News, a mainland Chinese publication, has reported that the launch of the Hang Seng Tech Index has been greeted with enthusiasm in China due to its strong weighting towards technology firms that are well known to Chinese investors.
China AMC and Dacheng already have other ETF products tracking Hang Seng indices, as do China Southern Asset Management, E Fund Management and Fullgoal Asset Management.
The main blue-chip Hang Seng index has been struggling to regain losses suffered since its high point of 29,056 points seen in January this year, partly due to coronavirus but also due to the political tension between the US and China.
Hong Kong’s economy contracted 9 per cent in the second quarter compared with the same period a year ago. The various political and public health crises have partly offset the excitement brought about by a slew of Chinese tech firms going public or carrying out secondary listings in Hong Kong.
*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at

Aug 13, 2020

News | Business | Markets | China: Covid-19 vaccine hopeful doubles on China stock market debut

Christian Shepherd and Hudson Lockett 

Shares in a pharmaceutical group that is developing a coronavirus vaccine alongside China’s military more than doubled on its trading debut, as investors brushed aside longstanding doubts over profitability.
CanSino Biologics’ stock surged as much as 127 per cent on its first day of trading on Shanghai’s Nasdaq-like Star Market on Thursday after the company raised Rmb5.2bn ($748.9m) in a secondary share offering. The shares later pared some of that initial enthusiasm to trade 85 per cent higher.
Appetite for Tianjin-based CanSino’s stock has been driven by its development of an experimental Covid-19 vaccine that seeks to stimulate an immune response to coronavirus using a chemically weakened common cold.
The treatment has been developed jointly with a team of leading immunologists from China’s People’s Liberation Army and has already been approved for use on troops.
Optimism that the company may successfully deliver a vaccine has helped propel its Hong Kong-listed shares more than 320 per cent since the start of the year. CanSino’s Hong Kong-traded stock fell 11 per cent on Thursday.
But the drug, which is about to enter into final stage trials in Saudi Arabia, is months away from being commercially available. That, and the fact that CanSino has been chronically unprofitable, has prompted analysts to question its business model.
The company said in its Star Market prospectus that its net losses had risen from Rmb64.4m in 2017 to Rmb157m last year.
“The political pressure surrounding a vaccine is enormous and CanSino has been unprofitable for years,” said Brock Silvers, chief investment officer of Adamas Asset Management in Hong Kong. “CanSino looks deeply speculative at this point — no profit, deep tech hype, abundant risk, but at premium valuations.”
Mr Silvers, who spoke prior to the listing, added that CanSino was not even at the front of the pack in China’s vaccine race. Rivals Sinovac Biotech and state-owned Sinopharm Group have already been approved for phase three trials. CanSino experienced mixed results in its proposed vaccine’s phase two trial.
China’s Star Market, which launched a little more than a year ago, is known for its spectacular listing debuts with retail investors often bidding up shares. Chipmaker SMIC’s stock soared 246 per cent on its first day of trading last month.
“Before the Star Market, there’s no chance for unprofitable companies like CanSino to be listed,” said Zhao Bing, an analyst at Huajing Securities.
Chinese groups were among the first globally to announce experimental vaccines and begin clinical trials. But they have increasingly had to conduct final stage trials in other countries where the virus is still spreading, given that China appears to have largely contained the pandemic.
That has put China’s vaccine makers at a disadvantage compared with the likes of the UK’s AstraZeneca — which is working with Oxford university — US-based Moderna and Germany’s BioNTech, which are based in countries with a relatively high number of new daily Covid-19 infections.
Additional reporting by Xueqiao Wang in Shanghai

Aug 4, 2020

News | Business | Markets | Europe: European equities rise after Nasdaq strikes record

Naomi Rovnick and Hudson Lockett 

European equity markets opened higher on Tuesday, extending a bout of exuberance that began in the US overnight.
While London’s FTSE 100 traded flat, Germany’s Dax rose 0.8 per cent, France’s CAC 40 was 0.6 per cent higher and the Euro Stoxx 600 gained 0.4 per cent.
Europe’s gains were led by industries that have been among the biggest victims of the Covid-19 pandemic. Within the Euro Stoxx index, automotive shares rose 2 per cent, travel shares gained 1 per cent and the oil and gas segment rose 1.7 per cent.
Investors’ willingness to take more risk followed rises in Asian equities on Tuesday. Japan’s benchmark Topix index climbed 1.9 per cent and Australia’s S&P/ASX 200 rose 1.8 per cent in Asia-Pacific trading on Tuesday. Hong Kong’s Hang Seng rose 0.8 per cent while China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks was little changed.
This came after Donald Trump dropped his opposition to Microsoft acquiring the US operations of the popular mobile video app from its Chinese parent, ByteDance. Microsoft shares rose 5.6 per cent, lifting the tech-focused Nasdaq 1.5 per cent to a record, and sending a wave of optimism across Asian markets.
The S&P 500 rose 0.7 per cent overnight following the release of better than expected US manufacturing data. The Institute for Supply Management said on Monday that US manufacturing activity hit its highest level in almost 18 months in July, as orders rose despite a resurgence in new coronavirus infections.
The US dollar, which had its worst month in a decade in July because of concerns about the ability of the coronavirus-scarred economy to lead a global recovery, bounced around a two-year low.
The dollar index, which measures the performance of the US currency against those of trading partners, drifted from a reading of 93.54 to 93.457. The index has declined more than 6 per cent in the past three months.
Kristina Hooper, chief global market strategist at Invesco, said the US currency’s weakness was “likely to persist” in the near term as the withdrawal of emergency unemployment benefits weighted on the US economic recovery.
“We are already starting to see a stalling of economic data and families losing their benefits could make August’s data even worse,” she added. “However, the US Senate still seems far from reaching a deal on fiscal stimulus.”
The price of gold, which has surged to an all-time high in recent weeks as investors sought out haven assets, was steady at $1,973 per troy ounce.
Brent crude, the international oil benchmark, dropped 0.6 per cent to $43.87 per barrel ahead of the American Petroleum institute releasing data that will show how much unsold oil inventory is idling in US warehouses.
Oil major BP cut its dividend 50 per cent on Tuesday morning, the first time the group has lowered its payout to shareholders since the Deepwater Horizon disaster in 2010, as it unveiled a record $6.7bn quarterly loss.

Jul 9, 2020

News | Markets | Investing | Europe Bonds: Bond investors wait for more headlines on EU recovery fund

Yoruk Bahceli

AMSTERDAM (Reuters) - Euro zone bond yields held their ground on Thursday with investors’ main focus expected to be any new developments on the European Union’s recovery fund, which aims to help the region’s economy recover from the coronavirus crisis.
FILE PHOTO: A two Euro coin is pictured next to an English ten Pound note in an illustration taken March 16, 2016. REUTERS/Phil Noble/Illustration.

Hopes are high that the 750 billion euro ($851.70 billion)fund will be approved at a European Union summit late next week. Designed to mostly offer grants to countries worst hit by the coronavirus, it has been one of the main drivers of a drop in Southern European borrowing costs led by Italy in the past few weeks.
On Wednesday, European Council President Charles Michel said the EU needed to reach an agreement quickly on the fund but much negotiation was still needed.
Euro zone finance ministers will meet at 1300 GMT to select their new leader, while German Chancellor Angela Merkel and Dutch Prime Minister Mark Rutte will give a joint news conference in Berlin at 1830 GMT.
“We don’t anticipate a fast agreement (little in the EU moves quickly), but would be cautious around putting too much weight on negative-sounding headlines, which are almost certain to be seen,” Mizuho analysts told clients.
“Instead, we stick to our expectation for a slow but inexorable grind towards a consensus relatively close to the Franco-German proposal,” they said, referring to an initial proposal which offered 500 billion euros in grants before the EU added 250 billion euros in loans to its plan.
On Thursday, Germany’s 10-year yield was unchanged at -0.44%, close to one-week lows, while Italian 10-year yields were also unchanged at 1.28%.
On the data front, German exports rebounded 9% in May in another sign of recovering demand spurred by the lifting of lockdown measures, but rose less than the 13.8% expected in a Reuters poll.
In the primary market, Ireland is due to sell between 1 and 1.5 billion euros via the sale of 7, 10 and 30-year bonds.

May 11, 2020

Markets | Bond Market Signal: This bond market signal indicates the bear market isn't over yet

Elliot Smith

The price action of high-yield corporate bonds will signal to investors when the bear market triggered by the coronavirus pandemic is truly at its bottom, according to Longview Economics.
A bear market is a broad decline in a stock market, often defined as a price decline of 20% from a recent high. Sudden, sharp losses in stocks in early-to-mid-March took global stocks into bear market territory as the coronavirus pandemic spread worldwide and oil prices plummeted.
Stock markets have rallied in recent days, however, fueled by unprecedented monetary and fiscal stimulus from central banks and governments around the world, and the commencement of efforts to reopen economies following prolonged lockdowns. Markets have shrugged off dire economic indicators, such as the U.S. shedding a record 20.5 million jobs in April, suggesting that investors are beginning to see a case for a V-shaped recovery.
However, Longview economists believe this is too optimistic, in terms of the outlook for both earnings and GDP (gross domestic product). They expect the “current pandemic induced supply side shock to evolve into a demand side shock” in a more traditional recession.

Relief rally, not a bull market

In a note Monday, Longview argued that high-yield corporate bond spreads have signaled the end of every cyclical bear market since they started being recorded in 1997, often peaking before the equity bear market low.
Credit spreads are the difference between the yields on a particular corporate bond and a government bond.
“On this occasion, credit spreads are not confirming the end of the bear market. Over the last 6 - 7 weeks, the S&P 500 has rallied 34% from its intraday lows. Credit spreads, though, are little changed (tightening from 19.4pp (percentage points) to 17.6pp),” the note said.
“That type of muted price action in credit is normal during equity market relief rallies within a bear market.”
As a bear market nears its end, credit spreads narrow aggressively as the equity markets rally, Longview economists said. Within seven weeks of the end of the bear market that originated during the global financial crisis in 2008, spreads tightened by more than 10 percentage points, they flagged.
The behavior of spreads was similar in during the bear markets of 2002 and 2016, but the current muted price action of U.S. high-yield bonds rated CCC or lower is not signaling the start of a bull market, Longview economists argued. A CCC rating indicates a “junk” bond that is considered particularly high risk, and so is high yield.
“This message is consistent with the behavior of US 10 year bond yields, which remain stuck near their lows,” the note added.
The message, Longview economists hypothesized, is one of caution that bankruptcies are inevitable and policy is not yet sufficient to bring the bear market to a close. The current market action signals a relief rally, and not the start of a V-shaped recovery, they concluded.

Remove stimulus at your peril

This was echoed by M&G Investments Macro Fund Manager Eric Lonergan, who told CNBC Monday that a key risk to any recovery would arise if stimulus measures were rolled back too soon.
“The reality is we are going to need stimulus after lockdown is removed, and I fear that there is a belief out there that once we lift lockdown, we can start unwinding support,” Lonergan told CNBC’s “Squawk Box Europe.”
He suggested that economies are not going to return to 100% capacity for some time and will instead return to at-best around 90-95%, which still represents a “severe recession in the context of history.”
Lonergan argued that the subtle message in markets was that the cyclical sectors have not recovered with any great momentum.
“If you look at U.S. banks, which are probably the cyclical indicator, or 10-year Treasuries over the last five weeks, they haven’t shifted very much,” he said.
Instead, markets have been driven by investors seeing “some winners” in the tech sector, and have been “very discriminating” since liquidity concerns sparked the initial mass sell-off in March, Lonergan concluded.

May 5, 2020

US Market | Futures Indicator: Dow futures surge more than 200 points as investors focus on reopening of economy

Yun Li

Wall Street and much of the Financial District stands empty as the coronavirus keeps financial markets and businesses mostly closed on April 20, 2020 in New York City.
Wall Street and much of the Financial District stands empty as the coronavirus keeps financial markets and businesses mostly closed on April 20, 2020 in New York City.
Spencer Platt | Getty Images

Stock futures rose in early morning trading Tuesday as investors remained focused on the reopening of the U.S. economy.
Futures on the Dow Jones Industrial Average climbed 240 points, implying a Tuesday opening gain of around 173 points. S&P 500 and Nasdaq futures also pointed to a positive Tuesday start for the two indexes.
Investors weighed fears of a second wave of coronavirus cases against efforts to reopen businesses and loosen restrictions. California governor Gavin Newsom said Monday some of the state’s retailers will be allowed to offer curb-side pickup starting Friday. 
Meanwhile, New York Gov. Andrew Cuomo said that the daily number of hospitalizations and new deaths are declining, suggesting the state is on “the other side of the mountain.” However, he added that officials are not seeing as steep of a decline as they hoped.
The overnight moves followed Monday’s modest gains on Wall Street. The strength in the biggest U.S. technology companies including Microsoft, Apple, Amazon and Netflix lifted the broad market out of negative territory. The S&P 500 closed the session 0.4% higher, while the Nasdaq jumped 1.2%.
“Megacaps mask underlying rally fragility,” Ken Johnson, investment strategy analyst at Wells Fargo, said in a note on Monday. “This concentration raises concerns about the rally’s long-term health and durability as it suggests that ample liquidity, rather than broadly improving fundamentals, may be fueling it.”
On Monday, airline stocks suffered a big sell-off with Delta, United, American Airlines all dropping more than 5%. The decline came after Warren Buffett’s said over the weekend that his Berkshire Hathaway dumped the entirety of its stakes in the sector due to the fallout from the pandemic.
Tensions between China and the U.S. appeared to have flared up again. Secretary of State Mike Pompeo on Sunday said there was “a significant amount of evidence” of the coronavirus originating in a Wuhan lab. President Donald Trump previously said he was considering imposing tariffs on China for its handling of the outbreak.

May 4, 2020

US Market | Futures Indicator: Dow futures drop 300 points to start the week, airline stocks fall on Buffett sale

Yun Li,Fred Imbert

Stock futures fell early Monday morning as traders weighed the reopening of the economy along with brewing tensions between China and the U.S.
Dow Jones Industrial Average futures fell 300 points, or 1.2%, pointing to an opening decline of more than 290 points. S&P 500 futures lost 1%. Nasdaq-100 futures fell 0.8%.
Warren Buffett said his Berkshire Hathaway sold all of its airline holdings because of the coronavirus outbreak. While the legendary investor was optimistic over the long term about the outlook for America, the move shows his concern that the pandemic has changed certain industries permanently and could be a sign that other investors are too optimistic about the economy returning to normal quickly.
Airline shares were the biggest losers in the S&P 500 in the premarket. Delta, United Airlines, American Airlines and Southwest Airlines all lost more than 10%, while plane maker Boeing dropped 5.6%.
“Mr Buffett is a long-term investor, so his decision to sell reflects his belief that airline industry is facing future challenges that fundamentally change the value-capture of that business,” wrote Tom Lee of Fundstrat in a note to clients.
Investors are also grappling with worries over another spat between China and the U.S. On Sunday, Secretary of State Mike Pompeo said there was a “significant amount of evidence” connecting the coronavirus to a lab in the Wuhan region of China.
Those comments came after National Economic Council Director Larry Kudlow said Friday that China will be “held accountable” for the coronavirus. Earlier in the week, President Donald Trump said he was considering imposing tariffs on China for its handling of the outbreak.
States across the U.S. are letting nonessential businesses reopen and are easing stay-at-home orders in an effort to restart the economy after the coronavirus forced a near-global halt in economic activity. However, this easing comes as data from the World Health Organization showed the U.S. had its deadliest 24 hours of the outbreak between Thursday and Friday.
“The next two to four weeks are critical for both the economic crisis and the health crisis,” said Marc Chaikin, CEO of Chaikin Analytics. “The biggest risk to the stock market is a premature reopening of the U.S. economy. If rising Covid-19 curves reemerge and economies are shut down again, the damage to the stock market’s psyche will be dramatic.”

Buffett sells airline stakes

“The world has changed for the airlines. And I don’t know how it’s changed and I hope it corrects itself in a reasonably prompt way,” Buffett said Saturday from Berkshire’s first-ever virtual shareholder’s meeting.
Berkshire had more than $4 billion invested across United, American, Southwest, and Delta Airlines before the sale. Buffett noted his admiration for the industry but added there are events “on the lower levels of probabilities” that call for a change of plans.
American and United have both fallen more than 60% year to date. Delta is down 57% for 2020 while Southwest has lost nearly half of its value. And the stocks were set for more losses on Monday.
Berkshire also reported a record $137 billion in cash after the first quarter, but Buffett said he doesn’t “see anything that attractive” to deploy that money.
Increasing hopes of a possible treatment from Gilead Sciences also lifted sentiment last month. On Sunday, CEO Daniel O’Day said remdesivir — Gilead’s promising antiviral drug — will be available to coronavirus patients this week. Gilead shares added 2% in premarket trading.
Stocks notched their best monthly performance in over 30 years in April in part because of hopes of an economic reopening. Last month, the S&P 500 rallied 12.7%.
More than 3.4 million cases of Covid-19 have been confirmed globally, including over 1.1. million in the U.S. alone, according to data from Johns Hopkins University.

Apr 30, 2020

US Market | Futures Indicator: US stock futures rise after solid tech earnings, Facebook up more than 10%

Thomas Franck

Futures contracts tied to the major U.S. stock indexes were higher in the overnight session Wednesday evening after both Facebook and Microsoft issued better-than-expected revenue projections in their earnings reports.
Dow Jones Industrial Average futures rose 116 points, implying an opening gain of around 155 points. S&P 500 and Nasdaq-100 futures also pointed to Thursday opening gains.
Both Facebook and Microsoft equity climbed in after-hours trading Wednesday evening after each reported promising revenue figures despite the global coronavirus outbreak.
Facebook soared more than 10% in the overnight session after it reported that, after an initial “significant” pullback in advertising revenues in March thanks to Covid-19, it’s seen sales stabilize in the first three weeks of April. It reported first-quarter per-share earnings of $1.71 and revenues of $17.74 billion.
Microsoft rose about 2.15% in after-hours trading after the company reported fiscal third-quarter sales growth of 15% thanks to growth in its cloud business. The software giant said in a statement that the disease “had minimal net impact on the total company revenue” in the three months ended March 31, but cautioned that “effects of COVID-19 may not be fully reflected in the financial results until future periods.” 
The overnight moves followed a bounce in U.S. equities during normal trading hours on Wednesday that put the S&P 500 up more than 13% for the month and on track for its biggest one-month gain since 1974.
The Dow Jones Industrial Average rose 532.31 points, or 2.2%, to 24,633.86 during Wednesday’s session. The S&P 500 gained 2.66% to 2,939.51 while the Nasdaq Composite closed 3.57% higher at 8,914.71.
Investors cited developments at Gilead Sciences for the market’s pop during Wednesday’s session after the biotech company reported positive results from two tests that showed its drug remdesivir could be a Covid-19 treatment. Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said remdesivir shows a “clear-cut” positive effect when treating the virus.
U.S. traders will on Thursday pore over the Labor Department’s latest report on jobless claims. Another 3.5 million workers are expected to have filed for benefits last week, which would bring the total number of Americans seeking unemployment benefits over the last six weeks to about 30 million.
The Labor Department’s prior jobless claims report — released April 23 — showed the number of Americans who had filed for unemployment insurance benefits over the previous five weeks was 26.45 million.
That number exceeded the 22.442 million positions added to the American economy since November 2009, when the U.S. economy began to add jobs back to the economy after the Great Recession.
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Apr 29, 2020

Business News | Company´s Revenue: GE says first-quarter revenue declined 8%, expects this quarter to be worse because of pandemic

Fred Imbert

General Electric reported Wednesday a steep decline in first-quarter revenue as the industrial giant took a hit amid the coronavirus pandemic.
The company posted total revenue of $20.524 billion, which represents a year-over-year decline of 8%. On an adjusted per-share basis, the company earned 5 cents. That’s below a Refinitiv estimate of 8 cents per share.
“The impact from COVID-19 materially challenged our first-quarter results, especially in Aviation, where we saw a dramatic decline in commercial aerospace as the virus spread globally in March,” CEO Larry Culp said in a statement.
As global travel screeched to a halt, General Electric’s aviation business saw revenue fall by 13% to $6.892 billion on a year-over-year basis in the quarter, with profit tumbling 39% to $1.005 billion from $1.66 billion in the division. Orders also declined by 14%. The company’s power and renewable energy businesses also saw revenues decline in the first quarter.
Larry Culp, CEO, General Electric
Scott Mlyn | CNBC
GE’s health care segment, however, saw revenues expand by 7% to $5.292 billion and profit grow to $896 million from $781 million in the year-earlier period. The company cited “surge demand for products used in the diagnosis and treatment of COVID-19.”
Culp said the company is eyeing cost cuts of more than $2 billion along with $3 billion in cash preservation to cushion the coronavirus blow. GE’s earnings release also indicated the industrial giant expects this quarter to be worse than the first.
“The second quarter will be the first full quarter with pressure from COVID-19, and GE expects that its financial results will decline sequentially,” GE said.
Shares of General Electric traded 2.2% lower in the premarket. GE shares have lost about 40% of their value this year through Tuesday.
The company announced earlier this month that it was withdrawing its 2020 forecast. The company also said its cash and cash-equivalent holdings topped more than $47 billion along with a revolving debt facility of $15 billion to ride out the virus-induced downturn.

US Market | Futures Indicator: Dow futures point to opening gain of nearly 200 points ahead of Fed decision

Yun Li

Stock futures rose in early morning trading on Wednesday as investors looked for guidance from the Federal Reserve on the future path of interest rates with a gradual reopening of the economy in sight.
Futures on the Dow Jones Industrial Average traded 144 points higher, implying a Wednesday opening gain of 193 points. S&P 500 and Nasdaq futures also pointed to Wednesday opening gains for the two indexes.
All eyes will be on the Fed’s monetary policy decision at 2 p.m. ET Wednesday. Investors will look to the central bank’s statement and chairman Jerome Powell’s virtual press conference for clues about how long interest rates will stay near zero as the economy seeks to emerge from coronarivirus crisis.
“It doesn’t look like the Fed will raise interest rates beyond 0% until well-past the pandemic, which we think might be around 2023,” said Jim Caron, head of global macro strategies at Morgan Stanley Investment Management. “The market is pricing a recovery that starts in Q3, but there’s wide variability, and we need the Fed to give its input.”
While no one is expecting any change to its benchmark interest rate, the Fed could potentially adjust the rate on bank reserves and announce asset purchases targeted toward driving down longer-term rates.
Another big market catalyst on Wednesday will be a reading on real gross domestic product at 8:30 a.m. ET. Economists surveyed by Dow Jones forecast the U.S. economy shrank by 3.5% in the first quarter as the pandemic disrupted economic activities. U.S. GDP grew by 2.1% in the fourth quarter.
Stocks fell slightly on Tuesday as a slide in mega-cap tech shares put pressure on the broader market. The S&P 500 ended the day 0.5% lower, but the equity benchmark is still up more than 10% this month alone.
The possibility to reopen the economy soon boosted the areas of the market that had been hit the hardest. Retailers rebounded sharply with Simon Property Group and Kohl’s jumping 10.7% and 6.7%, respectively.
President Donald Trump said in a press conference Tuesday the U.S. will “very soon” run five million coronavirus tests per day. The number of most tests the country has run was 314,182 on April 22, according to the Covid Tracking Project. The lack of testing remains an obstacle for many states anxious to reopen for business.
Meanwhile, earnings season remains in focus with Boeing reporting its first-quarter results before the opening bell on Wednesday. Facebook, Tesla and Microsoft are set to drop earnings after the bell.

Apr 27, 2020

US Market | Futures Indicator: Dow futures up more than 100 points as oil declines; traders weigh prospects of re-opening the economy

Fred Imbert

GP: Wall Street bull seen quite due to Coronavirus pandemic
Charging Bull Statue is seen at the Financial District in New York City, United States on March 29, 2020.
Tayfun Coskun | Anadolu Agency | Getty Images

Stocks futures were higher in early Monday morning trade, as oil prices fell, while investors assessed the possibility of re-opening the global economy after the coronavirus outbreak.
Dow Jones Industrial Average futures were up 177 points, implying a Monday opening gain of around 168 points. S&P 500 and Nasdaq 100 futures also pointed to a higher Monday open for the two indexes. West Texas Intermediate futures were down more than 10% at $15.18 per barrel.
Wall Street’s coming off its first weekly decline in three as a record plunge in oil prices sent investors for a wild ride. Both the Dow and S&P 500 fell over 1% last week while the Nasdaq Composite dipped 0.2%.
New York Gov. Andrew Cuomo said Sunday the state plans to re-open its economy in phases. The first phase, Cuomo said, would involve New York’s construction and manufacturing sectors. As part of the second phase, businesses will need to design plans for a re-opening that include social distancing practices and having personal protective equipment available.
Cuomo also noted that coronavirus-related hospitalizations have fallen for 14 days and that virus deaths in New York hit a near one-month low. Those comments came as Georgia started to re-open its economy.
“As various states begin to reopen their economies and relax social distancing rules, we will get a glimpse of what the new normal looks like,” said Marc Chaikin, CEO of Chaikin Analytics. “The biggest risk to the stock market is a premature reopening of the U.S. economy which results in an increase in COVID-19 cases and requires an abrupt reversal of these efforts to awaken the economy out of its engineered coma.”
Shelter-in-place orders and social distancing guidelines forced thousands of businesses to shut down starting in March as the federal and state governments tried to contain the coronavirus outbreak. Nearly 3 million cases have been confirmed worldwide with over 900,000 in the U.S., according to data from Johns Hopkins.
The outbreak, and subsequent business closures, sparked a wave of job losses. Data from the Labor Department shows that more than 26 million people have filed for unemployment benefits over the past five weeks.
To be sure, a decline in new virus infections and unprecedented monetary and fiscal stimulus have sparked a massive stock-market rally from the lows reached on March 23. Since then, the major averages are all up more than 20%, with the S&P 500 retracing about half of its decline from a record set Feb. 19.
Investors have also cheered the prospects of Gilead Sciences’ remdesivir as a potential treatment for the coronavirus. On April 16, STAT News reported patients at a Chicago hospital with severe coronavirus symptoms were quickly recovering after being treated with the drug in a trial.
A Financial Times report on Wednesday quelled some of that excitement, however, as it stated remdesivir did not improve patients’ condition during a trial in China. Gilead pushed back on the report and the study it cited, noting the trial was “was terminated early due to low enrollment,” making it “underpowered to enable statistically meaningful conclusions.”
“This drug has become the single most important macro topic/theme/trend in the entire market,” Adam Crisafulli, founder of Vital Knowledge, said in a note. “Investors are dismissing the “flop” headline from the FT and continue to anticipate positive results of some kind out of (at least) one of the many Remdesivir trials now underway (while FDA approval is widely assumed).”
“The present setup is such that Remdesivir anticipation will very likely be more beneficial/powerful than the actual results themselves (the data most likely will show efficacy to some extent in certain instances, but a medical “silver bullet” isn’t about to emerge),” Crisafulli added.
—CNBC’s Michael Bloom contributed to this report.

Apr 26, 2020

Banks: Banks Could Prove Weak Partner in Coronavirus Recovery( Originally Published on April 24, 2020)

Julia-Ambra Verlaine and Liz Hoffman

In September 2008, eight bank chiefs filed out of black town cars and into the Federal Reserve. Their firms had tipped the country toward economic collapse. But they also offered a way out, and the government handed them marching orders, in exchange for billion-dollar bailouts.
Today, the banks are not the cause of the economic crisis. But nor are they the solution. Changes to the nation’s financial system, put in place after the 2008 crash to prevent a repeat, have sapped banks’ tolerance for the kinds of risks that are necessary to bring about a recovery, according to regulators, experts and bank executives themselves.
Regulators ringfenced Wall Street from Main Street after 2008 and insulated the real economy from the financial one. New rules curbed banks’ risk-taking and pushed more lending and trading outside of banks, to less-regulated institutions such as hedge funds and nonbank lenders.
Banks are far safer today, but the costs of those changes have become clear over the past month: sustained turbulence across Wall Street securities-trading, credit drying up for some of the country’s largest corporations and the Fed taking unprecedented action, in some cases sidestepping banks that have proven to be imperfect conduits for its rescue efforts.
“There is less risk-taking in the banking system” today, said Jean Boivin, head of the BlackRock Investment Institute, the think-tank arm of the world’s biggest asset manager. “As a result, the traditional channel of [the Fed] lending to banks and having them deploy it is not as powerful.”
The changes in regulations and market infrastructure that made banks safer than they were in 2008 also made them less effective at their basic job: moving money from those who have it to those who need it, which could be a drag on the nation’s financial recovery.
The Fed is charging into the gap, increasing its sway over the economy and putting Washington at the center of business like never before. At the end of March, the central bank said it would lend straight to struggling companies, bypassing banks.
A warning sign flashed back in September. Almost overnight, a crucial but often overlooked part of the financial system broke down—the market for Treasury repurchase agreements, or repo, where banks and asset managers borrow for short periods of time using government debt as collateral.
The going rates for repo spiked on Sept. 16, tripling in the course of an afternoon from 2% to about 6%. Suddenly a kind of borrowing that is usually so inexpensive and plentiful that nobody pays it much attention became scarce and expensive.
Historically when this happened, banks would seize the opportunity to earn money at higher rates and jump in. Prices would abate.
That didn’t happen. Scott Skyrm, a repo trader at Curvature Securities LLC, watched the next day as rates as high as 9.25% flashed on his screen. Traders with securities scrambled to find cash to exchange them for.
“The panic was a classic run on the bank,” said Mr. Skyrm. “Cash investors did not pull cash out of the market, but they made borrowing cash more expensive.”
Not until the Fed stepped in with hundreds of billions of dollars in repo funding did the market begin to stabilize. Rates abated within a week.
Bank executives and traders sounded the alarm. At a banking conference that month, JPMorgan Chase & Co.’s chief executive, James Dimon, said regulations requiring his bank and others to hold loads of cash-like assets would hamper the ability of banks to help keep markets functioning during tough times.

The Federal Reserve has been stepping in to fill the gap in traditional banking roles. Above, Jerome Powell, the Fed’s chairman.

Photo: Andrew Harrer/Bloomberg News
“We are dealing with the remnants of what happened back in September today,” said Alex Roever, head of interest rate strategy at JPMorgan. It was clear then, he said, that banks’ ability to step into misfiring markets and smooth them out “was already challenged.”
When coronavirus hit, stocks plummeted. Investors fled gold-plated bonds for the safety of cash, sparking a race for U.S. dollars. Money-market funds, which lend to businesses overnight, struggled to stay liquid.
This is when banks usually step into their role as the circulatory system of the markets, scooping up assets, matching buyers with sellers and making money in the process. Unwilling to give up cash, and with their trading limited, they couldn’t steady the safest and most liquid market in the world: the market for U.S. government debt.
Sharp swings in Treasury bond prices in March showed markets at their breaking point. The 30-year bond had its biggest weekly move since October 1987. The 10-year bounced between 0.335% and 1.25% inside of two weeks.
So the Fed stepped in where banks no longer could, buying Treasurys even faster than it did in 2009—some $720 billion over 10 days in late March and early April.
The Treasury market stabilized, but others broke down, and the Fed rolled out one Band-Aid after another. It cut interest rates to near zero, opened up its dollar reserves to central banks around the world and pledged to buy hundreds of billions of dollars in public and corporate debt. It intervened to prop up money-market funds, exchange-traded funds and short-term corporate IOUs.
Over the past six weeks the Fed’s portfolio of securities and other holdings has grown by more than $2 trillion, to $6.6 trillion. It is likely to get larger still.
The Fed is “now the commercial bank of last resort for the entire economy,” said Michael Feroli, JPMorgan’s chief economist.
In the 2000s, lighter regulations allowed banks to hold big positions in, say, corporate bonds or mortgages. They also had trading desks that wagered with the firm’s own cash. When markets lurched, banks had both the regulatory freedom and the financial incentive to keep trading.
It didn’t always end well—trading blowups nearly brought down firms including Morgan Stanley and Merrill Lynch—but it added to the overall ecosystem of buyers and sellers, which helped smooth out bumps.
The Dodd-Frank legislation of 2010 shuttered those proprietary trading desks and limited banks’ ability to take risks even as middlemen for clients. Today banks dart in and out of positions quickly so as not to trip risk limits or attract the attention of on-site Fed examiners.
Those same limitations are also clear in lending, banks’ most basic function and one that is sorely needed now. The U.S. government has earmarked hundreds of billions of dollars in emergency loans to businesses whose revenue has fallen off a cliff.
Normally, when the Fed wants to prop up the economy, it cuts interest rates, making money cheaper, and trusts banks will get that money out by making new loans.
Over the past decade, more and more lending has moved outside of banks. New regulations made certain types of loans—to low-rated borrowers—uneconomic for banks to own, in an effort to discourage a repeat of the borrowing binge that set off the mortgage crisis.
Private-equity firms and hedge funds stepped in, lending directly to companies and buying up consumer loans from a new crop of online lenders.
The result is that many American consumers and businesses get their credit not from their local bank—which the Fed can press into service to jump-start the economy—but from institutions that are outside the banking system entirely.
In leveraged loans, an especially risky type of debt, banks’ share fell from 25% in 2000 to 3% in 2018, according to FDIC data.
Nonbanks like auto makers and car dealerships wrote half of new car loans last year, according to Experian. In mortgages, nonbanks like Quicken Loans Inc. and made 59% of home loans through the first nine months of 2019, according to Inside Mortgage Finance.
Many of those loans wind up being sold to banks, and many of those entities rely on banks for their own funding. But the last mile to many consumers and businesses runs through institutions that U.S. regulators have few ways to control.
The rollout of the $350 billion emergency-loan program for small businesses, passed as part of the $2 trillion coronavirus stimulus, has been rocky. Congress added $310 billion to the program, called the Paycheck Protection Program, on Thursday.
The government will pay off the loans for borrowers that use most of the money to keep employees on the payroll, making them fairly safe for the banks that extend them.
But banks have been concerned about lending too much, too fast, or to people who are too risky. They worry about foot-faulting the intake forms, violating arcane money-laundering rules, or having loans go bad at higher-than-expected rates—all of which could land them in trouble with regulators, according to bank executives and experts.
“Banks are not just opening up the fire hose full blast,” said Darrell Duffie, a finance professor at Stanford University. “The Fed’s money is getting out there, but it seeps through the system more slowly.”
Write to Julia-Ambra Verlaine at and Liz Hoffman at
Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Apr 23, 2020

US Market | Futures Indicator: Dow futures up 100 points as investors digest oil turbulence, await jobless claims

Thomas Franck

GP: Coronavirus New York subway 200330
A passenger wears a protective mask at the Wall Street subway station in New York, on Monday, March 30, 2020.
Michael Nagle | Bloomberg via Getty Images

U.S. stock futures were up in early morning trade Thursday as investors took a breather after the turbulence of the prior three regular sessions.
Dow Jones Industrial Average futures were up 105 points, implying an opening gain of about 100 points. S&P 500 and Nasdaq futures also pointed to a positive Thursday open for the two indexes.
The overnight moves followed a bounce in U.S. equities during normal trading hours on Wednesday that helped pare the S&P 500′s 4.8% slide over Monday and Tuesday.
The Dow Jones Industrial Average rose 456.94 points, or 1.99%, to 23,475.82 during Wednesday’s session. The S&P 500 gained 2.29% to 2,799.31 while the Nasdaq Composite closed 2.8% higher at 8,495.38.
Violent fluctuations in the price of oil have kept markets on edge this week as a slide in demand the result of the coronavirus and persistent oversupply keep pressure on crude.
Though West Texas Intermediate crude is down more than 70% from highs north of $60 per barrel earlier this year, its bounce on Wednesday pacified investors who worried that the futures contracts could fall back into negative territory like they did on Monday.
The contract for June delivery settled up 19% at $13.78 per barrel on Wednesday after President Donald Trump tweeted that he’d “instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea.”
WTI contract for May delivery plunged below zero to trade in negative territory on the first day of the week for the first time ever. A day later, the more actively traded June contract fell 43.37% to settle at $11.57. Brent and WTI crude futures were last seen trading up 8% and 3.7%, respectively.
U.S. traders will on Thursday digest the Labor Department’s latest report on jobless claims.
Another 4.3 million workers are expected to have filed for benefits last week, which would bring the total number seeking benefits to over 26 million since states started shutting down in the second half of March in an effort to slow the virus.
The number of cumulative claims rose to 22.025 million over four weeks prior, erasing nearly all of the 22.442 million jobs recovered since the Great Recession.
Domino’s PizzaEli Lilly and Southwest Airlines will all report earnings on Thursday.
Click here for the latest news on the coronavirus.

Apr 22, 2020

US Market | Futures Indicator: US stock futures higher as Wall Street looks to rebound from two days of steep losses

Maggie Fitzgerald

U.S. stock futures pointed to gains at the open on Wednesday, following recent weakness in markets aggravated by oil’s massive decline.
At around 4:10 a.m., Dow futures rose 220 points, indicating a gain of about 242 points at the open. Futures for the S&P 500 and Nasdaq-100 also pointed to modest opening gains for the two indexes on Wednesday.
The West Texas Intermediate contract for June, however, remained in negative territory as it fell around 1% to $11.46 per barrel.
Helping sentiment, Senate Republicans and Democrats passed on Tuesday evening a $484 billion coronavirus relief package for small businesses, hospitals and testing. The House could approve the bill as early as Thursday.
On Tuesday, the Dow Jones Industrial Average lost about 630 points, bringing its weekly decline to more than 1,000 points. The 30-stock index was dragged down by Merck & Co., which lost 5.5%, and Boeing, which fell more than 5%.
The S&P 500 also experienced sharp declines, falling more than 3%. The tech heavy Nasdaq Composite fell about 3.5%,  its worst daily performance since April 1.
The market’s sell-off this week came beside massive losses in the oil market due to the evaporation of demand. Oil prices are tanking and spreading to more futures contracts, worrying investors about the deep economic damage being done by the coronavirus shutdowns.
“This week investors are realizing that even though the crisis could soon get better, the negative impacts of having an economy which is essentially shut down are magnifying at an alarming rate. With no demand even for a couple months, energy prices go negative as excess oil supplies balloon,” Jim Paulsen, chief investment strategist at the Leuthold Group told CNBC. 
 The June contract for West Texas Intermediate, which is the more actively traded contract and therefore a better indication of how Wall Street views the price of oil, settled down 43.4% at $11.57 per barrel. On Monday, crude futures for May fell below zero for the first time in history.
Investors also digested another batch of corporate earnings showing the economic fallout of the virus on Tuesday. Shares of IBM fell 3% after reporting a decline in revenue. Coca-Cola fell 2.5% as the beverage company said global volumes plunged 25% due to the coronavirus pandemic.
Netflix and Chipotle both rose in extended trading on Tuesday following their quarterly earnings report. Netflix reported global streaming net additions came in a 15.8 million, far higher than the 8.2 million expected. Netflix, which has rallied nearly 35% this year, is benefiting from the stay-at-home trend. Chipotle saw digital sales surge more than 80% as the revved up online orders during the coronavirus shutdown.
Before the bell on Wednesday, Delta Air Lines, AT&T and Biogen will report earnings. 

Apr 21, 2020

Markets: Oil drops 18%, May contract still in negative territory

Pippa Stevens, Sam Meredith

West Texas Intermediate crude futures for May delivery reversed gains to trade in negative territory again on Tuesday, one day after plunging below zero for the first time in history. The contract expires today, which means that thin trading volume has contributed to the wild price action.
The June contract for WTI, which is more actively traded, slipped more than 18% during morning trade, falling to $16.73 a barrel. It had dipped below $15 earlier in the session, before paring some of those losses. The contract for July delivery fell roughly 10% to $23.68.
The May contract last traded at negative $6.25 per barrel, which means producers would effectively pay traders to take the oil off their hands. On Monday it fell below zero for the first time in history. However, as contracts approach expiration, trading volume is typically thin, so longer-term contracts can be more indicative of how Wall Street views the price of oil.
Meanwhile, international benchmark Brent crude traded 15.5% lower at $21.60 per barrel. Earlier in the session Brent traded as low as $18.10, its lowest level since Dec. 2001.
“Oil futures continue to defy gravity,” Louise Dickson, Rystad Energy’s oil markets analyst, told CNBC in an email. “This moment is of course historical and could not better illustrate the price-utopia that the market has been in since March, when the full scale of the oversupply problem started to become evident but the market remained oblivious,” she added.
The front part of the oil futures ‘curve,’ which is the May contract that expires on Tuesday, was hit the hardest since it applies to fuel that’s set to be delivered while most of the country remains on lockdown thanks to the coronavirus. The only buyers of oil futures for that contract are entities that want to physically take the delivery like a refinery or an airline. But demand has dropped and storage tanks are filled, so they don’t need it.
And as storage continues to fill, some are warning that prices could trade at extremely depressed levels for the foreseeable future. 
“We expect extremely weak fundamentals to persist for at least the next month,” Deutsche Bank analyst Michael Hsueh wrote in a note to clients Monday. “Continued pressure on infrastructure may result in negative pricing at some point again before the end of May, on the current trajectory,” he added.
The coronavirus pandemic has led to unprecedented demand loss. The International Energy Agency warned in its closely-watched monthly oil report that demand in April could be 29 million barrels per day lower than a year ago, hitting a level last seen in 1995. And with places to store the crude quickly filling, some argue that prices could stay lower for longer.
“Even as OPEC++ oil production cuts are set to kick in May 1, and supply and inventories should tighten significantly in 2H′20, the next 4-6 weeks are seeing severe storage distress, likely to drive wild price realizations and unusual disconnects, including supercontango and negative prices,” Citi analysts led by Eric Lee wrote in a note to clients Monday.
The spread between the May and June contracts — known as the front month and second month — is now the widest in history, which Bernadette Johnson, vice president of strategic analytics at Enverus, described as “insane.”
“That’s a very strong signal that there are bottlenecks in the physical market and people are having a hard time placing barrels,” she said.
- CNBC’s Michael Bloom contributed reporting.

US Market | Futures Indicator Update: Dow futures point to 500-point drop at the open as historic sell-off in oil continues

Yun Li

Stock futures pointed to big losses for a second day on Tuesday as oil prices continued their unprecedented wipeout.
Futures on the Dow Jones Industrial Average dropped more than 450 points and indicated a loss at the open of more than 500 points. S&P 500 futures lost 1.5%. Nasdaq futures also pointed to a lower open.
Traders were focused on the strange happenings with oil futures once again, which raised concern about deep losses for the energy industry hitting the U.S. economy even further. On Monday, the May contract for oil futures expiring Tuesday fell to zero and then went to an actual negative price, meaning producers would pay for someone to take the oil off their hands. The bizarre move has to do with the fact that because of the coroanvirus shutdowns, big buyers of oil like refineries don't need any more oil because their tanks are nearly filled.
That May contract remained deep in negative price territory on Tuesday.
More concerning to traders on Tuesday was the selling now occurring in later month contracts for oil futures. The more actively traded June oil contract was down nearly 20% to $16.44 Tuesday morning. That contract expires on May 19.
The United States Oil Fund, an exchange-traded security for the retail investors which buys oil futures, tanked 19% to just $3.02 in premarket trading.
Major oil stocks like Exxon Mobil were hit again in premarket trading. Exxon was down 4%.
Not helping sentiment were shares of IBM, which slipped 3.7% in premarket trading after the company reported a 3.4% decline in revenue in the first quarter from a year ago amid the spread of coronavirus. Coca-Cola, Netflix, and Chipotle are on deck to report earnings on Tuesday.
Stocks dropped on Monday to start another likely volatile week, with the Dow falling nearly 600 points, as an unprecedented plunge in oil prices weighed on investor sentiment.
Late Monday, President Donald Trump said he would sign an executive order to temporarily suspend immigration  to the United States to protect jobs "in light of the attack from the Invisible Enemy." Millions of Americans have filed for unemployment benefits as the coronavirus pandemic shuts down economic activity in much of the country.
Trump's tweet did not provide specifics on what the order would entail.
Earlier Monday, the Senate failed to reach a deal on the next package to rescue an economy and health care system ravaged by the global pandemic. However, a vote is set up as soon as Tuesday afternoon to replenish a key small business aid program.
Investors continued to monitor the coronavirus pandemic and the country's plan to reopen the economy. Signs have emerged that New York is past the worst of its outbreak. Georgia on Monday rolled out aggressive plans to reopen the state's economy, calling for many businesses to reopen their doors as early as Friday.
Stocks enjoyed their first back-to-back weekly gains since early February as investors grew more optimistic that the pandemic is easing off. The S&P 500 is now about 17% from its record high on February 19, cutting about half of its losses during the coronavirus sell-off.
"Market volatility remains intense, as subtle changes in the tone of the news drives dramatic shifts in investor sentiment," said Mark Hackett, Nationwide's chief of investment research. "Markets rallied sharply last week on hope that the worst of the outbreak is behind us. This optimism is likely to face headwinds, as the reopening of the economy is heading for an intense debate."

Apr 20, 2020

US Market | Futures Indicator: Dow futures fall more than 100 points as US crude prices plunge

Fred Imbert

RT: Coronavirus Wall Street
A man wears a protective mask as he walks on Wall Street during the coronavirus outbreak in New York City, New York, U.S., March 13, 2020.
Lucas Jackson | Reuters

U.S. stock futures traded lower early Monday morning as investors weighed the latest coronavirus news along with a sharp decline in U.S. crude prices.
Dow Jones Industrial Average futures fell 137 points, pointing to a Monday opening drop of around 107 points. S&P 500 and Nasdaq 100 futures also pointed to a lower Monday open for the two indexes.
Stock futures followed the decline of U.S. oil prices. The May contract for West Texas Intermediate plunged about 19% to $14.79 per barrel on weak demand outlook and storage capacity issues. WTI’s June contract slid over 6% to $23.43 per barrel.
The market was coming off its first back-to-back weekly gains in more than two months. Stocks got a jolt after a report last week said patients with severe virus symptoms were quickly recovering after using remdesivir, a Gilead Sciences drug. The Dow, S&P 500 and Nasdaq all rose more than 2% last week.
Last week’s gains also put the S&P 500 and Dow more than 30% above their intraday lows set on March 23.
New York Gov. Andrew Cuomo said Sunday the state is “past the high point” of new cases, noting the infection rate has fallen along with coronavirus-related hospitalizations. Cuomo added New York will roll out antibody testing this week. In New Jersey, Gov. Phil Murphy said Saturday: “We’re flattening the curve.”
In Washington, Treasury Secretary Steven Mnuchin said the administration and Congress were close to striking a deal on a second round of loans for small businesses. A $349 billion rescue loan program ran out of money on Thursday.
“The equity markets and bond markets in the US are telling me that my relatively optimistic outlook for the global economy is also what the markets are starting to price in,” Stephen Jen, co-founder of SLJ Macro Partners, wrote in a note. “There is now light at end of the tunnel.”
“While nobody should be under the illusion that the virus will be eradicated soon, it is important to the equity markets that we have gone through most of the known ‘rolling apexes,’ through mitigation measures,” Jen said.
But while the market may be pricing in an improvement in the virus outbreak, recent economic data has been dismal. Over the past month, 22 million jobs have been lost, weekly unemployment claims numbers from the Labor Department showed.
The number of coronavirus related deaths have also risen to more than 165,000 globally, according to Johns Hopkins University. In the U.S., the death toll has risen to over 41,000.

Apr 16, 2020

US Market | Futures Indicator: Dow futures turn around, point to opening gains ahead of key jobless claims data

Thomas Franck

Futures contracts tied to the major U.S. stock indexes recovered earlier losses and pointed to opening gains ahead of key jobless claims data.
In early Thursday morning trading, Dow Jones Industrial Average futures rose 227 points, implying an opening gain of about 228 points. S&P 500 and Nasdaq futures also pointed to higher opens Thursday.
Earlier, Dow futures had fallen more than 100 points.
The overnight moves followed a slump during the regular trading session on Wednesday as gloomy economic data and anemic bank earnings fueled concerns over the coronavirus’s impact on the U.S. economy.
The Dow Jones Industrial Average dropped 445.41 points, or 1.9%, to 23,504.35 during Wednesday’s session. The S&P 500 slid 2.2% to 2,783.36 while the Nasdaq Composite closed 1.4% lower at 8,393.18.
Central to Thursday’s session will be the Labor Department’s report on last week’s initial jobless claims, which economists polled by Dow Jones expect to total 5 million.
The jobless figures have proved a key retrospective gauge for those tracking the ailing health of the U.S. economy, with last week’s 6.61 initial claims. Last week’s print brought total claims over the three weeks prior to more than 16 million, implying that about 10% of the U.S. workforce had filed for unemployment benefits over that time.

20200415 SP500 looking for a bottom
Traders cited a plunge in March retail sales as a principal weight on equities on Wednesday. The worse-than-expected data showed retail sales during the month of March plunged a record 8.7%, the largest one-month decline since the department began tracking the series in 1992.
Manufacturing in the New York area also slumped by its biggest margin ever to a historic low, surpassing the levels seen in the throes of the Great Recession.
Energy stocks remain under pressure after U.S. oil fell to its lowest level in more than 18 years on Wednesday. The slide in West Texas Intermediate crude futures followed reports of the largest inventory build on record as well as a bearish report from the International Energy Agency. WTI slipped 1.19% to settle at $19.87, a price not seen since Feb. 7, 2002.
The Dow and S&P 500 remain more than 20% and 17.9% below their respective all-time highs set in February as marketplace jitters over the spread of the novel coronavirus and an uncertain vaccine timeline foster volatile trading on Wall Street.
Despite the recent dismal economic data, some market strategists pointed to a slowdown in the daily number of new U.S. coronavirus cases and the flattening in the net number of hospitalizations in New York state as evidence that markets may trend upward in the coming weeks.
JPMorgan’s Marko Kolanovic said Wednesday evening that such improvements in health-care data could encourage state governments to take “baby steps” to reopen certain economies as soon as next week. 
Kolanovic, the global head of quantitative and derivatives strategy at JPMorgan, reiterated his forecast that the U.S. equity market could reach new all-time highs as soon as the first half of 2021 if the economy is set to recover later that year.
Better health-care figures mean “we think it’s gonna be possible to reopen it sooner. We think within a week from now, you will start seeing some limited moves,” he told CNBC’s “Fast Money.”
“It’s going to be limited: I’m talking baby steps,” he added. “But that tells us that by the summertime, we may more substantially recover. And sometime next year — maybe the second half of next year — the economy reaches the high watermark. Which means that the market could reach a high watermark in the first half of next year.”
Stock futures ticked lower Wednesday evening as President Donald Trump again advocated for a gradual reopening of the U.S. economy during a press conference.
The president said that there are also public health costs the result of keeping state economies closed. Lost income and benefit coverage, the president said, can also lead to significant and negative health outcomes.
“There has to be a balance. You know, there’s also death involved in keeping [the economy] closed,” Trump said from the White House. “We have to get back to work.”
“With all of that being said, we’re going to start with states and with governors that have done a great job. And they’re going to open it up as they see fit,” he said.

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News | U.S. Politics: News | U.S. Politics: Interim Power-Sharing Proposes U.S. to the Taliban in Afghanistan. U.S. proposes interim power-sharing government with Taliban in Afghanistan Karen DeYoung ...