Financial News for the week ending April 24, 2020

Article expanded on April 29, 2020:

Source

http://creditbubblebulletin.blogspot.com/2020/04/weekly-commentary-fault-lines.html

For the week ending April 24, 2020:

S&P500 declined 1.3% (down 12.2% y-t-d)

Dow Industrials fell 1.9% (down 16.7%)

Dow  Utilities sank 4.1% (down 8.8%)

Dow Transports fell 1.7% (down 25.8%)

S&P 400 Midcaps dipped 0.7% (down 24.8%)

Small cap Russell 2000 increased 0.3% (down 26.1%). 

Nasdaq100 declined 0.5% (up 0.6%)

Biotechs jumped 2.5% (up 4.8%). 

With bullion jumping $47, 

the HUI gold stock index 

surged 13.6% (up 14.7%).

Ten-year Treasury yields 

fell four bps to 0.60% 

   (down 132bps).

 Long bond yields 

declined three bps to 1.17% 

   (down 122bps). 

Freddie Mac 30-year 
fixed mortgage rates 

added two bps to 3.33%
    (down 87bps y-o-y). 

Fifteen-year rates 
rose six bps to 2.86% 
   (down 78bps). 

Five-year hybrid ARM rates 
fell six bps to 3.28% 
   (down 49bps). 

Jumbo mortgage 30-year fixed rates 

up a basis point to 3.70% 
   (down 55bps).

Federal Reserve Credit

over the past year, 

expanded $2.559 TN, 

or 65.8%. 

M2 (narrow) "money" supply 

surged $2.329 TN, or 16.0%, 

over the past year. 

Commodities Watch:

Bloomberg Commodities Index 

dropped 3.0% (down 25.5% y-t-d). 

Spot Gold jumped 2.8% to $1,730 (up 13.9%). 

Silver slipped 0.3% to $15.445 (down 13.8%). 

WTI crude fell $1.33 to $16.94 (down 72%). 

Gasoline dropped 7.3% (down 61%)

Natural Gas declined 0.9% (down 20%).

Copper lost 0.9% (down 17%). 

Wheat dipped 0.6% (down 5%). 

Corn fell 2.0% (down 17%).



Added on April 29:

April 21 – Reuters (Jonnelle Marte): 

“Black and Hispanic families in the United States are taking the biggest income hit due to the coronavirus pandemic, and they are less prepared to withstand the blow, according to two studies… Low-income workers, including people of color and those without a college degree, are more likely to report a job loss or a pay cut related to measures introduced to limit spread of the virus, according to a report by the Pew Research Center. Hispanic workers are particularly vulnerable, with 61% saying they or someone in their household lost a job or experienced a pay cut because of the pandemic…”

April 18 – New York Times (Michael Corkery and David Yaffe-Bellany): 

“Pork and beef producers boast about having some of the most heavily sanitized work spaces of any industry. Yet meat plants, honed over decades for maximum efficiency and profit, have become major ‘hot spots’ for the coronavirus pandemic… The health crisis has revealed how these plants are becoming the weakest link in the nation’s food supply chain, posing a serious challenge to meat production.”

April 21 – Financial Times (Gregory Meyer and Derek Brower): 

“The world’s largest oil-backed exchange-traded fund has been forced to make far-reaching changes to its portfolio, after below-zero crude prices raised the spector of unlimited losses for investors and its holdings ballooned to almost a quarter of the benchmark US futures market. The United States Oil Fund, an ETF with more than $4bn in assets, said it would shift money out of the West Texas Intermediate futures contract set to expire in June, in favor of later-dated contracts and possibly even other kinds of energy derivatives.”

April 19 – Financial Times (Colby Smith and Robin Wigglesworth): 

“Investors have pushed back on pleas by the G20 group of big economies to allow emerging economies to pause their debt repayments, in an early indication of how difficult it will be to get private creditors to collectively and voluntarily agree on coronavirus relief measures. …The G20 urged private creditors to participate in its plan to provide temporary debt relief to low-income countries until the end of the year. Zambia and Ecuador have already been forced to seek debt restructurings, and many more are expected to follow given the scale of the economic and financial shocks caused by the virus outbreak.”

April 21 – Bloomberg (Christopher Condon and Dave Merrill): 

“The U.S. budget deficit may quadruple this year to almost $4 trillion. Projections from the Committee for a Responsible Federal Budget (CRFB) say that by 2023 U.S. debt held by the public will surpass records set in the post-World War II years. And these projections only include spending enacted so far… Additional spending is almost certain as the coronavirus pandemic destroys millions of jobs and thousands of businesses while slashing tax revenues for local and state governments… Even before the crisis, U.S. debt-to-GDP had more than doubled to 79% in 2019 from 35% in 2007. Deficit hawks, already hard to find, disappeared once the virus shut down whole swaths of the U.S. economy.”

April 19 – Washington Post (David Lynch): 

“The United States is embarking on a rapid-fire experiment in borrowing without precedent, as the government and corporations take on trillions of dollars of debt to offset the economic damage from the coronavirus pandemic. The federal government is on its way this year to spending nearly $4 trillion more than it collects in revenue…, a budget deficit roughly twice as large relative to the economy as in any year since 1945. Business borrowing also is setting records. Giant corporations…, which binged on debt over the past decade, now are exhausting their credit lines and tapping bondholders for even more cash. To support such borrowing, the Federal Reserve has dropped interest rates to zero and added more than $2 trillion of loans to its portfolio in the past six weeks — as much as in the four years following the Great Recession.”

April 20 – CNBC (Patti Domm):

 “The oil industry is in its worst crisis since at least the Great Depression, according to analysts. There’s too much oil, and nobody wants to buy any more. Planes aren’t flying, shipping has slowed, and U.S. consumers, who use 10% of the world’s oil output in their cars, are now staying at home. The action Monday in the most closely watched energy market in the world was devastating, as the value of the May oil futures contract plummeted 300%, flipping into negative territory to end at minus $37.63 per barrel.”

April 22 – Bloomberg (Kevin Crowley and Rachel Adams-Heard): 

“An historic crash in crude prices is driving U.S. shale into full-on retreat with operators halting new drilling and shutting in old wells, moves that could cut output by 20% for the world’s biggest producer of oil and leave thousands of workers unemployed. For shale companies, the price of West Texas Intermediate crude went from hunker-down-and-ride-it-out mode to crisis mode in just a few days, with many now unsure whether there will even be a market for their oil. Some 1.75 million barrels a day is at immediate risk of shutting down while the number of new wells being brought online is forecast to plunge almost 90% by the end of the year, according to IHS Markit Ltd.”

April 21 – New York Times (Clifford Krauss): 

“Workers at Marathon Petroleum’s refinery in Gallup, N.M., are turning off the valves. Oil companies in West Texas are paying early termination fees to contract employees rather than drill new wells. And in Montana, producers are shutting down wells and slashing salaries and benefits. Just a few months ago, the American oil industry was triumphant in its quest for energy independence, having turned the United States into the world’s biggest petroleum producer for the first time in decades. But that exhilaration has given way to despair… The oil industry has lived through many booms and busts, but never before have prices collapsed as they have this week.”

April 19 – Bloomberg (Joanna Ossinger): 

“The biggest U.S. companies will slash their cash spending this year amid the uncertainty of the coronavirus pandemic, according to Goldman Sachs… ‘We forecast S&P 500 cash spending will decline by an annual record 33% during 2020 as firms prioritize liquidity in a worsening economic environment,’ strategists led by David Kostin wrote… He continues to expect a big decline in earnings per share for the first and second quarters.”

April 20 – Financial Times (Laura Noonan): 

“Up to a fifth of Goldman Sachs’ credit card and personal loans customers are taking payment holidays, a far higher level than at more established lenders such as Bank of America and Wells Fargo. Goldman, which lends to consumers under its Marcus brand and issues credit cards offered by Apple, has seen 10 to 20% of such borrowers request to defer payments since the coronavirus crisis…”

April 19 – Reuters (Tetsushi Kajimoto): 

“Japan boosted its new economic stimulus package… to a record $1.1 trillion to expand cash payouts to its citizens… Prime Minister Shinzo Abe formally decided the new stimulus less than two weeks after his cabinet approved an earlier plan to spend 108.2 trillion yen ($1 trillion)…”

April 19 – Reuters (Tetsushi Kajimoto): 

“Japan’s exports slumped the most in nearly four years in March as U.S.-bound shipments, including cars, fell at the fastest rate since 2011… Japanese exports fell 11.7% in the year to March, compared with a 10.1% decrease expected…”