Wall Street ends lower on COVID-19 worries, tech weighs

(Reuters) – The S&P 500 dropped on Thursday, pulled lower by Microsoft Corp (O:MSFT) and Apple Inc (O:AAPL), as elevated levels of unemployment claims heightened concerns about the economic toll from rising coronavirus cases.

U.S. retail sales increased more than expected in June, but a resurgence in new COVID-19 cases is undercutting the budding recovery, keeping 32 million Americans on unemployment benefits.

A jump in cases of the virus has forced California and other states to shut down again, sparking fears of more business damage and slowing the pace of a Wall Street rally. The S&P 500 is about 5% below its February record high.

“The economic data shows there is still a challenge going forward,” said Willie Delwiche, an investment strategist at Baird in Milwaukee. “Congress better get its act together and pass another fiscal stimulus.”

The S&P real estate <.SPLRCR> and technology (SPLRCT) indexes each lost more than 1%, more than any others.

Apple declined 1.2% and Microsoft lost 2%, each weighing more than any other company on the S&P 500.

The S&P 500 has exceeded the Nasdaq by nearly 3 percentage points over the past week, its greatest five-day outperformance over the Nasdaq since late March, reflecting a shift away from Amazon.com (O:AMZN), Microsoft and other major technology companies that have led Wall Street’s gains in recent months.

“This is an early indication of good signs that money is now flowing away from completely overbought Nasdaq into those names that will bode well when the economy starts finding more of a solid footing,” said Andrew Smith, chief investment strategist at Dallas, Texas-based Delos Capital Advisors.

Twitter Inc (N:TWTR) fell 1.1% after hackers accessed its internal systems to hijack some of the platform’s top voices, including U.S. presidential candidate Joe Biden, reality TV star Kim Kardashian West, former U.S. President Barack Obama and billionaire Elon Musk and used them to solicit digital currency.

In extended trade, Netflix (O:NFLX) tumbled 10% after the streaming video service’s quarterly report.

The Dow Jones Industrial Average (DJI) fell 0.5% to end at 26,734.71 points, while the S&P 500 (SPX) lost 0.34% to 3,215.57.

The Nasdaq Composite (IXIC) dropped 0.73%, to 10,473.83.

Rounding up earnings reports of big banks, Bank of America Corp (N:BAC) fell 2.7% after its second-quarter profit more than halved, while Morgan Stanley (N:MS) rose 2.5% after posting a record quarterly profit.

American Airlines (O:AAL) tumbled 7.4% after it sent 25,000 notices of potential furloughs to frontline workers and warned that demand for air travel is slowing again.

Tesla Inc (O:TSLA) declined nearly 3% after its vehicle registrations nearly halved in the U.S. state of California during the second quarter, according to data from a marketing research firm.

Declining issues outnumbered advancing ones on the NYSE by a 1.26-to-1 ratio; on Nasdaq, a 1.48-to-1 ratio favored decliners.

The S&P 500 posted 30 new 52-week highs and no new lows; the Nasdaq Composite recorded 76 new highs and 14 new lows.

Volume on U.S. exchanges was 9.6 billion shares, compared with the 11.7 billion average for the full session over the last 20 trading days.

Oil Down 1%, Reacting Belatedly to OPEC’s Cuts Rollback

A day late, but perhaps better late than never for the bears in the market.

Crude prices fell 1% on Thursday, reacting belatedly to the decision by the Organization of the Petroleum Exporting Countries from a day earlier to rollback 20% of production cuts that OPEC had maintained since the start of May.

The market rallied instead on Wednesday, responding to a large unexpected drawdown in U.S. crude oil stocks.

“Oil news is very light other than people weighing in on the relaxing of the OPEC oil cuts that are coming,” said Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, N.C.

For now, there wasn’t “enough demand information” that clearly indicated a bullish or bearish market for oil in the coming weeks and months, Shelton said. 

He, however, added: “The evidence in the U.S. that I see suggests that there is enough demand to increase runs to some extent as gasoline stocks are drawing and margins are ‘OK’.”

New York-traded West Texas Intermediate, the benchmark for U.S. crude futures, settled down 45 cents, or 1%, at $40.75 per barrel.

London-traded Brent, the global benchmark for oil, fell 42 cents, or nearly 1%, to settle at $43.37.

WTI settled up 2.2% on Wednesday while Brent rose 2.1%, responding to a blockbuster weekly drawdown on U.S. crude.

The Energy Information Administration reported in the previous session that US crude stockpiles fell 7.5 million barrels for the week ending July 11. Analysts tracked by Investing.com had expected a decline of 2.1 million barrels, after the previous week’s rise of 5.6 million barrels.

The EIA also reported a drop of 3.1 million barrels in gasoline stockpiles and slide of nearly 500,000 barrels in diesel-dominated distillate inventories. Analysts had expected a gasoline draw of 643,000 barrels and distillates build of nearly 1.5 million barrels.

The Saudi-led and Russia-assisted OPEC+ alliance, meanwhile, said on Wednesday it will withhold 7.7 million barrels a day from the market from August onward, compared with the 9.6 million in July. 

Some say that a 2 million barrel reduction in OPEC cuts could go a long way in negating weekly draws in U.S. crude.

Case in point:  Crude inflows into the United States fell by 1.8 million barrels last week, the most in four years, underscoring the work by OPEC, or precisely Saudi Arabia, to reduce shipments to the United States in order to create low inventory levels that would boost WTI prices.

if the Saudis start sending more of their cargo in the direction of the United States, that could change.

And the jury is still out on how demand for oil could fare amid the new wave of coronavirus infections across the world. 

The United States reported more than 67,000 new cases of coronavirus on Wednesday. Top U.S. pandemics expert Anthony Fauci said recently the daily case growth could reach 100,000 without proper social-distancing and other safety measures. 

Some 3.5 million Americans have already been infected by Covid-19, with a death toll reaching nearly 140,000.  A new model by the University of Washington predicts 200,000 coronavirus deaths in the United States by Oct. 1, casting further doubts on economic reopening from lockdowns. 

The U.S. economy shrank 5% in the first three months of 2020 for its sharpest decline since the Great Recession of 2008/09, as most of the 50 states in the country went into lockdown to stem the outbreak of the virus. While most businesses  have reopened over the past two months,  economists still warn of a double-digit recession by the second quarter.

Gold Down Most in a Week, Cracking $1,800 Support, as Dollar Bounces

Gold prices lost nearly 1% on Thursday, their most in a week, and fell below the key $1,800 support as rival dollar staged its sharpest rebound in that period.

The European Central Bank’s widely-expected decision to keep rates unchanged did not provide the yellow metal with any bullish leads. Neither was the slight dip on Wall Street’s main indexes particularly helpful.

Gold did get some support from worsening U.S.-China relations and a continued ramp up in coronavirus cases in the United States. The combined effects of these helped Comex futures settle at just above $1,800, though it fell back below that level in later trading, along with bullion.

U.S. gold futures for August delivery on Comex settled down $13.50, or 0.7%, at $1,800.30 per ounce. 

It was the biggest slide for gold on Comex since the 0.9% drop on July 9 and came after the nine-year high of $1,829.65 struck on July 8. 

By 2:36 PM ET (18:36 GMT), however, August gold was back under $1,800, trading down $16.85, or 0.9%, at $1,796.95.

Spot gold, a real-time indicator of bullion prices, was down $12.54, or 0.7%, at $1,797.58. Bullion scaled $1,809.22 a week earlier, setting a peak since September 2011.

The dollar index, which ties the greenback to a basket of six currencies, was up 0.3% at 96.310, its most since July 9.

Analysts said gold might have fallen more if not for safe-haven bids attracted by the metal from buyers worried about the continued escalation of Covid-19 case numbers in the United States. 

“Gold prices remain trapped in a range as virus uncertainty is countered by vaccine progress and as central banks adopt a wait-and-see approach for the rest of the summer,

The United States reported more than 67,000 new cases of coronavirus on Wednesday. Top U.S. pandemics expert Anthony Fauci said recently the daily case growth could reach 100,000 without proper social-distancing and other safety measures. 

More than 3.5 million Americans have been infected by Covid-19, with a death toll surpassing 140,000.  A new model by the University of Washington predicts 200,000 coronavirus deaths in the United States by Oct. 1, casting further doubts on economic reopening from lockdowns. 

The U.S. economy shrank 5% in the first three months of 2020 for its sharpest decline since the Great Recession of 2008/09, as most of the 50 states in the country went into lockdown to stem the outbreak of the virus. While most businesses have reopened over the past two months, economists still warn of a double-digit recession by the second quarter.

“Gold is trading as a risk asset, in a regime defined by a surge in liquidity and money supply,” TD Securities said in a note. “We expect that these common drivers will continue to drive capital to shelter itself from negative real yields in risk and real assets.” 

The Canadian bank-backed brokerage said speculative positioning in gold, while not extreme, has begun to bloat.

A decomposition of the themes driving trading decisions in gold revealed that macro themes and technicals have driven an increase in length, while risk-on has had a limited impact on positioning, and was positively correlated with length on average over the last month, the brokerage said.

“Therefore, we argue that money managers need not be concerned about trading gold in a risk-on environment, but instead should continue to watch for adverse shocks to the prevailing themes that have driven gold positioning higher,” TD Securities added.

“Gold is likely to continue to see record ETF inflows as coronavirus worries continue to worsen,” he said. “Gold should continue to rise as U.S. business activity lost most of its reopening momentum and many investors anticipate more stimulus will be thrown to try to avoid permanent labor damage to the economy.”

Saudi Aramco has seen $200 billion of market value erased since its record-shattering IPO as Mideast tensions drag it lower

Saudi Aramco’s market value has tanked by $200 billion since its post-IPO peak, and the stock is falling faster in the wake of heightened tensions between the US and Iran.

The world’s most highly valued company fell 1.7% Sunday and as much as 1.2% Monday. Aramco became the first company to hit a $2 trillion valuation on December 12, but its market cap now sits at roughly $1.8 trillion.

Aramco shares have since pared some losses through Monday, trading roughly 0.1% lower at 34.50 riyals ($9.20) per share. The two-day drop placed shares at their lowest point since the firm’s December 11 initial public offering, and just 7% higher than its offering price of 32 riyals ($8.53).

Global stocks continue to fall as the US’s assassination of Iranian Major General Qassem Soleimani late Thursday inflamed tensions between the two nations. Gold, a traditional safe-haven asset, on Monday hit its highest price since 2013.

Aramco stock fell despite oil surging to $70 per barrel, suggesting higher oil prices were overshadowed by boosted risk in the Gulf region.

Some analysts have said Iran could target oil infrastructure and raise the commodity’s cost to hit back at the US. Any such retaliation could resemble the attacks on Aramco facilities in September. The firm’s oil production was cut in half after explosive-armed drones disabled several of its facilities. The US and Saudi Arabia blamed Iran for the strike, while Houthi rebels from Yemen claimed responsibility.

Aramco returned to its normal output levels in just one month and pushed forward with its IPO, but the attacks left many investors mulling the company’s exposure to geopolitical risk.
Though the US airstrike pushed Aramco lower, the state-run company has several defenses to keep its shares from falling too far. Saudi Arabia government institutions sank $2.3 billion into the company’s stock ahead of its record-breaking IPO, giving the kingdom a stronger hold on Aramco’s stock price.

Saudi Arabia has also marketed Aramco shares as a stable investment in the kingdom’s future. The oil giant and its December IPO are key components in the government’s plan to diversify away from oil. The kingdom could intervene to keep the stock price stable.

“There’s broad awareness that the government is a large investor and that they’re willing to step in during times of market volatility to protect prices,

Crude Inventories Fell by 5.9M Barrels

U.S. oil inventories fell last week by more than the market anticipated, according to the American Petroleum Institute’s estimate released late Tuesday.Crude stockpiles dropped by 5.9 million barrels for the week ended Jan. 3, the API reported, compared with a plunge of about 11.5 million barrels reported for the week before.The Energy Information Administration is expected to report a drop of about 3.6 million barrels when it issues official numbers tomorrow, according to analysts, WTI futures were down about 0.8% after the API numbers came out.

Gold Just Broke Through A Key Level

For the first time in more than six years, gold broke through a key level. Gold surged on Friday due to the geopolitical tensions stemming from the Middle East after the U.S. took out Iran’s top military leader. During early trading in the early Asian markets, the gold price continued even higher, reaching $1,579.

This morning, gold is trading at the $1,575 level. It will be interesting to see if gold closes at the end of the day near its high or a low. The key resistance level is $1,550, which gold surpassed by $25. Here is gold’s monthly chart below (each candlestick represents one month of trading).

If you look at the “Larger View” insert, I have superimposed the candlestick breaking through the Key level. Unfortunately, Stockcharts.com does not provide a live chart for the metals or commodities. We have to wait until the close of trading to see the new candlestick price level. I find this quite odd because they recently added “Live” Crypto Trading charts for Bitcoin and several others.

Regardless, the Gold price finally broke through this level, and for it to remain in a bullish trend in the monthly chart below, it will have to close above the $1,550 (actually $1,560) level by the end of January. If we look at the next chart, the gold price surpassed the high of $1,566 in September:

I thought gold would retest its breakout level of $1,360 before moving higher. While it’s not a guarantee that gold would retest this $1,360 level before moving higher, traders typically expect it to happen.

Furthermore, the latest Gold COT Report shows the Commercial Net Short position at the highs from last summer:

This is a very strange situation for gold. Due to the Fed continued Repo Market intervention and the $60 billion a month in U.S. Treasury purchases, it seems that gold just won’t selloff or correct down to that $1,360 breakout level. However, with the Commercial net short position at a high, logic suggests that gold will likely correct lower before resuming its trend higher in 2020.

Moreover, at some point, the bloated U.S. stock market will need to experience a correction lower, even if it continues higher due to the massive Fed and Central Bank liquidity. Thus, the gold and silver price may correct lower with the broader markets once a correction takes place.

If I thought that the world would continue expanding oil production for the next 20-30 years, Pento might be correct in his analysis of silver. However, silver will likely be the better performing asset because there’s about the same amount of above-ground silver “investment” inventories as there is gold.

The spiking of the gold and silver prices recently due to the geopolitical tensions in the Middle East is just a warm-up for the price action in the future when the Investing World wakes up to the “Store of Wealth” properties of the precious metals. Most stocks, bonds, and real estate will lose a great deal of their value during the next phase of the market… The Wealth Preservation Phase.

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