Gold rises on pandemic fears; palladium scales new peak
February 27, 2020
“Gold prices gained on Thursday as rising cases of coronavirus beyond China exacerbated fears of a pandemic and its broader economic impact, boosting hopes for interest rate cuts by major central banks and demand for safe haven assets. Palladium notched up an all-time high, driven by short supplies of the auto-catalyst metal. Spot gold rose 0.6% to $1,650.12 per ounce by 1237 GMT, having jumped as much as 1% in the previous session. U.S. gold futures were also up 0.6% at $1,652.30.
‘The global panic around the coronavirus outbreak is pulling equity markets down, while all the funds are coming to safe havens … there are few places to hide, and gold is one of the best alternatives,’ said Hussein Sayed, chief market strategist at FXTM. ‘If the coronavirus doesn’t take a U-turn then $1,700 is just a matter of time and even higher prices (are on the cards).’ Global stocks plunged, while U.S. 10-year Treasury yields hit a record low as governments ramped up measures to battle a looming global pandemic of the coronavirus. A number of new coronavirus infections in other countries overtook China – for the first time, raising fears of a wider spread.”
MARKET WATCH/William Watts
Dow, S&P 500 enter correction territory as stock-market selloff rolls on for 6th straight day
February 27, 2020
“Major U.S. stock indexes were poised to enter a full-blown market correction Thursday if they maintain early losses until the closing bell. The Dow Jones Industrial Average DJIA, -3.44% tumbled more than 600 points and was off 610 points, or 2.3%, near 26,348. A close below 26,596.28 for the blue-chip gauge would meet the widely used definition of a market correction by marking a more-than-10% drop from its record close.
The S&P 500 SPX, -3.40% was also trading in correction territory, slumping around 73 points, or 2.4%, to 3,043, after trading as low as 3,034.18. A close below 3,047.54 would push the benchmark large-cap index into a correction, according to Dow Jones Market Data. The Nasdaq Composite COMP, -3.91% was also changing hands below the correction threshold. The tech-heavy index was down around 240 points, or 2.7%, near 8,741. A close below 8,835.46 would push it into correction mode.”
KITCO NEWS/Allen Sykora
Gold holds gains after U.S. jobless claims rise by 8,000
February 27, 2020
“Gold retained earlier gains after the Labor Department said Thursday that initial weekly U.S. jobless claims rose by 8,000 to a seasonally adjusted 219,000 in the week to Saturday. Spot gold was last up $10.30 to $1,651.10 an ounce. Consensus expectations compiled by various news organizations had called for initial claims to be around 212,000 to 214,000. The government revised the prior week’s tally to 211,000 from the previously reported 210,000.
Meanwhile, the four-week moving average for new claims – often viewed as a more reliable measure of the labor market since it smooths out week-to-week volatility – was up by 500 claims to 209,750.
Continuing jobless claims, the number of people already receiving benefits and reported with a one-week delay, decreased by 9,000 to a seasonally adjusted 1,724,000 during the week ending Feb. 15, the government said. The report on jobless claims came out at the same time as data on gross domestic product and durable-goods orders.”
Coronavirus ‘is a true black-swan event,’ sparking corrections across globe
February 27, 2020
“International investors believe coronavirus is truly a global phenomenon: Stock markets around the world are all down 10% to 12% from their recent highs. While travel-related stocks are taking very large hits, the entire global stock market has been taken down in recent weeks. All this has occurred in a short period — the S&P 500 hit historic highs just last Wednesday, which leaves veteran trader Matt Maley, Chief Market Strategist at Miller Tabak, marveling at the speed of the decline.
‘You don’t usually fall this fast from an all-time high,’ he said. ‘They usually don’t throw in the towel until they see a failed rally, but this is a true black-swan event. Markets don’t like uncertainty, but this is the ultimate uncertainty because there is no clear time frame.’ Big-cap stocks have all been taken down at least 10% from their recent highs, including many technology stocks. In the absence of clear information on fundamentals — on the extent of the global economic impact of coronavirus–traders have turned to technicals.”
U.S. Quarterly GDP Revisions Show Weaker Underlying Demand
February 27, 2020
“Underlying demand in the U.S. economy was slower than initially reported at the end of last year, putting growth on a weaker footing ahead of risks from the coronavirus in 2020. Upwardly revised contributions from trade and inventories kept gross domestic product expanding at a solid 2.1% annualized rate in the fourth quarter, matching estimates for no revision of the initially reported rate, Commerce Department data showed Thursday. But consumer spending, which makes up about two-thirds of the economy, was revised down to a 1.7% increase from 1.8%, also matching forecasts. Nonresidential fixed investment was revised lower to a 2.3% drop, representing the third straight decrease and matching the biggest decline since 2015.
The report suggests the record-long U.S. expansion is more vulnerable to weakening than previously thought, and it may remain below President Donald Trump’s target of 3% growth as he seeks re-election. Global stocks on Thursday extended this week’s rout and Treasury yields declined to record lows as the coronavirus spreads and investors fret about its impact on world commerce. Earlier this month, economists had forecast that U.S. growth would slow to 1.5% in the first quarter, amid weaker gains in government spending and only a slight increase in private investment. The record-long expansion is reliant on consumers continuing to open their wallets, particularly as businesses already whipsawed by the U.S.-China trade war start to contend with the coronavirus.”
THE STREET/Tony Owusu
Microsoft Warns It Will Miss Guidance Due to Coronavirus
February 27, 2029
“Shares of Microsoft (MSFT) fell sharply Thursday after the company warned that the coronavirus outbreak would hurt its fiscal third quarter PC segment, cutting its sales guidance from its previous view of between $10.75 billion and $11.15 billion. JPMorgan noted that Microsoft is diversified enough to handle the sales hit, with its Personal Computing segment only representing 32% of the company’s total revenue. JPMorgan maintained its overweight rating and $200 price target on the stock. ‘Microsoft enjoys a broad portfolio of strategic products, sits at the intersection of digital transformations and cloud adoption, and CIOs view it as the most critical and indispensable IT mega-vendor,’ JPMorgan’s note said. While the company is valued at a premium with a 29x trailing PE ratio, the firm says that this valuation is justified due to its diversified business.
Meanwhile, Jefferies analyst Brent Thill said that Microsoft’s announcement should remind investors that there is no immunity, even for elite companies like Microsoft. Jefferies lowered its 2020 earnings expectations for Microsoft to $5.62 per share from its previous view of $5.65 per share, but it also said that it remains bullish on the company’s overall performance and maintained its buy rating and $195 per share price target. Deutsche Bank reaffirmed its buy rating but noted that the company did not comment on the duration of the coronavirus headwind. However, the firm did say that Microsoft will benefit from pent-up demand in 2021, raising its PC segment estimate for next year by $413M.”