CNBC/Fred Imbert and Jesse Pound
Stocks fall for a third day as coronavirus cases rise, jobless claims data disappoint

Stocks fell slightly on Thursday as the market’s rally this month loses steam amid disappointing U.S. unemployment data and rising coronavirus cases.

The Dow Jones Industrial Average traded 144 points lower, or 0.5%. The S&P 500 slid 0.4% and the Nasdaq Composite pulled back by 0.1%.

Travelers and UnitedHealth fell more than 1% each to lead the Dow lower. Utilities and financials were the worst-performing sectors in the S&P 500, falling 0.9% and 0.8%, respectively.

The Labor Department said that 742,000 Americans filed for unemployment benefits in the week of Nov. 14, topping a Dow Jones estimate of 710,000.

Meanwhile, the number of U.S. coronavirus cases keeps rising, dampening the upbeat sentiment seen in the market earlier in November. A CNBC analysis of Johns Hopkins University data found that the seven-day average of daily new U.S. coronavirus infections is now at 161,165, up 26% from last week. In total, more than 11.5 million coronavirus cases have been confirmed.

This recent uptick in Covid-19 cases has prompted some parts of the country to retake stricter measures to curb the virus spread. New York City Mayor Bill de Blasio ordered schools to close for in-person learning “out of an abundance of caution.”

“Negative COVID headlines/increased economic lockdowns (especially in NYC and LA County) are starting to offset vaccine optimism, and that’s weighing on stocks,” wrote Tom Essaye, founder of The Sevens Report. “We are now facing the biggest number of economic restrictions since the Spring, and that will weigh on economic growth and, potentially, earnings.”

Thursday’s losses were kept in check, however, after the release of preliminary data showed University of Oxford and AstraZeneca’s vaccine candidate triggered a similar immune response among all adults.

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Fox Business/Jonathan Garber
Coronavirus vaccine not cure-all for bond investors

The U.S. Treasury market is warning that an economic slowdown is coming before a COVID-19 vaccine becomes available to the masses, according to one Wall Street strategist.

The yield curve, or spread between the 2-year and 10-year yields, fell to 69.9 basis points on Tuesday, down from 77 basis points on Nov. 10. A flattening yield curve suggests the economy will weaken in the months ahead.

“My expectation is if you look at it one month from now, two months from now, the yield curve would have flattened,” Sri Kumar, president of the Santa Monica, Calif.-based Sri-Kumar Global Strategies, told FOX Business. “There are very few signs of inflation picking up. There are very few signs of the economy surging ahead.”

The U.S. economy has 10 million jobs less than it did in February and the unemployment rate remains elevated at 6.9%. Additionally, there is no sign of rising wages.

Other recent economic data has been tepid, at best.

Retail sales ticked up a seasonally adjusted 0.3% month-over-month in October, marking a sharp slowdown from the 1.6% pace of September. The disappointing data followed last week’s flat consumer price index reading and a discouraging consumer sentiment number, although economists at the University of Michigan pointed to the election as a factor in that reading.

Kumar expects further economic weakness in the months ahead as a resurgence of COVID-19 infections has caused many states to roll back their economic reopenings.

While many states have reverted to closing dining rooms and other restrictions, New Mexico is reentering a full lockdown. No matter the restrictions, they are a sign of an economy going in reverse.

A slowing economy and the increasing likelihood Congress won’t agree on another stimulus package until January are a recipe for lower bond yields, according to Kumar.

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CNN Business/Matt Egan
Joe Biden fires an early warning shot at Wall Street

Elizabeth Warren’s fingerprints are all over the Biden transition, much to Wall Street’s dismay.

President-elect Joe Biden’s agency review teams include several people who share Warren’s reputation for being tough on the financial industry.

It’s more evidence of the influence of Warren, a fierce opponent of big banks and the excesses of Wall Street — as well as an early signal that Wall Street will be under much greater scrutiny, especially compared to four years of President Donald Trump’s efforts to dismantle regulation and unshackle big banks.

“The big-bank CEOs who read that list are probably somewhat concerned,” said Isaac Boltansky, director of policy research at Compass Point Research & Trading. “Progressives absolutely won the day on this.”

Biden tapped about 500 people to work with government agencies, from the CIA to the United States Postal Service, and help shape the future of government policy and appointments.

‘He made a lot of enemies’

Perhaps top on Wall Street’s worry list is Gary Gensler, who will lead the team working with financial regulatory agencies including the Federal Reserve, SEC and FDIC. Gensler led the Commodity Futures Trading Commission from May 2009 to January 2014.

Among the Obama-era regulators, Gensler was the most aggressive in implementing the Dodd-Frank financial reform law that Wall Street opposed.

“Gary Gensler undoubtedly brings back some bad memories,” said Boltansky.

Although Gensler is a former Goldman Sachs banker, he is now viewed as a tough-on-Wall-Street ally of Warren.

“He made a lot of enemies in DC and the industry,” said Ed Mills, Washington policy analyst at Raymond James. “The fact he’s leading this is a signal to the Elizabeth Warren wing of the Democratic Party that they have a voice on financial regulatory picks.”

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CNBC/Yun Li and Maggie Fitzgerald
Dow falls more than 300 points for a second day of losses as rally to records pauses

U.S. stocks fell for a second straight day on Wednesday as the market’s recent rally to new records took a pause.

The Dow Jones Industrial Average dropped 344.93 points, or 1.2%, to 29,438.42 in a volatile session, after rising as much as 147 points at its session high. The S&P 500 slid 1.2%, or 41.74 points, to 3,567.79, while the tech-heavy Nasdaq Composite fell 0.8%, or 97.74 points, to 11,801.60. The major averages finished the day near their session lows.

The worsening pandemic that brought on new restrictions overshadowed positive developments on the coronavirus vaccine front.

Stocks turned sharply lower after Mayor Bill de Blasio announced New York City’s public schools will move to remote learning only as the city tries to tamp down a growing number of coronavirus cases.

The U.S. is grappling with rising Covid-19 infections ahead of a likely tough winter. The country is recording roughly 157,000 new coronavirus cases per day, on average, as of Tuesday, according to a CNBC analysis of Johns Hopkins data. That’s another new record and nearly 30% higher than infection levels a week ago.

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Bloomberg/Jared Dillian
Gold Is a Hedge Against Bad Government Decisions

Investors don’t really have a handle on what gold is or what it represents. Many erroneously believe gold is some sort of inflation hedge, because of our experience in the 1970s. It’s also not a hedge against stock market crashes, as we discovered in March. Gold is a hedge on government authorities making poor economic choices. Inflation is usually the result of those poor decisions, but people confuse cause and effect here. Gold is a hedge on policy makers screwing up, and there has been a lot of screwing up in the last 20 years.

Gold has significantly outperformed stocks this century, gaining about 555% versus 79% for the MSCI All-Country World Index of stocks and 146% for the S&P 500 Index.(1) This is a direct result of significantly looser financial conditions, and no constraints on monetary and fiscal policy. From a financial perspective, the global economy is in a much worse place than 20 years ago, and there is no evidence that things are going to improve.

The year 2000 is of interest because financial conditions were very tight at the time. In the U.S., the target federal funds rate was 6.5%, real interest rates – or those after inflation – were strongly positive, the federal budget was balanced and the dollar was strong and getting stronger relative to other Group of 10 currencies. This was when the “strong dollar” doctrine preached by former Treasury Secretary Robert Rubin was still being pursued. A strong dollar increased the attractiveness of U.S. financial assets, especially Treasury securities, which helped to keep borrowing costs lower than they might be otherwise.

Financial conditions are much looser today. Interest rates are effectively zero (and negative after taking inflation into account), the Federal Reserve has bought a range of risky assets in the course of pumping some $3 trillion into the financial system this year as part of its quantitative easing policy, and the U.S. budget deficit is the widest ever at $3.1 trillion.

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60 Years Experience