31 July 2020

1) The American economy last quarter is the worst on record, with a 32.9% annual rate contraction (April – June). American business ground to a halt from the pandemic lockdown this spring, leaving the country in its first recession in eleven years. This wipes out five years of economic gains in just months. From January to March, the GDP (Gross Domestic Product) declined by an annualized rate of 5%. While the unemployment is declining as states open up from the shutdown, there are still about 15 million unemployed workers. Americans are spending less money during th lockdown, partly because of lost of jobs. Consumer spending is the biggest driver of the economy, and it declined at an annual rate of 34.6% for the second quarter.

2) While Walmart has posted surging sales for each month, it is still taking cost savings measures. The retailer has laid off hundreds of workers including store planning, logistics, merchandising and real estate. Also, Walmart is reorganizing its 4,750 stores by consolidation of divisions and eliminating some regional manager roles. Walmart is performing well because of high demand and low prices during the pandemic. The company isn’t opening as many new stores in the U.S. anymore, so Walmart doesn’t need as many people to find new locations and so design them.

3) Job postings in technology are 36% down from 2019 levels. This is attributed to increased competition, low priority in hiring and uncertainty over the pandemic. Therefore, the tech industry is also feeling the economic effects of the coronavirus pandemic. Sending a very significant portion of its workers remote to work at home, there were predictions tech jobs would lead the recovery with increase job numbers. The ‘work at home’ was thought to show tech jobs might be available outside the traditional hubs. Neither has proved to be true. In short, the tech jobs are faring worst than the overall economy.

4) Stock market closings for – 30 JUL 20:

Dow 26,313.65 down 225.92
Nasdaq 10,587.81 up 44.87
S&P 500 3,246.22 down 12.22

10 Year Yield: down at 0.54%

Oil: down at $40.45

2 June 2020

1) Experts say it could take as much as a decade for America’s economy to fully recover from the coronavirus and the subsequent massive shutdown of businesses. Presently, it’s expected that the GDP (Gross Domestic Product) will decrease about 3% from 2020 to 2030 or about $7.9 trillion dollars. It’s expected that the measures to counter the virus, the business closures and social distancing measures, will reduce consumer spending, which in turn will cool the economy. With 41 million people now unemployed, more layoffs are expected for the next week with an unemployment rate of 19.6%. Furthermore, it’s expected that the coronavirus will cost the economic about $7.9 trillion dollars.

2) The reopening of America from the lockdown was going to be difficult enough, but now the growing violence of protest is threatening to hamper that recovery. Stores in the protest areas are closing for the protection of its employees such as CVS and Target, with doubts mounting if some of the stores will ever reopen. Mayor Lightfood of Chicago said the continuing violence is making the city reconsider the opening of Chicago’s businesses. Also, the wireless carriers T-Mobile has closed Metro and Sprint stores over the same consideration of possible violence.

3) China has stopped some imports of U.S. farm products such as soybeans and pork meat. This is the latest sign that the January phase one trade deal between the world’s two largest economies is unraveling. The halts come after President Trump’s criticism of China’s efforts to bring Hong Kong under the firm control of the communist. The president is threatening to strip Hong Kong of some of it’s special privileges, which in turn would make Hong Kong less valuable economically to China. Further aggravating U.S. and Chinese relations is the charges that China shares some responsibility for the Convid-19 pandemic.

4) Stock market closings for – 1 JUN 20:

Dow 25,475.02 up 91.91
Nasdaq 9,552.05 up 62.18
S&P 500 3,055.73 up 11.42

10 Year Yield: up at 0.66%

Oil: up at $35.56

1 June 2020

1) For the last few years, a number of retailers have been downsizing by closing a number of their stores across the country, something that the coronavirus pandemic has greatly accelerated. But the restaurant chains have also been downsizing as well, closing branches all across the county. Such popular names as Jack in the Box, Luby’s, Pizza Hut, Ruby Tuesday, Steak’nShake , Subway, Burger King, TGI Fridays and Applebee’s just to name a few, who are closing restaurants across the country. Each have been struggling for the last several years. This is another sign that the American consumer market is in the process of fundamentally changing.

2) The U.S. consumer spending plunged in April by the most on record because of the nation wide lock down. Spending fell 13.6% from the prior month, making for the sharpest drop in six decades. A rise in income temporarily masks the fact that people are in a fragile economic position, because the rise was a result of the one time stimulus checks. The virus crisis halted all but the most essential purchases, with economists expecting it will take a year or more before spending recovers.

3) It’s anticipated that the national debt will increase to more than 100% of the national GDP (Gross Domestic Product) by the end of the year. This will exceed the record set after World War II. The $25 trillion dollar national debt equates to $76,665 dollars per citizen or $203,712 dollars per taxpayer. The federal deficit is over $1.9 trillion dollars through April, and is expected to rise to $3.7 trillion dollars by the end of September, which is the end of the fiscal year. Such debt could draw investors to demand higher interest rates, as the federal government’s position becomes increasingly precarious. This is like an individual piling on credit card debt without consideration for the short or long term consequences to their financial position. For America, those consequences could be deep depression coupled with inflation of the dollar leaving money far less valuable than today.

4) Stock market closings for – 29 MAY 20:

Dow 25,383.11 down 17.53
Nasdaq 9,489.87 up 120.88
S&P 500 3,044.31 up 14.58

10 Year Yield: down at 0.65%

Oil: up at $35.32

22 May 2020

1) Again, there is additional unemployment this week with 2.4 million people filing for unemployment benefits this last week. This brings the total U.S. unemployment during the pandemic up to 38 million, with continuing claims at 25.07 million, the highest level on record. The good news is the filings continue to decline from previous weeks. So far, there’s no indications that the easing of the lockdowns is having any effect on the unemployment dilemma.

2) The apparel retailer chain ‘The Gap’ is accelerating its implementation of robots in warehouses to assemble online orders, thus avoiding the use of human contact during the pandemic. The Gap is tripling the number of item picking robots in use to 106 by the fall. With the pandemic forcing the closure of its stores nationwide, their online sales shot up just when social distancing rules reduced their staff. Each robot does the work of four humans in a warehoused that was already highly automated. This is an example of increased automation occurring during times of economic shock, leaving fewer jobs for when the economy improves. These are times when employers shed less skilled workers by replacing them with technology and higher skilled workers thereby reducing their labor cost.

3) The second crisis for the American economy is arriving. The pandemic is having sever consequence for state and local governments with lockdowns eviscerating their finances. Monies needed to pay for public services and infrastructure have withered leaving governments to do triage of the services they provide. Basic services such as police, fire fighting, health, trash and water/sewer services are threatened with curtailment for lack of monies to pay salaries and supplies such as gasoline. Such actions is politically dangerous which can fuel political extremism that threatens democracy. Losses of state and local revenues are estimated to be 15 to 45 percent, or an overall loss of $1.75 trillion dollars a year. With growing doubts of re-employment after the crisis passes, this economic crisis is long term.

4) Stock market closings for – 21 MAY 20:

Dow 24,474.12 down 101.78
Nasdaq 9,284.88 down 90.90
S&P 500 2,948.51 down 23.10

10 Year Yield: down at 0.68%

Oil: up at $33.82

20 May 2020

1) Just three months after filing for bankruptcy, the Pier 1 retail chain is closing down all its retail store outlets as soon as possible. This drastic action is blamed on store closure from the pandemic and failure to find a buyer. After modeling several options for remaining in business, they found liquidation was the best option to maximize Pier 1’s assets. Plans are to sell its remaining inventory, website and intellectual property. Once a large seller of home goods, the company has suffered severely from online retailers such as Amazon and Wayfair, while big box stores such as Target and Walmart have increased their marketing of home goods products. The fifty-eight year old retailer joins several other big name store chains now in bankruptcy, in what appears to be a fundamental change in consumerism.

2) The damage to employment continues to spread, starting with 1 million public sector workers possibly losing their jobs. All governments are seeing a drop in revenue from businesses being shut down because of the coronavirus. With limited money- cities, counties and states are facing layoffs of their workers until things improve. Restaurants have loss 417,000 jobs to closure. The low wage workers account for 86% of job losses, while over two hundred hospitals have laid off staff because of elective procedures being suspended to accommodate Covid-19 patients, because hospitals have experienced cash crunches.

3) The ride sharing service Uber has had steep revenue losses from the pandemic shutdown, and so announced another 3,000 layoffs to bring their total layoffs to 6,700 or 25% of its workforce. It’s anticipated this action will save the company more than $1 billion dollars annually. Additionally, the company is reorganizing into transportation (Uber Works) and food delivery (Uber Eats).

4) Stock market closings for – 19 MAY 20:

Dow 24,206.86 down 390.51
Nasdaq 9,185.10 down 49.72
S&P 500 2,922.94 down 30.97

10 Year Yield: down at 0.71%

Oil: down at $31.86

CVS BUYING HEALTHCARE GIANT AETNA…

By: Economic & Finance Report

Pharmacy giant CVS is buying the third biggest healthcare company, Aetna for a reported $69 billion dollar deal, which includes cash and stock options.

This deal is coming to fruition just in time as the Senate and US House Reps each passed their version of the tax reform bill, now the two versions will go into conference with negotiators from both chambers. The end bill looks like it will be touching President Trump’s desk before Christmas, for his signature into law.

Both CVS and Aetna are power houses in their respective industries and business sectors. CVS beong one of the biggest retail and pharmaceutical chains in the US and Aetna being in the top 3, in the healthcare industry. Both companies have indicated that the merger makes sense because the consumer(s) will be the ultimate winners from the deal because they will be paying a lot less and saving alot more for medical prescription drugs in the US. -SB