MARKETS
COVID-19
Three Days in a Row, U.S. Coronavirus Deaths Top 1,100
The United States passed a total of more than 4 million coronavirus infections since the first U.S. case was documented in January, reflecting a nationwide escalation of the pandemic. Fatalities nationwide were recorded at 1,118 on Thursday, 1,135 on Wednesday, and 1,141 on Tuesday – contributing to the rising deaths in the U.S for a second week in a row. Even though deaths are rising in the United States, they remain well below levels seen in April when 2,000 people a day on average died from the virus.
ENERGY
Rising Oil Prices Pulling Energy Stocks Up from the Grave
The commodity has taken quite a journey from the start of the year when in March a price war broke out between Saudi Arabia and Russia dragging down oil prices. Then, when COVID-19 hit demand for the commodity crumbled, further weighing down the prices. But on Tuesday, energy stocks jumped sending the S&P 500 Energy Sector Index up more than 6%. Energy companies hit their highest levels since March as West Texas Intermediate crude gained as much as 3.9% at $42.40 per barrel; and Brent crude rose 3.7% at $44.89 per barrel (intraday highs). As economic reopening efforts continue, rising oil prices are expecting a boost of demand in the future.
These key energy companies made quite an impact on Tuesday:
Occidental ($OXY): as much as 15%
Apache Corp. ($APA): as much as 12%
Devon Energy Corp. ($DVA): as much as 13%
FED
Senate Banking Committee Approves President Trump’s Nomination to Add Judy Shelton to the Federal Reserve’s Board of Governors
On Tuesday, Judy Shelton, an advocate for the return to the gold standard and critic of the way the Federal Reserve operates has obtained a 13-12 vote to advance her nomination to becoming a member of the central bank’s board of governors. This board oversees the Federal Reserve system which sets monetary policy (including emergency lending policies). Shelton questions the separation of The White House and the Fed as this distance is meant to enable the Fed to make decisions based on long-term economic trends. This puts economic experts at unease as the Fed and central bankers are more crucial than ever moving through the current economic crisis and adding politicization to the situation is a headache for everyone. Shelton is not the only nominee as Christopher Waller is also being considered and both will go through the next steps through the full senate voting where President Trump’s Republican Party has majority. Many speculate that Shelton can climb even higher than the Board if Trump is reelected, as Shelton can be nominated for Powell’s spot.
ECONOMY
Another Round of Stimulus Check for Americans
On Thursday, Senate Republicans were finalizing a $1 trillion coronavirus relief package that will include another round of $1,200 stimulus checks, $70 billion for schools, $16 billion for new coronavirus testing, and added tax credits and funding for the Paycheck Protection Program. The Labor Department reported this week that the number of Americans filing jobless claims rose for the first time since March as 1.4 million people filed for unemployment claims. The extra $600 unemployed Americans receive on top of their weekly benefits is set to run out at the end of the month and the GOP plan would extend those benefits but at a different level. The benefits will be restructured so that instead of a $600 flat rate, a new formula would be used to replace 70% of a worker’s lost wages through combined state and federal benefits. In effect, would lower the federal benefit to about $200 a week for the average worker.
GOLD
Coronavirus Fueling a Gold Rush
This week, gold prices rose to a new record high for the first time since 2011 as nervous investors are adding bullion to their portfolios due to the negative economic outlook. Most actively traded gold futures for next month, rallied 0.4% to $1,897.50 a troy ounce surpassing August 2011 prices at $1,891.90. Gold has been steadily rising since the end of 2018, fueled by trade tensions and the pandemic pressuring investors to safer assets. Traditionally, gold has been a safe asset to hedge against inflation and hold a high value. With more money being poured into gold, the U.S. dollar has been decreasing in value compared to other global currencies. Analysts are cautious about a reversal following such a strong rally, and traders say investors who normally don’t trade gold are flocking to the sector, fueling the advance.
AUTO
Tesla Reports Fourth Straight Quarter of Profits Creating Eligibility in Entering S&P 500
On Wednesday, Tesla reported its first full year of GAAP profits and second-quarter results, resulting in a 4% rise in shares after hours as the company beat expectations. Here’s how Elon Musk’s electric car and renewable energy business did versus analysts’ expectations:
Earnings: $2.18 adjusted vs. $0.03 per share expected
Revenue: $6.04 billion vs. $5.37 billion, expected
Net income: $104 million (GAAP)
A fourth consecutive quarter of reported profitability on a GAAP basis would make Tesla eligible to enter the S&P 500 index. To join the index, companies must be U.S. based, listed on either NYSE, the Nasdaq, or Cboe, have a market cap of more than $8.2 billion, and report four straight consecutive quarters of profit. However, meeting the criteria still does not guarantee inclusion into the index as the “Index Committee” decide entrance based on quantitative and qualitative factors. This committee meets on a quarterly basis to rebalance the index, but companies can be added or removed from the S&P at any time. If Tesla is added to the index, it would be the biggest company by market value to ever join the S&P 500, as shares tripling this year drove Tesla’s market value to $295 billion. But entering the index, the price effects would be temporary and would eventually reverse throughout time. Looking forward, Elon Musk added in the earnings call that the next Gigafactory will be built right here in Austin, Texas.
Written By: Sarah Lee
Works Cited
GmbH, finanzen net. “Energy Stocks Surge as Oil Hits a 4-Month High.” Markets.Businessinsider.Com. markets.businessinsider.com, https://www.businessinsider.com/energy-stock-prices-oil-hits-four-month-high-optimism-exxon-2020-7. Accessed 22 July 2020.
Senate Banking Committee Approves Contentious Nominee Judy Shelton for Federal Reserve Board. https://www.nbcnews.com/business/economy/senate-banking-committee-approves-controversial-nominee-judy-shelton-federal-reserve-n1234518?utm_source=morning_brew. Accessed 22 July 2020.
Stevens, Pippa. “Tesla Could Soon Join the S&P 500 — but Inclusion Isn’t Automatic, Even with a Full Year of Profitability.” CNBC, 21 July 2020. www.cnbc.com, https://www.cnbc.com/2020/07/21/tesla-isnt-a-gurantee-for-the-sp-500-even-with-year-of-profits.html.
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Collins, Michael. “Senate Republicans Back More Stimulus Checks, Money to Schools in New Pandemic Aid Proposal.” USA TODAY. www.usatoday.com, https://www.usatoday.com/story/news/politics/2020/07/23/coronavirus-gop-plan-calls-more-stimulus-checks-school-funding/5489044002/. Accessed 24 July 2020.
“U.S. Coronavirus Deaths Top 1,100 for a Third Day in a Row.” Reuters, 24 July 2020. www.reuters.com, https://www.reuters.com/article/us-health-coronavirus-usa-idUSKCN24O2C2.
Wallace, Amrith Ramkumar and Joe. “Gold Climbs to a High, Topping Its 2011 Record.” Wall Street Journal, 24 July 2020. www.wsj.com, https://www.wsj.com/articles/gold-climbs-to-all-time-high-topping-2011-record-11595612234.
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