Coronavirus Stimulus Talks Make Progress Despite Resistance White House and Democratic negotiators said they would press ahead with efforts to reach a coronavirus relief deal after making progress even as the prospect of a roughly $2 trillion package sparked opposition from Senate Republicans.
(…) White House chief of staff Mark Meadows said on CNBC that the day’s talks had been “productive enough to continue to have discussions tomorrow,” adding that Mrs. Pelosi and the administration were now trying to secure “some kind of agreement before the weekend.”
Any deal approaching $2 trillion would encounter deep resistance in the GOP-controlled Senate. Senate Majority Leader Mitch McConnell (R., Ky.) told Senate Republicans at their weekly lunch Tuesday that he had advised the White House not to divide the Senate GOP right before the election and that a $2 trillion relief bill would split the caucus, according to people familiar with the comments.
“That’s a high number to me,” Senate Appropriations Committee Chairman Richard Shelby (R., Ala.) said Tuesday of a deal upwards of $1.8 trillion. “I am not optimistic about us doing anything.” (…)
In the face of Senate GOP resistance, he [Trump] said he would be willing to pass the bill with largely Democratic votes. (…) “Just right now, procedurally, the mechanics of getting a deal done [before the election] would be challenging to say the least,” Mr. Thune said Tuesday. (…)
Mrs. Pelosi said that two policy issues remained the biggest sticking points: how much funding to include for state and local governments, and what kind of legal protections to provide businesses and other entities operating during the pandemic. (…)
Goldman Sachs yesterday:
The Senate voted down PPP funding today, and is likely to vote down the Senate Republican stimulus package tomorrow. The outcome of today’s vote was widely expected, as it appeared aimed mainly at putting senators on record. Tomorrow’s vote is also expected to fail, as Senate Democrats have already objected to the Republican proposal.
Negotiations are likely to continue, because neither side benefits from ending them. (…) Some of the biggest issues remain unresolved and a deal doesn’t seem particularly close. (…) even if a deal in principle is announced in coming days—this seems possible, but not likely—it looks very unlikely that it would pass before Election Day.
New York Faces $59 Billion Revenue Shortfall New York governments and authorities are projecting one of the deepest funding holes of any state through 2022 because of the continuing coronavirus crisis
Gov. Andrew Cuomo, a Democrat, said services will be cut and taxes will increase if Congress doesn’t pass another relief package—which Democrats say should include direct aid to states and cities hit by the pandemic. Mr. Cuomo said recently that he will postpone decisions in the hope that Democrats make gains on Election Day Nov. 3. (…)
Moody’s Investors Service is forecasting the fiscal shock to the state government will be $29 billion through the end of the 2022 fiscal year. That is 1.9% of gross state product, which is above the national average, said Moody’s economist Emily Mandel. (…)
Going into the pandemic, New York was the state with the seventh smallest rainy day fund, or cash it keeps on hand for an emergency, according to a study by the Pew Charitable Trusts. The combined $59 billion shortfall facing the state, transportation authorities and local governments represents more than half the state’s annual operating budget. (…)
“My position is, the state is not liable for this deficit. It was caused by the federal government’s negligence. So, I’m not taking action to close the deficit—the federal government has to make up for the deficit,” Mr. Cuomo said Oct. 7. (…)
The state has so-far postponed scheduled raises for public workers that were due in April. Some organizations and schools laid off employees as a result of the delays.
New York City officials said they are requiring managers and City Hall staff—including Mayor Bill de Blasio—to begin furloughs, but the Democratic mayor said last week that planned layoffs for public workers were on hold because he was able to defer payment of some back wages to teachers. (…)
Many Workers Gave Up Looking for Jobs Across the U.S. in September Declining unemployment rates in states masked signs of labor-market deterioration, data suggest
Workers gave up looking for jobs across the U.S. in September, with the size of the labor force shrinking in more than half of the 30 states in which unemployment rates fell last month, Labor Department data released Tuesday showed. (…)
In New York, some 300,000 workers came off the unemployment rolls in September, pushing the unemployment rate down 2.8 percentage points to 9.7%. But this wasn’t because of a hiring boom. Instead, the hard-hit state saw an even bigger number of workers stop searching for work, suggesting that workers who had been employed in August exited from the workforce, too. (…)
This busy chart gives all kinds of unemployment measures. U-6 (orange) is 12.8%, down from 22.8% in April but up from 7.0% in February. This is still missing some. e.g. the PEUC recipients. Estimates are that 25.3 million Americans were receiving some form of unemployment benefits at the end of September. That’s 15.8% of the labor force.
Local government employment is down 939k (-6.4%) since February, a significant drop for what is normally a stabilising force during recessions. States and municipalities have had to close many services due to the pandemic. But the fiscal hit will come nonetheless and trigger more layoffs well after the crisis.
U.S. Housing Starts Rebound in September
Housing starts rose 1.9% (11.1% y/y) in September to 1.415 million units (SAAR) from 1.388 million in August, revised from 1.416 million. The increase left starts 12.5% below their January peak of 1.617 million. The Action Economics Forecast Survey expected 1.450 million starts in September.
Starts of single-family homes rose 8.5% last month (22.3% y/y) to 1.108 million from an unrevised 1.021 million in August and 992,000 in July, revised from 981,000. The latest level was roughly two-thirds above the April low. Offsetting the increase was a 16.3% decline (-16.6% y/y) in multi-family starts to 307,000 units from 367,000 in August, revised from 395,000. It was the lowest level of multi-family start in five months and down 51.1% from the peak this past January.
Building permits rose 5.2% (8.1% y/y) to 1.553 million units from 1.476 million in August, revised from 1.470 million. It was the highest level of permits since March 2007. Permits to build single-family homes rose 7.8% (24.3% y/y) to 1.119 million, the fifth consecutive month of strong increase. Permits to build multi-family homes eased 0.9% (-19.2% y/y) to 434,000 after falling 13.4% in August.
By region, housing starts in the Northeast surged by two-thirds (26.1% y/y) to 145,000, the highest level since January. In the South, starts rose 6.2% (8.9% y/y) to 755,000 following August’s 15.3% decline. In the West, starts improved 1.4% (13.6% y/y) to 350,000, the highest level since February. To the downside were housing starts in the Midwest which fell 32.7% (+4.4% y/y) to 165,000. It was the lowest level in four months. (…)
Next two charts from Goldman Sachs:
Apartment Rents Are Plunging in the World’s Richest Cities. It’s Time For You to Negotiate Desire for space and stuck-at-home students weigh on formerly desirable areas — but for how long?
(…) In Westchester County — a region north of New York with more than 20,000 acres of parkland — purchase prices for single-family homes have surged 16% from a year ago.
By contrast, Manhattan apartments are the cheapest they’ve been since 2013. Listings have tripled from a year ago while the median rent has tumbled 11%, with even bigger declines for studios. (…)
The median monthly rent for a studio in San Francisco tumbled 31% in September from a year earlier to $2,285, compared with a 0.5% decline nationally, according to data released by Realtor.com.
[In Toronto], Rents have plunged, down 14.5% in the third quarter compared with the same period last year, according to data from research firm Urbanation Inc. Properties are also sitting on the market for longer — 26 days in August compared with 14 a year earlier. (…)
[In London], In the capital’s wealthiest areas, rents slumped 8.1% in the year through September, the steepest drop in more than a decade, according to broker Knight Frank. (…)
[Singapore] rental volumes of private units were down 8% from a year ago, according to data from real estate portal SRX Property. Rents are 17% lower than their peak in 2013. By contrast, home sales are at the highest level in more than two years. (…)
Canadian home prices rise in September as housing market firms, according to Teranet data
The Teranet-National Bank Composite House Price Index, which tracks data collected from public land registries to measure changes for repeat sales of single-family homes, showed prices rose 1.1 per cent in September from August.
In addition to the 11 major markets included in the index, Teranet also tracks 20 other cities across the country. All 31 posted gains for the month, the first across-the-board monthly gain since tracking of the current bundle began in 2009.
Prices were up 2.3 per cent in the capital region of Ottawa-Gatineau and 2.2 per cent in Quebec City, with Montreal and Hamilton both up 1.9 per cent in September from August.
On a year-over-year basis, the index was up 6.7 per cent in September, rising at a faster pace than the previous month. (…)
Pfizer Sets Up Its ‘Biggest Ever’ Vaccination Distribution Campaign The drugmaker is urgently laying the groundwork so it can move quickly if its vaccine gets the go-ahead from the Food and Drug Administration and other regulators around the world.
(…) The U.S. pharmaceutical giant says it wants to deliver up to 100 million doses this year and another 1.3 billion in 2021. (…) Pfizer says it may know whether its vaccine works by the end of October and that it could be ready to apply for emergency-use authorization of its Covid-19 vaccine by late November. (…)
Cargo airlines are scrambling to arrange scores of extra flights to move the vaccines. They could hit distribution channels at the height of the peak season for shipping goods ahead of the year-end holidays, squeezing expedited shipping capacity. (…)
Will a vaccine stop Covid? Even if it’s effective, the logistics of delivering it are monumental
Roche CEO Warns Against High Hopes for Speedy Covid Vaccines
It is “completely unrealistic” to expect a Covid-19 vaccine to be widely available by the end of this year, and most people probably won’t have access to a shot until the second half of 2021, Schwan said in an interview with Bloomberg TV anchor Francine Lacqua. Companies need time to test the candidates in enough people to be sure they’re safe and then scale up production, he said. Though Roche isn’t working on a coronavirus vaccine, it’s partnering with Regeneron Pharmaceuticals Inc. on a potential treatment. (…)
Novartis CEO Vas Narasimhan cited a similar late-2021 timeline in an interview last month. Pfizer Inc., one of the leaders in the vaccine race, said last week it wouldn’t be able to apply for an emergency authorization for use in the U.S. before late November of this year — and that it will need to continue monitoring safety for two years. And because not everyone will choose to get the shot, Covid-19 will probably be endemic even if a vaccine is available, said David Ricks, CEO of Eli Lilly & Co.
THE SHORT AND THE LONG OF IT
One of the inputs causing our sentiment models to become extremely positive in March, and then stay elevated into May, was the behavior of speculators in the major equity index futures contracts. They shorted heavily and remained short through much of this rally.
Commercial hedgers take the opposite sides of large and small speculators, so hedgers were curiously net long since March. Over the past decade, in particular, a large net long position by this “smart money” group has invariably been an excellent buy signal.
That changed in a drastic way in the past week. Thanks to a dramatic change in positioning in the Nasdaq 100, hedgers’ positions cycled from a large net long position to a large net short one. Over the past couple of years, when their net short neared $40 billion, stocks struggled.
Historically, hedgers have established much larger shorts against stocks than they have now, so the absolute level of their exposure isn’t too troubling. But when hedgers have been net long for at least 6 weeks and then flipped to a net short position, stocks have struggled over the short- to medium-term. (SentimenTrader)
Next Twelve Months P/E: Mega-Cap Growth Stocks vs. S&P 500 ex Mega-Cap Growth