The Market Persists

The Stock Market got off to a weak start Friday, as China Evergrande Group missed a key interest payment. Evengrande let a Thursday deadline pass to pay a $83.5 million coupon payment on its U.S. dollar bonds without notifying bondholders. Despite missing the payment deadline, the company has a 30-day grace period before bondholders can ‘signal’ a default. The Wall Street Journal reported Thursday that China is asking local governments to prepare for the potential failure of the property developer. Mean while the indices were rather steady. The Dow Jones Industrial Average and the S&P 500 edged up Friday, clenching a weekly gain, despite the giant China Evergrande debacle. The Dow added 33.18 points or 0.1% to close at 34798. The S&P 500 rose 6.50 points or 0.1% to 4455. The technology-heavy Nasdaq Composite slipped 4.54 points or 0.1% to 15047. Friday’s session was a quiet end to an eventful week. Markets had been whipsawed in recent weeks by fears of the possible collapse of Evergrande. “It is one of the largest companies in the second-largest economy in the world and if something pulls down China growth it is going to pull down global growth,” said Seema Shah, chief strategist at Principal Growth Investors. Such fears sparked a wave of selling at the start of the week but the market recovered as investors seized the opportunity to buy on the dip. “The week’s rebound showed how many investors feel they have no alternative but to keep piling money into stocks, with bonds unattractive due to low-interest rates,” said Phillip Toews, chief executive of Toews Asset Management. “If you want to have gains anywhere, the stock market is the place to be,” he said. Cryptocurrencies were also in the ‘spotlight’ this week as the ‘tremors’ from China and mounting pressure from regulators around the world rocked digital-asset markets. On Friday, crypto prices fell after China’s central bank declared all cryptocurrency-related transactions illegal. Bitcoin began to tumble-nearing the $41,000 to $43,000 levels. The yield on bench-mark 10-year treasury note rose to 1.459% on Friday, its highest settle value since July, from 1.408 on Thursday. Bond yields and prices move in opposite directions.

Natural-gas prices have reached their highest levels in more than seven years, thanks to a very slow recovery in the Gulf of Mexico production zone after a vicious hurricane in August and strong U.S. exports and tight supplies. “A global effort to limit carbon emissions has meant more demand for natural gas and renewable energy, says Troy Vincent, market analyst at data provider DTN. Recent weakness in wind generation in Europe, coupled with low natural-gas inventory ahead of winter, has caused natural gas and electricity prices “across the continent to shoot to record highs,” Mr. Vincent says. In 2020, U.S. natural-gas exports reached a record, according to the Energy Information Administration. Exports may increase by 20% to 25% this year, says Bryan Benoit, national managing partner, energy at Grant Thornton. Working gas in–the amount available to the marketplace–has fallen to its lowest level for this time of year since 2018. As of the week ended September 10, working gas in storage stood at 3 trillion cubic feet, well below both the total a year earlier and the five-year average. Hopefully U.S. inventories will peak in October at around 3.4 trillion cubic feet, which would still be about 10% below the prior five-year average for the period, says Vincent. Prices will still probably hold above $4 however, before easing lower amid rising production next spring, he adds.

Securities and Exchange Commission Chair Gary Gensler said Tuesday he doesn’t see much long-term viability for cryptocurrencies, underscoring the importance of protecting investors in the market and bringing it under regulatory oversight. Mr. Gensler likened the thousands of cryptocurrencies in existence to the so-called wild-cat banking era that took hold in the U.S. from 1837 until 1863 in the absence of federal bank regulation. Before President Abraham Lincoln created the Office of the Comptroller of the Currency, banks issued their own currencies, which they sometimes refused to redeem for their purported value in gold or silver. “I don’t think there’s long-term viability for five or six thousand private forms of money,” Mr. Gensler said in a virtual event hosted by the Washington Post. “So in the meantime I think it’s worthwhile to have an investor-protection regime placed around this.” Mr. Gensler who took office in April, previously taught a class on cryptocurrency at the Massachusetts Institute of Technology raising hopes among some industry participants that he would be a friendly regulator. Instead, he repeatedly has likened the crypto market to the Wild West, and urged crypto trading and lending platforms to register with the SEC, saying they are likely offering unregistered securities in violation of federal laws. An interesting stance, and turn-around for Mr. Gensler


Gary Gensler, SEC Chair Barron’s “Large parts of the field of crypto are sitting astride of–not operating within–regulatory frameworks”

Ed Yardeni of Yardeni Research, Barron’s “If we get a surprise here, I think we get a melt-up instead a meltdown.”

Daniel Yergin, Vice Chairman, IHS Market Barron’s “The relationship between Russia and China that was formerly based on Marx and Lenin is now based on oil and gas.”

Jerome Powell, Federal Reserve Chairman, after the Federal Open Market Committee meeting, Barron’s “No one knows with any certainty where the economy will be a year or more from now.”

Hans Vertberg, CEO of Verizon, at a telecom and media confab this past week. Barron’s “Our strategy is the network,” Mr. Vestberg noted. At&T made a different case, urging investors to add up the combined value of its media and telecom assets.