Good morning. Happy Friday.
The Asian/Pacific markets closed down overall, but there were pockets of strength. New Zealand, Australia, Thailand and the Philippines did well while China, Japan, South Korea, Hong Kong, Taiway, Malaysia and Singapore were weak. Europe, Africa and the Middle East are currently posting massive gains. The UK, Denmark, France, Germany, Turkey, Poland, Russia, Greece, Finland, Switzerland, Norway, Hungary, Spain, Italy, the Netherlands, India, Belgium, Portugal, Austria, Sweden and the Czech Republic are up 5% or more. Some are up more than 10%. Futures in the States point towards a huge gap up open for the cash market.
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The dollar is up. Oil and copper are up. Gold is up; silver is down. Bonds are down.
Stories/News from Seeking Alpha…
Volatility is returning to Wall Street after the major averages suffered their worst sessions since the “Black Monday” market crash in 1987. Dow futures started the night indicating an opening loss of 700 points at the lows, but are now pointing to gains of 900 points, while S&P 500 and Nasdaq futures are ahead by 4.3% and 4.7%, respectively. Coronavirus uncertainty quickly morphed into panic on Thursday as the S&P 500 plummeted 9.5%, joining the Dow (which fell 2,300 points) in a bear market. The plunge also highlighted the diminishing ability of stimulus to dampen shockwaves as the Fed announced over $1T in repo operations, while the ECB expanded its asset purchase program by €120B.
Coronavirus updates
New York City has declared a state of emergency, choosing to ban events over 500 people (that includes closing Broadway theaters). The Supreme Court Building is now closed to the public, the MLB has delayed the regular season by at least two weeks and the NCAA has canceled March Madness. Canadian Prime Minister Justin Trudeau will also remain in isolation for two weeks after his wife tested positive for the virus. In some better news, all of Apple’s (NASDAQ:AAPL) 42 stores in China reopened today.
Europe rallies, Asia pares big losses
Circuit breakers were triggered in many exchanges across Asia overnight following the mayhem seen yesterday, though things settled down (somewhat) by the end of the session. The Nikkei closed 6% lower (after falling 10%), the KOSPI was off 3.4% (after hitting a low of 8.4%) and Australia’s ASX 200 reversed course to gain 4.4% (after sinking more than 8%). European stocks jumped 4% at the open Friday amid temporary short-selling bans and pledges from France to support state-backed firms, though the gains still paled in comparison to the record-setting declines in the previous session.
Carnage across the board
Despite a 5% rise this morning to $33/barrel, crude oil is set to record a nearly 21% drop this week, marking the worst week since the financial crisis (it’s down almost 50% YTD). Just as travel bans, canceled events and other coronavirus disruptions eat into demand, Russia and the Saudis are also digging in deeper in their oil price war. Even safe-haven assets such as gold and bonds were ditched to cover losses in yesterday’s wipeout, while Bitcoin (BTC-USD) fell as much as 50% in two days.
Rates heading to zero?
Traders now expect the Fed to cut rates by 100 basis points at its March meeting, which would bring the Federal Funds target range to 0%-0.25% from 1.00%-1.25% currently. The CME FedWatch Tool puts the probability of a 1 percentage point rate cut at 86.7% vs. 50.2% a day ago and 0% a week ago. Bank stocks reflected that expectation in trading on Thursday, with the Financial Select Sector SPDR ETF (NYSEARCA:XLF) sinking 11%.
Mayday call from the airline industry
“Without a lifeline from governments we will have a sectoral financial crisis,” according to the International Air Transport Association, which called for extending lines of credit to airlines, reducing infrastructure costs and cutting taxes. IATA last week estimated that the crisis could wipe out some $113B of industry revenue, in a forecast that did not include the U.S. clampdown on European travel. “There is a heightened concern there will be increased airline bankruptcies in 2020 given the fallout from the coronavirus,” added Cowen analyst Helane Becker. “We expect some governments to step in to help some airlines, but ultimately we expect more airlines to fail this year than last year.”
Minimizing coronavirus disruption
Millions more Americans are expected to work from home as employers increasingly issue telecommute directives due to the coronavirus. As a result, AT&T (NYSE:T) is waiving data overage fees for all home internet users who are not currently on unlimited data plans, while Comcast (NASDAQ:CMCSA) said it would up the data speeds on the internet service it offers to low-income customers. Verizon (NYSE:VZ) similarly announced it would boost its capital guidance range from $17B-18B to $17.5B-18.5B in 2020 to accelerate its “transition to 5G and help support the economy during this period of disruption.”
Trouble for the Mouse House
New Disney (NYSE:DIS) CEO Bob Chapek is facing his first major challenge as fallout from the coronavirus affects many areas of the company. It announced Thursday the closure of Disneyland and Disney California Adventure from March 14 through the end of the month, while Walt Disney World is shuttering until April. The firm is also likely to take a hit at the box office: Mulan, The New Mutants and Antlers have been pulled off Disney’s film schedule for now.
Princess Cruises suspends operations
Impacting 18 ships, Carnival (NYSE:CCL) is halting all ship operations for Princess Cruises for 60 days due to the coronavirus. “While this is a difficult business decision, we firmly believe it is the right one and is in alignment with our company’s core values,” CEO Jan Swartz declared. “Rest assured the long-serving and dedicated professionals at our company will make best use of this time to prepare Princess Cruises’ fleet of cruise ships for a successful return to operation.”
What else is happening…
Amazon (NASDAQ:AMZN) tells all employees to work from home (if they can).
Walgreens (NASDAQ:WBA), Kroger (NYSE:KR) limit some product purchases.
Pentagon asks to reconsider JEDI decision.
Washington state repeals Boeing (NYSE:BA) tax break.
L Brands (NYSE:LB) appoints new board chair to replace Wexner.
Altria (NYSE:MO) sees Juul (JUUL) co-founder exit the board.
Microsoft (NASDAQ:MSFT) cancels in-person Build conference.
Thursday’s Key Earnings
Adobe (NASDAQ:ADBE) -2% AH giving soft Q2 outlook.
Broadcom (NASDAQ:AVGO) -9.7% AH logging a rare profit miss.
DocuSign (NASDAQ:DOCU) +2.8% posting upside revenue guidance.
Dollar General (NYSE:DG) -9.9% amid broader market selloff.
Gap (NYSE:GPS) +1.3% AH beating expectations.
Oracle (NYSE:ORCL) +4.4% AH on strong cloud demand.
Slack Technologies (NYSE:WORK) -19.3% AH despite Q4 beats.
Today’s Economic Calendar
8:30 Import/Export Prices
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count
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Good morning. Happy Thursday.
The Asian/Pacific markets got crushed. Japan, China, Hong Kong, South Korea, India, New Zealand, Taiwan, Australia, Indonesia, Singapore, Thailand and the Philippines all posted huge losses. Europe, Africa and the Middle East are currently down just as much. The UK, Denmark, Poland, France, Turkey, Germany, the UAE, Russia, Greece, South Africa, Finland, Switzerland, Hungary, Norway, Spain, the Netherlands, Italy, Belgium, Portugal, Israel, Austria, Sweden – all down huge. Futures in the States point towards another gigantic gap down.
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The dollar is up. Oil and copper are down. Gold and silver are down. Bonds are up.
Stories/News from Seeking Alpha…
S&P 500 and Nasdaq futures fell another 5% in overnight action, hitting the so-called limit down threshold, as the two indexes look to join the Dow Jones Industrial Average in bear market territory. The latter, which tumbled another 1,200 points in recent hours, crashed on Wednesday after the WHO classified the coronavirus outbreak as a pandemic for the first time. Threatening more disruptions to the world economy, President Trump said all travel from Europe to the U.S. would be suspended for 30 days. Efforts were also announced on deferred tax payments, payroll tax relief and low interest business loans, but investors seemed to have been looking for more.
How long will the bear market last?
Markets seem to be moving on three data points: oil, coronavirus headlines and fiscal stimulus. “Consumers sitting at home and not out spending money is the ultimate negative outcome,” added Scott Wren, senior global market strategist at Wells Fargo Investment Institute. The average bear market wipes about 36% off the S&P 500 and lasts for about seven months, according to Dow Jones Market Data. Some traders say it won’t be there for long, but others say it depends on whether the economy heads into recession, which is typically accompanied by steep share-price declines.
Latest coronavirus updates
Around 70M to 150M people in the U.S. will become infected with COVID-19, according to Dr. Brian Monahan, the attending physician of Congress and the U.S. Supreme Court. The Fed is raising the maximum offering of its daily operations in the repo market to $175B (from $150B) through mid-April, while the NBA announced it will suspend the season until further notice. Italy has also tightened its nationwide lockdown – after the nation’s coronavirus death toll jumped 30% in 24 hours – ordering all non-essential shops and services to close (supermarkets and pharmacies will remain open).
Eyes on ECB’s Lagarde
Europe is awash with red, with the Euro Stoxx 50 tanking nearly 7% during the session, after President Trump blamed the continent for not taking adequate action to control the spread of the coronavirus. The plunge arrives ahead of the latest monetary policy decision from the ECB, which is expected to announce stimulus measures to mitigate the economic impacts of Covid-19 (the BOE cut rates earlier this week). During the session in Asia, BOJ Governor Haruhiko Kuroda said the central bank was ready to respond with further steps without hesitation.
Latest blow to airlines
This is “probably worse” than the demand experienced after 9/11, said JetBlue (NASDAQ:JBLU) CEO Robin Hayes. An unprecedented 30-day ban on foreigners arriving from most of Europe is set to further roil the travel industry, especially ahead of the peak spring and summer travel season. The State Department has further issued a Level 3 warning that recommends U.S. citizens to reconsider all travel abroad, “even countries, jurisdictions, or areas where cases have not been reported may restrict travel without notice.”
Cash problems
Boeing (NYSE:BA) is freezing new hiring and overtime except in certain critical areas to preserve cash as the coronavirus compounds the fallout from a year-old grounding of its 737 MAX. News that Boeing was planning to draw down the rest of a $13.8B loan it took last month sent shares tumbling 18% on Wednesday, their biggest one-day percentage drop since 1974. Other issues: Boeing booked 46 cancellations last month, resulting in a net loss of 28 orders, as carriers switch from the grounded MAX to other planes.
Proxy battle
Carl Icahn is doubling down on a fight to take control of Occidental Petroleum (NYSE:OXY), upping his stake in the embattled oil-and-gas producer to 10%, from 2.5% at the end of last year. The activist investor has long-criticized the company for its $38B acquisition of Anadarko Petroleum and is seeking to replace OXY’s entire board, which includes CEO Vicki Hollub, at its annual meeting this spring. Occidental’s market value has shrunk to less than $11B from more than $46B just before the deal was struck, prompting the company this week to slash its dividend and cut FY 2020 capex spending.
Working from home is mandatory
“We are moving beyond our earlier guidance of ‘strongly encouraging work from home’ provided on March 2 and have now informed all employees globally they must work from home,” Twitter (NYSE:TWTR) wrote in a blog post. The company will also provide reimbursement toward additional daycare expenses, home office set up costs and continue to pay salaries to contractors and hourly workers who are not able to perform their responsibilities from home. The new policy applies to all employees globally, or 4,900 workers.
Coronavirus ad policy reversed
YouTube (GOOG, GOOGL) will discontinue classifying COVID-19 content as a “sensitive event,” enabling ads on some videos discussing coronavirus, according to CEO Susan Wojcicki. “It’s becoming clear this issue is now an ongoing and important part of everyday conversation, and we want to make sure news organizations and creators can continue producing quality videos in a sustainable way,” reads a blog post. YouTube previously did not allow monetization if a video includes more than “a passing mention” of the coronavirus.
Amazon Relief Fund
The company is providing up to two weeks of pay for employees who are diagnosed with the coronavirus or placed into quarantine. It’s also establishing the Amazon Relief Fund with an initial $25M to support delivery service partners, Flex workers, and seasonal employees experiencing financial stress due to the virus. “The health and safety of our employees and contractors around the world continues to be our top priority as we face the challenges associated with COVID-19,” said Beth Galetti, Amazon (NASDAQ:AMZN) VP of human resources.
What else is happening…
California ends fight against T-Mobile (NASDAQ:TMUS)-Sprint (NYSE:S) merger.
Starboard nominates slate of directors to eBay (NASDAQ:EBAY) board.
PepsiCo (NASDAQ:PEP) lands Rockstar Energy for $3.85B.
Bombardier (OTCQX:BDRAF) CEO Alain Bellemare is out – Globe and Mail
End of an era… Modell’s files for bankruptcy.
Iran turns to IMF for $5B in coronavirus aid.
Today’s Economic Calendar
8:30 Initial Jobless Claims
8:30 Producer Price Index
10:00 Quarterly Services Report
10:30 EIA Natural Gas Inventory
1:00 PM Results of $16B, 30-Year Note Auction
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
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Good morning. Happy Wednesday.
The Asian/Pacific markets closed mostly down. Japan, China, Hong Kong, Taiwan, Australia, Indonesia, Singapore and Thailand suffered losses; Malaysia did well. Europe, Africa and the Middle East are currently mostly down. Denmark, Poland, Turkey, Greece, Norway, Hungary, Israel, Austria, Saudi Arabia and the Czech Republic are down 1% or more. Futures in the States point towards another big gap down open for the cash market.
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The dollar is down. Oil and copper are down. Gold is up; silver is flat. Bonds are up.
Stories/News from Seeking Alpha…
Following Monday’s plunge and Tuesday’s rally, U.S. futures fell another 2% overnight as traders sized up fiscal and monetary policy responses. While President Trump suggested a 0% payroll tax rate that could last until the end of the year, and said cruise and airline industries would be getting aid, the details remained unclear. U.S. coronavirus cases have also topped 1,000 nationwide, according to Johns Hopkins University data, and at least 28 people have died from the disease.
BOE joins rate cut party
Looking to curb the economic impact from the coronavirus outbreak, the Bank of England has cut its main interest rate from 0.75% to 0.25%. “Although the magnitude of the economic shock from Covid-19 is highly uncertain, activity is likely to weaken materially in the United Kingdom over the coming months,” according to a press release. The BOE will also introduce a new term funding scheme with additional incentives for small and medium-sized enterprises, financed by the issuance of central bank reserves.
Saudis boosting output even further
While it didn’t say when the capacity increase would take place, Saudi Aramco (ARMCO) has received a directive from the kingdom’s energy ministry to up its output capacity to 13M barrels a day. On Tuesday, the company said it would raise its crude supply to 12.3M barrels per day starting April 1, only days after it slashed most of its official selling prices. Crude futures slipped 2.4% on the news to $33.54/bbl, following a 24% plunge on Monday and 10% rebound on Tuesday.
Crude crash fallout
Laden with debt following its $38B acquisition of rival Anadarko Petroleum last year, Occidental Petroleum (NYSE:OXY) is slashing its quarterly dividend to $0.11/share from $0.79/share. The company also plans to cut FY 2020 capex to $3.5B-$3.7B from its previous plan for $5.2B-$5.4B, and to implement additional operating and corporate cost reductions. “These actions lower our cash flow breakeven level to the low $30s WTI, excluding the benefit of our hedges, positioning us to succeed in a low commodity price environment,” Occidental said in a statement.
Loading up on cash
Corporate America is attempting to bolster its liquidity, plagued by a plunge in oil prices and the global coronavirus outbreak. Exxon (NYSE:XOM) has filed for an unspecified board offering, Royal Caribbean Cruises (NYSE:RCL) increased its credit capacity by $550M and United Airlines (NASDAQ:UAL) raised an extra $2B in financing. “It’s companies loading up on cash when you can get it. They are effectively building up that war chest,” said Jeremy Swan, managing principal at accounting and tax advisory firm CohnReznick.
Tax Day could be delayed
The Trump administration is likely to extend the April 15 tax deadline for filing income tax returns as part of its fiscal stimulus plan to combat the impact from Covid-19, WSJ reports. That would effectively act as a bridge loan for individuals and businesses facing disruptions from the virus. Delaying tax payments could also force the Treasury to borrow more in the near term as April is the largest month for federal tax payments.
Meeting with bank executives
CEOs from Bank of America (NYSE:BAC), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS) and Truist Financial (NYSE:TFC) are scheduled to meet with President Trump in the White House cabinet room at 3 p.m. Gordon Smith, CEO of JPMorgan’s (NYSE:JPM) consumer and community banking division, will also attend the gathering in place of Jamie Dimon, who is recovering from emergency heart surgery. What’s being discussed? Estimations on how long and how much the coronavirus can cause markets to fall, as well as plans to waive some fees and offer other assistance to consumers and small businesses.
WFH the new normal?
Google (GOOG, GOOGL) has sent a memo to all of its 100,000 North America-based employees recommending they work from home until at least April 10 due to coronavirus. The tech titan had only previously told staff in the San Francisco Bay Area, Dublin, and Seattle to log on remotely. Google offices will remain open to workers if they have to be physically present, but CEO Sundar Pichai urged people to “contribute” to social distancing.
Coronavirus updates
Cases are “coming in so intensely now that we’re not able to give a detailed case breakdown,” NYC Mayor Bill de Blasio told reporters, as the national guard was sent into New Rochelle, a suburb north of NYC. Washington Governor Jay Inslee further warned that the state’s COVID-19 cases could reach 64,000 by May if health officials and the public fail to take action. The Port of Los Angeles reported a 22.9% annual drop in container volume for February as low output from Chinese factories dented trans-Pacific maritime trade, while the New York Auto Show and Coachella music festival have been postponed.
Where is the gains?
Most stocks in the S&P 500 have tumbled over the past month, but shares in the consumer staples and healthcare sectors have generally suffered smaller losses. In fact, only 29 stocks in the S&P 500 have gained over the past month, and most of them are related to the demand jump prompted by the quickly spreading coronavirus outbreak. On the list: Regeneron Pharmaceuticals (NASDAQ:REGN), Kroger (NYSE:KR), AutoZone (NYSE:AZO), Dollar General (NYSE:DG); Campbell Soup (NYSE:CPB), Clorox (NYSE:CLX) and Walmart (NYSE:WMT).
What else is happening…
New Disney (NYSE:DIS) CEO hosts annual shareholders meeting.
Tesla (NASDAQ:TSLA) looks to build Cybertruck in central U.S.
Uber (NYSE:UBER) may suspend accounts of those with coronavirus.
Hilton (NYSE:HLT) withdraws Q1, FY outlook due to Covid-19.
DXC Technology (NYSE:DXC) to sell Medicaid-services business for $5B.
Wells Fargo (WFC) chief executive testifies to Congress.
Tuesday’s Key Earnings
Cloudera (NYSE:CLDR) +10.6% AH after beats, upside FY outlook.
DICK’S Sporting Goods (NYSE:DKS) +4% posting a strong holiday quarter.
Today’s Economic Calendar
7:00 MBA Mortgage Applications
8:30 Consumer Price Index
10:00 Atlanta Fed’s Business Inflation Expectations
10:30 EIA Petroleum Inventories
1:00 PM Results of $24B, 10-Year Note Auction
2:00 PM Treasury Budget
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Good morning. Happy Tuesday.
The Asian/Pacific markets bounced back. Japan, China, Hong Kong, Indonesia, Singapore and Thailand did well. Europe, Africa and the Middle East are currently doing well. The UK, France, Germany, the UAE, Greece, South Africa, Switzerland, Norway, Hungary, the Netherlands, Belgium, Portugal, Austria, Sweden and Saudi Arabia are up 2% or more; Russia is down. Futures in the States point towards a gigantic gap up open for the cash market.
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The dollar is up. Oil and copper are up. Gold and silver are down. Bonds are down.
Stories/News from Seeking Alpha…
Stocks set the stage to open higher following the S&P 500’s worst day since the financial crisis after President Trump said he’ll discuss a payroll tax cut with Congress and that he’s considering other relief measures. S&P futures are up 4.5%, the Dow futures rose 4.4%, and Nasdaq futures are up 4.6%. Treasurys retraced some of yesterday’s surge as 10-year yield added 22 basis points to 0.715%. Crude oil rose 7.4% to $33.42 per barrel. Volatility, though, hasn’t disappeared — the Cboe Volatility Index is up 18% to 49.65. In overseas markets, Asia equities markets closed higher and Europe stock averages gained in morning trading.
U.S. status as net oil exporter at risk
The country’s days as a net petroleum exporter may be numbered as plunging oil prices threaten domestic production, Bloomberg reports. For four of the last six weeks, the U.S. has shipped out more crude and refined products than it brought in, but the margin is relatively thin. After the worst price rout in nearly three decades, domestic drillers are facing a million-barrel drop in production that could curb U.S. exports and set back its progress toward energy independence. If shale output slips by more than 1M barrels per day this year, that could be enough to take the U.S. from net exporter back to net importer, Bloomberg estimates.
Saudi Arabia escalates oil price war
The kingdom plans to supply a record 12.3M barrels of oil per day next month, up 25% from the previous month, as it ratchets up its oil price war with Russia. The production boost pushes Aramco’s (ARMCO) supply over its maximum capacity, indicating it’s tapping Saudi Arabia’s strategic inventories to bring as much crude as quickly as it can onto the market. In February, it produced about 9.7M barrels per day. Russia’s energy minister parried back, saying Russia has the ability to boost production by 500,000 barrels per day, which could bring its output to a record 11.8M barrels per day.
Things look brighter in Hubei Province
Leaders in the province, the source of the global coronavirus outbreak, laid out plans to ease restrictions on Monday following a significant drop in the daily number of new infections and deaths from Covid-19. Officials said the government would lift travel restrictions in areas of low risk, allowing people to return to work after much of Hubei had been on lockdown during January.
Alibaba’s delivery staff back on the job
Alibaba’s (NYSE:BABA) package and meal delivery units are fully staffed at pre-coronavirus levels, the latest example of how China’s largest corporations are getting back to work after Beijing’s entreaty to safeguard economic growth, Bloomberg writes. Cainiao, meal delivery unit Eli.me and grocery chain Freshippo are all back at full strength, according to a spokesperson. Cainiao, of which BABA owns 60%, boasts a network of millions of delivery people that can handle more than a billion packages daily during peak demand. Last week, Alibaba rival JD.com (NASDAQ:JD) forecast at least 10% revenue growth this quarter, suggesting surprising resilience in online retail.
Toyota cuts Lexus output on weaker China demand – report
Toyota (NYSE:TM) is reportedly cutting back on Lexus production against weaker Chinese demand during the coronavirus crisis. It’s scaling back output of sedans and SUVs by 6% at two plants, in Fukuoka and Aichi prefectures. That cutback is expected to last for two weeks, starting March 16.
Coronavirus puts electric Cadillac model debut on hold
General Motors (NYSE:GM) has called off its early April introduction of the Cadillac Lyriq crossover, the first of several battery-powered models that CEO Mary Barra had said would debut in the next several years. The coronavirus is also affecting the automaker’s day-to-day operations, as the company has instructed its employees to hold meetings with suppliers and vendors via video calls instead of in-person meetings. GM considers the Lyriq a key in its efforts to restore the struggling Cadillac brand’s prestige and battle Tesla (NASDAQ:TSLA) for luxury buyers.
Tesla plans Shanghai car parts expansion
Tesla (TSLA) plans to boost production capacity for certain car parts at its $2B factory in Shanghai as it seeks to localize its supply chain in the world’s biggest auto market, Reuters reports. Specifically, it plans to add more lines to produce more battery packs, electric motors, and motor controllers. For cooling pipes, a key part of the car’s heat management system, it aims to boost production to 260,000 sets per year, up from 150,000.
More U.S. hotel REITs pull guidance on Covid-19 impact
Sotherly Hotels (NASDAQ:SOHO) and Park Hotels & Resorts (NYSE:PK) have added to the list of lodging REITs withdrawing guidance amid growing concerns about the COVID-19 virus outbreak. Park Hotels & Resorts reported $30M in lost rooms revenue from group customer cancellations, primarily in March and April. Sotherly Hotels expects governmental travel advisories, increased travel restrictions from corporations, and significant airline flight cancellations to adversely impact the REIT’s financial results for Q1 2020 and FY20.
Blackstone in talks for $4B deal to take SOHO China private
Blackstone (NYSE:BX) has entered exclusive talks to take office developer SOHO China Ltd. private, Reuters reports, in a deal that shows confidence via one of Blackstone’s biggest China bets yet. It’s a buyout worth about $4B, as Blackstone reportedly offered HK$6/share, which would be nearly a 100% premium to SOHO China’s January price averaging HK$3.03. The deal would also involve Blackstone assuming debt that came to about $4.7B as of last June.
What else is happening…
Ikea tests sales on Alibaba’s (BABA) Tmall.
Goldman Sachs (NYSE:GS) energy funds’ NAV materially hurt.
Heineken (OTCQX:HEINY) to invest in Brazil.
Cypress Semiconductor (NASDAQ:CY) acquisition wins CFIUS clearance.
Revlon (NYSE:REV) announces restructuring, debt financing.
Iron ore shows safe haven qualities – S&P Global.
Monday’s Key Earnings
Stitch Fix (NASDAQ:SFIX) -34.1% PM on disappointing sales growth.
Vail Resorts (NYSE:MTN) -11% PM on Q2 miss, coronavirus impact.
Synchronoss Technologies (NASDAQ:SNCR) -1.9% PM on mixed Q4 results.
Today’s Economic Calendar
6:00 NFIB Small Business Optimism Index
8:55 Redbook Chain Store Sales
1:00 PM Results of $38B, 3-Year Note Auction
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Good morning. Happy Monday. Hope you had a good weekend.
All market around the world got crushed today. The Asian/Pacific markets dropped 4-6%, while several dropped more. Europe, Africa and the Middle East posted 7-9% losses; several fell more than 10%. Futures in the States point towards a massive gap down open that will likely necessitate the market being haulted for a period of time.
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The dollar fell hard. Oil is completely tanking; copper is down also. Gold and silver are up. Bonds are up.
Stories/News from Seeking Alpha…
If you could pick one word to define the market leading into this week it would be “chaos.” An oil price war is in the making, treasuries are going haywire and coronavirus fears are everywhere. It’s also starting to look a lot like one of those turning points that marks a generation of investors, like the dotcom bubble in 2000 and financial crisis in 2008-2009. Irony? March 9 is the eleventh anniversary of the longest bull market for U.S. stocks, but it’s now taking a turn for the worse.
‘Historic’ oil price war
The failure of OPEC+ to agree on production cuts sent crude into freefall, plunging as much as 33% to $27 per barrel (it started the year in the mid-$60s). Besides a collapse in demand due to the coronavirus, Saudi Arabia launched an all-out oil price war by slashing pricing for its crude in an effort to push as many barrels into the market as possible. It was in response to a face slap from Russia, which refused to cut output further and insisted that U.S. shale producers should be made to share the pain.
Going global
A sea of red was seen around the world, with the Euro Stoxx 50 Index now down nearly 7%, Japan’s Nikkei tumbling about 5% and Italy on the edge of a bear market. Amid an increase in the number of global coronavirus cases (110K) and deaths (3,840), Italy locked down nearly a quarter of its population (17M people) as the World Health Organization urged governments to take decisive action. Stateside, Oregon became the ninth U.S. state to declare a state of emergency, while an agreement was reached to dock the coronavirus-hit Grand Princess (NYSE:CCL) cruise ship at California’s port of Oakland.
Ugly open
Stock index futures in the U.S. plunged the 5% limit overnight, triggering limit-down rules, meaning only transactions at or above that threshold are allowed. Once the market opens, NYSE circuit breakers will work like this: trading halts for 15 minutes if the S&P 500 falls 7% (to 2,764) at any time before 3:25 p.m. ET. Another 15-minute pause is triggered if losses reaches 13% (2,586). If the decline hits 20% (2,377.9), markets will close for the day.
Collapse in Treasury yields
The fears sent the benchmark 10-year Treasury yield below 0.4% for the first time ever, touching 0.3469% in overnight trade. In fact, yields on all maturities (including the 30-year and two-year) fell below 1% for the first time, with investors pricing a Fed rate cut to 0% in coming months. The flight to safety also saw gold futures blast past $1,700/oz overnight until the “sell everything” mindset kicked in, with the precious metal now falling back to $1,666/oz.
Are bond vigilantes out to get the Fed?
On Friday, Boston Fed President Eric Rosengren said if yields drop to zero, the Federal Reserve should consider buying a broader range of assets. “That would be a game-changer in my opinion, as no one in their right mind would want to be short an index when against a central bank with unlimited funds,” said Chris Weston, head of research at Australian brokerage Pepperstone. “It seems the bond vigilantes are out to get the Fed to go hard here.” The current bond rally is also notable because traders are preparing not only for zero-bound rates, but a raft of additional measures, including QE.
New coronavirus work policy
Immediate effects may be seen on the broader economy after Amazon (NASDAQ:AMZN) relaxed its attendance policy for employees who “work from an office, store, fulfillment center, delivery station or sort center” during the month of March. The company will not count any unpaid time off and won’t assign attendance points to ensure there are no repercussions for needing to stay home due to illness. Last week, Amazon told employees in Seattle, Bellevue and the San Francisco Bay Area to work from home – if they can – through the end of the month.
State Department weighs in on cruises
In more bad news for cruise stocks, including Carnival (CCL), Royal Caribbean Cruises (NYSE:RCL) and Norwegian Cruise Line (NYSE:NCLH), the U.S. State Department updated its website with instructions that U.S. citizens should not travel by cruise ship. “CDC notes increased risk of infection of COVID-19 in a cruise ship environment… While the U.S. government has evacuated some cruise ship passengers in recent weeks, repatriation flights should not be relied upon as an option for U.S. citizens under the potential risk of quarantine by local authorities.”
Authorities cancel SXSW
“After consultation with the city manager, I’ve gone ahead and declared a local disaster in the city,” Austin Mayor Steve Adler declared, adding that the order effectively cancels South by Southwest for this year. A wave of companies already pulled out of the festival, including Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX), Twitter (NYSE:TWTR), Twilio (NYSE:TWLO) and WarnerMedia (NYSE:T). Since its inception in 1987, SXSW has grown to include film and technology, and brings hundreds of thousands of people from around the world to Austin each spring.
Just Walk Out technology
Boosted by the success of Amazon Go (AMZN), the company has launched a new website to sell its automated checkout technology to retailers. Amazon has already inked “several” deals with customers, reflecting a strategy of turning its internal capabilities into lucrative services (think warehousing operations and cloud technology). Dilip Kumar, Amazon’s vice president of physical retail and technology, had no market forecast to share but said shoppers’ preferences will determine how big the business becomes.
What else is happening…
China’s exports contract sharply in Jan/Feb.
Tesla (NASDAQ:TSLA) is ‘better run’ after shakeup – top investor.
Cambridge Analytica scandal still plagues Facebook (FB).
AT&T (T) working with DOJ on Google (GOOG, GOOGL) probe – WSJ.
Twitter (TWTR) uses new ‘manipulated media’ label.
Some good news for Amazon’s (AMZN) JEDI challenge.
Tesco (OTCPK:TSCDY) retreats further from global ambitions.
Today’s Economic Calendar
12:30 PM TD Ameritrade IMX
2 thoughts on “Before the Open (Mar 9-13)”
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Jason – Friday 13/03 9.0AM At last take your view on the market collapse was I believe moderate; you define that more precisely in your text. I think you may have hardened your stance a bit since then. My view of the emerging events is and to some extent always has been more severe.
My view is that POTUS has been stimulating both the market and the economy excessively for some while now, borrowing from the future in the case of the economy and goosing the markets, and at least in part the current rundown is revenge, as in free market reward, for inappropriate policies. And if you stack that on top of the emerging virus issues and the shut down of many activities which contribute substantially to the economy, both at home and abroad, considerably more downside is likely, say double the fall to date, and the difficulty will extend for several months at best, all subject perhaps, to effective containment of the virus spread, and/or relief from its potency.
Another way of saying this is that we have had now for at least the past three years, and maybe more, an absence of productive policies as well as inappropriate excesses aimed, or maybe not aimed at all, at producing an environment which suited political ambitions, and these actions are now facing a day of reckoning in the face of what promises to be a severe unexpected difficulty.
Thanks for your comments Michael. It’s very possible you may be entirely right.
Actually you are right. The question is whether it matters. Your argument could have been made last year and the year before and 5 years before that. Yet the market kept going up. That’s always been the issue. We knew inappropriate behavior was taking place, but it was, unfortunately, rewarded. Is the coronavirus just the thing that brings the market down just enough to cross a threshold and bring some reality back?
We’re not supposed to go 10 years without a recession, and we may find out that one big recession is much worse than a couple mini ones along the way.