Friday saw markets remain weak going into the weekend. There were increasing concerns over the spread of COVID19 and concerns about the upcoming Nevada caucuses on the back of a horrendous Democratic debate on Wednesday evening. How would Nevada go? Was Mikey Bloomberg wounded beyond repair? I mean he wasn’t even on the ballot, but his performance on Wednesday left many disappointed. He seemed ill-prepared and at time looked like a deer in the headlights.
As stocks weakened on Friday, gold and treasuries surged as increasing worries are now really beginning to cause unrest among the investing community as all the street analysts/strategists try to define the depth of what the virus will do to global growth and the global supply chain. By the end of the day we saw the Dow down by 227 pts or 0.79%, the S&P lost 35 pts or 1.05%, the Nasdaq was off by 174 pts or 1.79% and the Russell was lower by 17 pts or 1.03%. 10-year Treasuries, on the other hand, surged sending yields to 1.47%, Gold advanced by $25 to $1,645/oz.
Over the weekend, Nevada spoke and Bernie soared to the top of the list, scoring a cool 41%, with Joey Biden in second place at 22%, Petey at 15% and Lizzy Warren at 10%. The others down in single digits. Bloomberg not even on the list as he wasn’t one of the choices and is not a choice in SC either, although the polls show he would perform well if he was on the ballot. As the reality of a Bernie win settled in, we are now beginning to see how the other candidates have him right in the line of sight, as they try to differentiate themselves and distance themselves from the far left “Socialist/(fill in the blank)” moniker that is now clearly attached to Bernie. Suddenly, the rest of them are reconsidering their stances and moving more to the center. But the question now: Is it too late to slow this train down?
FULL STOP! So far it is only three states that have voted. So it is a bit of stretch to call it, BUT his momentum is building and is the strongest in the 17 year – 30-year-old demographic, which is in itself an issue (think lack of life experience and high student debt). Tomorrow evening, we will get the South Carolina debate on CBS and it will be hosted by Norah O’Donnell, Gayle King, Margaret Brennan, Major Garret and Bill Whittaker. It will include “the usual suspects” plus Tommy Steyer. After last week’s debate, this is sure to attract a large crowd. Next Tuesday is March 3rd, otherwise known as Super Tuesday, where we will have results from 15 states plus American Samoa and “Democrats Abroad” (yes that is a registered group and will allocate 17 delegates to the process). It will be this event that should clearly define the top three contenders while forcing the others to reconsider their chances. If not, then this could go to a “brokered convention” which is sure to divide the party. (Because the party does not want Bernie as the candidate, so there will be some serious horse trading taking place).
Over the weekend, CNN reported that Coronavirus cases SOAR in Italy! The Italian authorities quarantining at least 50k people in the northern region of Lombardy and Veneto. Veneto is where Venice is located and if you have ever been to Venice you know that it attracts people from all over the world (many by boat), especially China! Get the picture? In addition, South Korea also reporting a sharp rise in cases, raising the virus alert to “HIGHEST LEVEL.” And guess what, global markets (think Algos) are no longer ignoring the impact of the virus as well as the spread of the virus as they go into RISK OFF mode. Sunday evening on the east coast was Monday morning in Asia, and the tone was ugly. US futures plunging and at 9 pm last night. We saw Dow futures down 400 pts and moving lower. As the week began, markets braced for the onslaught of selling that was now expected. With new cases in South Korea increasing, those markets got hit hard, the Kospi losing 3.87%, Taiwan down 2.57%, China off by 0.4%, Australia losing 2.27%, Hong Kong down 1.7% (Japan was closed for a holiday). Every sector under pressure, but Airlines, tech, leisure, energy all getting hit the worst.
European markets in early trading are also under pressure, with all market centers down more than 3% across the board, stocks in Italy are down more than 4% as the virus story unfolds. Algos are throwing everything out the window! Interesting because the algos were the ones that couldn’t buy ‘em fast enough. The latest news causing the buyside interest to withdraw and move bids lower, creating a vacuum in prices, thus the collapse around the world. Over the weekend, the G20 finance ministers met in Riyadh, Saudi Arabia and were dealt a sobering view of what the impact of the virus was expected to have on the global economy. But in reality, this is far from over. Any impact is purely speculative and while they tried to be thoughtful. The latest surge in the spread of the virus is causing the automated systems to hit the SELL button.
At 5:30 am (EST) we have the FTSE -3.2%, CAC 40 -3.74%, DAX -3.56%, EUROSTOXX -3.58%, SPAIN -3.38% and ITALY -4.46%.
US futures are plummeting. Dow futures suggesting a 800 pt loss or 2.97%, the S&Ps -95 pts or 2.85%, Nasdaq losing 315 pts or 3.34% and the Russell off by 50 pts or 3.03%. Should I continue?
Look, US economic data remains strong. Wages are growing, unemployment is at historic lows, Job creation remains robust, manufacturing is coming back to life, inflation remains under control and that’s great for us and speaks volumes about how the US economy is firing on all cylinders. While that does attract capital that has helped to support prices, today’s headlines will drive the action lower. The buyers are still here, but they aren’t going to allow themselves to get run over. If the sellers want out, then here’s the bid! If you don’t like it, one of the other algos will and that then creates the cascade in prices. The hardest part to remember is that the virus itself will not price stocks. It is now what the virus will do to the global economy and the impact it will have on company earnings and guidance that is causing today’s sell off. With no end in sight, I would expect that this revaluation to continue.
With S&P futures suggesting a loss of 88 pts or so, the market will open below the 50 DMA at 3274 and begin the day closer to 3250. The Dow will plummet, piercing its 50 DMA at 28,802 coming close to its 100 DMA at 28,000. The Nasdaq is set to fall by 300 pts, but that is not enough to pierce its 50 DMA at 9228. (if that is a positive at all), but very easily could and most likely will. In the end, while the markets are lower, there are plenty of buyers, all looking for an opportunity to buy stocks at cheaper prices. But this is not a call to BTD (Buy the Dip) just yet patience is a virtue. When we get a shock like this, it is usually better to let this play out for a day or so. Chances are the selling isn’t over just yet meaning prices could get a bit cheaper.
I guess the message is: Do not panic! Do not get drawn into the chaos created by the technology driven action. Stick to the plan. Last week you wanted to buy Apple at $327, today you’ll get a chance to buy it below $300. How do like them apples?
On Friday I said that if we broke Thursday’s S&P low of 3357, then we would test 3300. In fact, on Friday. we broke 3357, traded down to 3328 before settling at 3337. This morning’s move will take us not only thru 3300 (currently 3250) but potentially could test the 100 DMA at 3159 in the days ahead.
Oil, as you might expect is under pressure and is down $1.85 trading at $51.48/barrel. That makes sense, especially after the latest virus alerts is causing the whole demand fear conversation to take on new life. Look for it to hold $50. That will be the test for the next move.
Gold, also as you might expect is surging, up $40/oz at $1,688. The surge clearly due to concerns over what the virus is and what it could do to the economy. Until we get more clarity, stocks will continue to come under pressure and gold will continue to surge.
Take good care.
Roasted Chicken – Roman Style
Paese lato di Roma – means the Countryside of Rome and it is here that we get today’s recipe. This meal is hearty and aromatic. The Italian countryside is renowned for its unique artistic heritage, its beautiful mountains, villages, people and landscapes. This meal comes from the heartland…
You will need: Chicken breasts and thighs on the bone, S&P, Olive oil, red, green and yellow bell peppers, prosciutto, garlic, can of diced tomatoes*, white wine, thyme & oregano (fresh is always better), chicken stock, capers and parsley (for color).
Begin by seasoning the chicken with S&P. In a heavy skillet – heat olive oil – enough to cover the bottom of the pan, when the oil is hot – then brown the chicken on all sides – remove and set aside.
In the same skillet – turn heat to med – add sliced peppers, and chopped prosciutto – sauté until the peppers are soft and the prosciutto is crisp… (no longer than 5 / 8 mins), next add chopped garlic (not minced) cook for another min or two… add diced tomatoes, about ½ – ¾ cup of white wine and oregano/thyme. Scrape the bottom of the pan. bring to a boil – add back the chicken and chicken stock (about ½ – ¾ cup) bring to boil again… now reduce heat to simmer and cover.
Cook for about 30 mins longer. Once ready – add about 2 tbsp. of capers and chopped parsley for color – mix and serve on a warmed platter – family style – and present in the center of the table. Accompany with a large green salad of arugula, spinach and bib lettuce, sliced tomatoes, red onions, and cucumbers – dressed in a balsamic vinaigrette. Your choice of a light red wine – nothing too heavy or a chilled white would work fine with this dish.