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Circuit breaker limits today

Level 1 – S&P must fall 7% – 161.34 pts

Level 2 – S&P must fall 13% – 299.64 pts

Level 3 – S&P must fall 20% –460.98 pts.

Nowhere to run, nowhere to hide – No – this is not the Martha and the Vandella’s version of that song of the same name – Oh no – this is different…

Stocks wrapped up another week of massive volatility – as global investors tried once again to make sense of it all. But making sense of it all – is what is proving to be the biggest issue, as the coronavirus pandemic surges around the world – as the whipsaw moves continue to rattle investors and see them selling everything that isn’t nailed down. Stocks, Treasuries, Gold, Oil, etc. all coming under massive pressure as the indiscriminate selling takes on a new phase and the term Cash is King takes on new meaning.

On Friday of last week – stocks opened higher – feeling like maybe there was going to be some relief to the onslaught of selling. In fact – I thought it was a brief respite known as “Seller’s exhaustion.” But that was short-lived. Stocks did open higher and it just felt like maybe we were going to get some relief. But as word hit the tape that NY Governor Cuomo had ordered the states workforce to stay home, joining California and Illinois, the algos doubled down and went into sell mode yet again. In addition – stocks got hit over the head again after the WH announced that we were closing the borders to both Mexico and Canada to all non-essential travel. The 430-pt gain at 11:11 am in the Dow quickly started to fade. By 12:04 pm – the gains turned to losses, struggled to come back only to fade into the end of the day. Remember it was a Friday and the weekend was here and so much more could happen before the bell rang on Monday. By the time it was over – the Dow lost 913 pts or 4.6%, the S&P gave up 104 pts or 4.3%, the Nasdaq gave back 271 pts or 3.8% and the Russell fell by 45 pts or 4.2%.

The disruption that is being caused to the US and the global economy is now in high gear and is more and more apparent as the hours tick by. Expectations are that Initial Jobless Claims this week could hit 2 million. That would be up from 215k is another reason we saw the push lower. Estimates of a massive contraction in US GDP are now all over the tape. GS hinting that a 24% contraction would not be out of the question – and that would be more than double the prior record set in the first quarter of 1958 when Dwight D. Eisenhower was the President.

10-year U.S. treasuries, which have been under pressure, did find a little support on Friday – sending its yield back down to 0.92% from 1.12% as some investors saw this as an opportunity in the treasury markets after they had taken a beating last week. And Oil? Oh boy – this story only gets uglier and uglier – as threats of increasing production by the Saudis and worries over demand destruction caused that asset to fall by 11% – taking it down to $22.50/barrel. Oil fell by 29% last week alone and is now down 65% from the start of the year.

Gold which is down $250/oz. or 13% appears to have found support at $1450/oz. taking it back to levels last seen in July 2019. This morning, gold is up $9 as some bargain hunting takes place.

As we went into the weekend – expectations of a massive stimulus package being discussed in DC kept investors alert. Estimates of a $1 trillion package quickly turned into a $4 trillion package, as DC tries to stop the bleed. And the FED, along with a handful of other central banks which have taken very aggressive steps, announced a new lending facility to backstop the municipal bond market as well. All of these measures beginning to feed money into the system which should help improve liquidity but may not stop the fallout, as stocks continue to come under pressure. To put this in a bit of historical perspective – as of this morning – stocks are down 32% from the February highs. That pales in comparison to the 60% drop in prices during the 16-month selloff in 2007/2009 and the 49% sell off during the Dot Com bubble and bust at the turn of the century.

So on Sunday – Congress took to the floor to try and pass this stimulus package – and failed, with the democrats suggesting that it was a handout to big business and didn’t do enough for the worker. Futures traded limit down again last night as the sun rose over Asia and trading began for another week.   Negotiations went through the night, with little progress, sending global markets further into negative territory.

Stocks in Asia taking it on the chin as the economic costs of the virus take hold. And while China does say that they are returning to normal – I’m not sure anyone really believes a word they say. So it is fair to say that the negative sentiment building around the world will continue to cause markets to remain skittish.

This morning in Europe, stocks there continue to succumb to the pressure. Virus outbreaks across the region continue to take their toll on all of the EU nations. There are now 340k global cases and just over 14k deaths. Italy once again seeing the brunt of this disaster, as the virus kills hundreds of people every day. Now to be fair – 90% of the deaths in Italy are in the older (+80 years old), immune compromised demographic. Not that this makes it right – but it is not killing the Italian population en masse. In fact – what we do know is that this is the same demographic that we’ve seen all around the world.

As of 6:45 am – the FTSE -4.4%, CAC 40 – 3.58%, DAX – 3.86%, EUROSTOXX -3.62%, SPAIN – 3.19% and ITALY -3.45%.

Futures have done a complete about-face. Dow futures are now up 370 pts, S&Ps are up 62 pts, Nasdaq up 245 pts and the Russell ahead by 30 pts, as the FED once again promises to do whatever it takes and announces a new round of asset purchases. The FED announced that they will buy unlimited amount of bonds to keep interest rates low and they are re-iterating that they are setting up programs to ensure the flow of credit. Futures surge, oil and gold surge as well.  

The S&P closed at 2304 – well below the December 2018 low of 2350. So this is now the third index to fail, leaving just the Nasdaq index at 6879 as the only one to remain above its December 2018 low of 6192. My sense was that this sell off in the markets will not be complete until the Nasdaq at least tests this level. So that is another 10% from here, but this morning’s FED announcement has once again changed the conversation. So let’s see how this will play out in the days ahead.

As the US capital markets prepare for another day, the NYSE will remain dark. “Rona” has succeeded in bringing this iconic marketplace to its knees as the spread of the virus takes hold on NYC. This will be the first time in our nation’s history that the capital markets will be trading without the benefit of the NYSE.  It is a “new moment in time” for our nation and the world. A time of massive unrest and uncertainty. It is a time to come together and re-evaluate our priorities. It is reminding us of how delicate and important life is.

Take good care.



(what’s the saying? When life give you lemons, make limoncello!)

Limoncello – is an Italian liqueur mainly produced in Sorrento along the stunning Amalfi Coast. It is used as an after-dinner drink to soothe your stomach after a delicious meal. It is kept in the freezer to be consumed ice cold.

For this you need: A doz. lemons, liter of vodka, 3 and a half cups of water and 2 and a half cups of sugar.

Zest the lemons –  and take the lemon zest and mix with the vodka. Cover tightly and leave it to sit for one week at room temp.

At the end of the week – mix the water and sugar in a pan and bring to boil – and let it boil for 15 mins so that it gets syrupy. **do not stir*** After 15 min turn off the heat and let it cool.

Next – combine the vodka with the syrup – then strain it thru a sieve to get out the zest. Seal and let sit for another two weeks at room temp. After two weeks – place in the freezer and let it chill. Once chilled you are good to go.

Buon Appetito.