Circuit breaker limits today
Level 1 – S&P must fall 7% – 186.46 pts
Level 2 – S&P must fall 13% – 346.27 pts
Level 3 – S&P must fall 20% – 532.74 pts.
Headlines scream about the progress – Europe seeing relief, while the peak of cases in NY – expected later this month – may have arrived early!
Coronavirus appears to be weakening, 10 different therapeutic agents are in active trial, research to develop a vaccine has “accelerated at incredible speed.”
And the one that – in my opinion – is much more significant appears in today’s WSJ:
“Credit Markets Show Signs of Stabilizing After Historic Fed Intervention” –the article goes to say that the FED has:
“reduced disruptions in the $17 trillion treasury market that sent shock waves through the financial system. Markets have grown more stable…”
This my friends, is much more important than a news conference hosted by Andrew Cuomo telling us that he thinks NYC has seen its peak – because I’m not sure I believe that yet. Yes – lockdowns and social distancing are helping but my gut tells me that we haven’t seen the peak just yet. Now let’s be clear – this is a bit confusing. The city is gearing up for the onslaught of infections as we speak, as I write this, the Jacob Javitz center is being turned into a military style hospital and the USNS Naval ship is being equipped to take care of the expected surge in cases that is due to hit us later this week and into next. Cuomo, screaming about needing 4,000 ventilators last week, is suddenly saying that NYC has seen its peak. It is confusing and doesn’t seem to make sense – Is it that we WANT it to be over? YES, of course. But it ain’t over just yet. And in fact – while the market rallied – it is not rallying on anything fundamental – because nothing fundamental has really changed – yet.
The Algos – reading the positive tone of the headlines, kicked into overdrive yesterday sending stocks on a tear in the pre-market trading session – futures pointing to 700 + point gains on the opening. News that deaths are slowing in Europe – Spain, Italy, Germany and France all reporting lower numbers igniting the rally seen round the world is helping to ignite the flames in the US for an advance that was completely unexpected. And then word that NYC is beginning to see a plateau – Cuomo taking to the airwaves to suggest so – as the reason for the rally to continue. By the end of the day every index surging by more than 7%! The Dow added 1,627 pts or 7.73%! The S&P gained 175 pts or 7.03%, the Nasdaq surged by 540 pts or 7.33% and the Russell added 86 pts or 8.24%.
Now let’s be clear – I want this to end to as much as the next guy. Infections and cases in the states are far from over if you listen to Dr. Fauci as opposed to Donny Trump. Yet – they are now trying to tell us that the markets surge was all about the plateauing of supposed NYC cases. I have to ask – really? On one hand Cuomo telling us in his daily press briefing yesterday morning that that the virus cases have been “effectively flat” for two days and the number of hospitalizations and intubations are down and then in the afternoon briefing he EXTENDS the NYC lockdown until April 29th (Another 3 weeks). He instructs the USNS Naval hospital to treat Coronavirus victims vs. non-corona victims as originally planned and warns that he expects the caseload to surge! Hello? Does anyone else see anything wrong here? Which is it? A slowing or an increase? In any event the original news of slowing is being cited as the reason for the surge in stock prices.
OK – let’s be honest – this virus is just beginning to wash across the states – and yes –NYC is the epi-center today. Tomorrow it will be Miami and then onto Detroit, Chicago, and then the rest of the country. Unless there is a miracle happening, we all know what’s ahead. All we have to do is look at Europe, since we really can’t look to China to give us the facts.
And we haven’t even gotten through one full week of economic data – never mind the coming earnings season which starts next week. Both events that are expected to “shock” the financial community as the forced global shutdown has devastated businesses all around the world. Estimates of what we think is happening are about to be tested as the beauty pageant begins. Forward guidance is a thing of the past for now – as so many companies have already said that it is too difficult to try and predict (or forecast) what’s next. That leaves a cloud of uncertainty hanging over the markets – and we know what uncertainty does, it creates concern – concern that has taken the markets on a wild and sometimes uncontrolled ride. A perfect example are these multi-thousand point days – both up and down. With volatility spiking and then easing, the markets and investors have been tested and tested hard. I suspect that the testing is not over – but that does not mean that you jump ship. All it means is that you talk to your advisor – eliminate any of the “underperformers” and roll into what are expected to be the winners as we emerge from this crisis.
Next – oil continues to make the news. The virtual “Zoom” meeting that was supposed to take place yesterday between the Saudis and the Russians got pushed to Thursday. This created a bit of angst and the 35% surge seen on Friday came under pressure yesterday. This morning we are seeing oil rise by 3.5% as word has it that they are likely to announce an agreement on Thursday. It is still unclear what role other nations will play in cutting production, think US. With oil trading well below breakeven at $40/barrel – US production is already in decline. Economics 101 – so do we have to cut further? Market pricing is taking care of it on its own…
And with oil below $40, we can expect to see a rise in US bankruptcies across the sector – and there isn’t anything we can do to stop that. The longer it stays in the $20s the more bankruptcies we can expect. And when that happens then production gets cut even more. See how that works? It’s a natural result of weaker prices but what we should see is a more vibrant, robust industry on the other end.
Asian markets closing up 2+% as the virus comes to a near halt. South Korea reports less than 50 new cases and China reports no deaths overnight (if you believe what comes out of that country – considering so much of their data has been flawed since this all began). The RBA – Reserve Bank of Australia – left rates unchanged (expected) causing that market fall by 0.65%.
In Europe – UK Prime Minister BoJo is now in intensive care as his symptoms worsen. (You would think that’s a negative, but UK markets are higher). Foreign Secretary Dominic Raab to take the reins during BoJo’s hospitalization. Investors continue to focus on hopes that the virus is peaking in that country and across Europe. Across the EZ (Eurozone)– finance ministers are meeting today to discuss additional monetary support for the 19-member nation bloc.
As of 6 am: FTSE +2.31%, CAC 40 +2.73%, DAX +3.30%, EUROSTOXX +2.75%, SPAIN +2.89% and ITALY +3.81%. – this is as that country shows the most improvement.
US Futures are in RALLY MODE again, as the algos go all in as the headlines suggest that the virus is loosening its grip on the world. This morning – Dow futures are up another 800 pts, the S&P is up 78 pts the Nasdaq is gaining 221 pts and the Russell is up 34 pts.
There is no eco data due today – so expect the focus to remain solidly on oil and the virus. Tomorrow brings us the FOMC minutes from March. Later in the week we will get PPI, CPI, a new round of Initial Jobless Claims and Continuing Claims.
The S&P closed at 2663 – blasting through 2600 – a level I thought would provide for some resistance and did not! And today’s action suggests that 2700 will soon be a distant memory as well. A look at the chart doesn’t really provide definitive resistance levels – leaving that to your own discretion and analysis. Some will tell you it should have been 2600 (like me) and others will tell you that it won’t be until we reach the down trending 50-day moving average – which right now is at 2941. But is moving lower. What does appear to be true is that the lows are more than likely set it (2200). While we are nearly 500 pts higher – it is likely that as earnings season progresses. A test lower again will follow. My guess is that it doesn’t pierce the March lows. But it could test it.
Now remember, two weeks ago when Bill Ackman took to CNBC, crying about not wanting to be responsible for killing daddy as he ranted that “hell was coming.” Well that was then – because now he is changing his tune – and took to Twitter to say so. Now – suddenly hell is not coming and since he took advantage of the angst he created – and is now net long – he suddenly thinks that the end is near and that the economy is set to explode. I mean you can’t make this stuff up. Surely Billions will have a couple of episodes on this. The question is: Who will play Billy?
Gold which rallied strongly last week and rallied again yesterday taking it up and thru $1700/oz. before settling at $1604. It is up again this morning, trading up $9 at $1703/oz. but did trade as high as $1736/oz. Yesterday I said that last week’s bounce off of $1600 appears to be taking us to $1700 – where it should find resistance and sellers IF in fact the virus appears to be slowing. Well everyone is telling us that it is slowing – so I expect that Gold should stall right in here. The surge to $1736 feels like it was an “algo surge.” If the news continues to suggest that the spread is slowing, then expect to see gold back off.
Take good care
Pork Cutlets Caprese
Pork Cutlet Milanese with Tomato, Arugula and Red Onion Salad. This is a great dish – colorful, hearty, and easy to make.
For this you need: Pork cutlets (pounded thin), flour, eggs, seasoned bread crumbs, olive oil, butter, fresh arugula, Ripe Cherry Tomatoes, sliced red onion, lemon juice, and shaved parmegiana cheese.
In a bowl – beat 3 eggs (add a splash of milk), on a separate plate put some flour and on a third plate – place the seasoned breadcrumbs. (It is like an assembly line – capisce?)
Begin by pounding the cutlets to thin them out. Now – in this order – dredge the cutlet in the flour – dip in the egg wash and then cover in breadcrumbs – pressing gently so that the breadcrumbs adhere to the cutlet. Place on a plate. Place in the fridge for about an hour.
Preheat the oven to broil
After an hour – place a pyrex dish in the oven with enough olive oil to cover the bottom of the dish. You can add a dollop of butter (never a problem) – place the cutlets in the dish on one side then immediately flip them and allow to broil. Cook the cutlets until they are crispy golden brown then flip and repeat. Remove and place on a warmed plate. Top the cutlet with some arugula, then the cherry tomatoes (cut in half), and the red onion. Squeeze fresh lemon juice sparingly – drizzle some olive oil – season with s&p and top with shavings of Parmegiana cheese. Simple yet outstanding. Enjoy your favorite wine – and now that spring is in the air. Go for a nice French Rose… vs. a heavy red.