Circuit breaker limits today
Level 1 – S&P must fall 7% – 195.29 pts
Level 2 – S&P must fall 13% – 362.68 pts
Level 3 – S&P must fall 20% – 557.96 pts.
The FED did it again! Shocking the markets with yet another multi-trillion dollar “backstop” benefitting aid to states, cities and more small businesses as Initial Jobless Claims hits another record high. 6.6 million more people filed for unemployment last week – 1.2 million MORE than expected. Continuing Claims surged to 7.7 million people. Unemployment, while not reported weekly, is now expected to already be at 10% – this is up from 3.8% 2 months ago!
On Thursday at 8:30 – when Initial jobless claims hit the tape – it wasn’t 30 seconds later when the FED made another surprise announcement. This reminded me of the world of Star Trek and Captain Kirk, Spock and Scotty – “going where no man has gone before!”
The program is designed to lend directly to states, cities and small to midsize businesses – all places that have seen tax revenues and regular revenues evaporate as the forced shutdown of the US economy continues to slam the country from coast to coast. In addition, they will also backstop large companies by buying “riskier bonds” that are no longer considered “investment grade” status. This now makes 9 NEW lending programs that would add another $2.3 trillion to the economy. To sweeten it even more – FED officials signaled that they were “prepared to expand” it even more if need be. This now goes beyond the then famous phrase uttered by former ECB (European Central Bank) President Mario Draghi during the height of the GFC (Great Financial Crisis), when he said that the ECB “will do whatever it takes” to save the union. On Thursday – the FED defined the extent of the programs and promised even more. Remember – Draghi never defined the programs when he made that statement. He just made the statement and then followed up with action as the crisis unfolded. In this case – the FED has defined it and launched it and promised even more Kool Aid!
Investors, traders and algos LOVED it. Futures surged as the excitement of all this money sent the algos into a frenzy. Stocks opened strong – rallying and then backing off four separate times over the day – closing once again in positive territory with the Dow up 285 pts or 1.22%, the S&P up 40 pts or 1.45%, the Nasdaq surging by 62 pts or 0.77% and the Russell moving up by 55 pts or 4.62%. It was a historic week on Wall St – as the Dow gained 11%, the S&P 10%, the Nasdaq adding 8.5% and the Russell gained 15.3% – technically putting us back into a “BULL Market” – defined as a 20% move off the bottom! Put this stat in your memory banks. The Dow is now UP 31% from the March low, the S&P is up 27%, the Nasdaq is up 23% and the Russell is up a whopping 30%. So we have gone round trip from 11-year bull market to a bear market suffered in three weeks back to a technically defined BULL market in two weeks! It’s nuts – right? We can thank the rule sets and the technology for such swift moves both down and up. (But that’s another story!).
In addition – we had the OPEC+ and Russian “ZOOM” meeting that happened on Thursday – as those nations attempted to stop the bleed in the oil markets – a bleed that has seen oil collapse taking the energy stocks with it. News that Mexico wasn’t going to play nice in the sandbox – threw a wrench into it. They did not want to cut production by 400k barrels a day holding up any agreement – so Donny jumps in attempting to help “broker the deal” as Trump now saw the collapse of the US energy industry as a national security issue. The ZOOM continued over the weekend and last night – OPEC+ and the Russians announced another “historic” deal, deciding to cut production by 9.7 million barrels a day (the single largest output cut in history), handing Trump a victory as the media reports that he may have struck the ‘biggest and most complex deal’ in the oil markets ever. Oil shot higher – initially surging nearly 10% in overnight trading. It has since backed off and if up 1.5% as of 5:30 am as the analysis begins. Many analysts in the industry suggesting this is nothing more than “temporary relief” and will only postpone the stock building constraints, but the worst of the issue has been avoided for now. Stay tuned – this is not over by any stretch.
Overnight, Hong Kong and Australia were closed for the Easter Monday holiday. Japan, China and South Korea were the only game in town to speak of. All of those markets ended the day lower – even as the oil story hit the tape. Again – it appears that while the markets are happy that a deal was struck. They are not sure it will solve the issue right now. Until we see the global economy come back online and demand surge, we won’t know. So sit tight – more to come…
Japan -2.3%, China -0.49% and South Korea lost 1.8%.
In Europe – Markets are closed for the holiday – so no action there.
US futures are down in early trading as so many markets around the world are closed. Investors/traders, and algos assess the landscape after last week’s surge – catching our breath and moving lower should not be a surprise at all. Dow futures are currently down by 300 pts, the S&P lower by 35 pts, the Nasdaq giving up 89 pts and the Russell off by 27 pts. Corona continues to steal the headlines as peak cases are set to hit the East Coast today and this week. Boston, NY, Mid-Atlantic states and Florida all expecting a push in cases and deaths as the week begins. This morning NY tells us that there were only 53 new hospitalizations in the past 24 hours. That is a positive headline and is – at the moment – more important than any eco data point – of which there are none today. So a fall in cases will be widely reported. I suspect that the oil story should be widely discussed as well, but overnight trading is suggesting that while the deal is good – it is not “the best.” So here we go.
There is NO economic data today – but it is the beginning of earnings season – otherwise known as the Beauty Pageant. Expect to see dividend EX dates followed by the reports. Tomorrow brings us the start – JPM is the first to walk the plank – estimates call for $2.14 or 15% below first quarter 2019. But let’s see. Remember – earnings are history – they are what they are. It will be what the future looks like – if they can even make that assessment and THAT is what will drive prices over the next three weeks. What will these companies say? What can they say with any clarity? How will investors and the algos respond? We are about to find out. Now look, no one expects it to come up roses at all, if you have been alive and breathing that should be obvious. But just how bad it could be being the question. Even in all of this – there is opportunity – good names will get clobbered and dislocated. There will be cheap stocks and then there will be “cheap stocks for a reason” and that is the difference.
The S&P closed at 2789! It feels a bit toppy right here. It should not surprise anyone if we back off a bit. Technicians might say to 2649 – which is 4% lower, while other technicians might say we have room to run – citing 2921 as the level of resistance (50 DMA). My sense is that the path of least resistance is lower – as we digest all of the news: Corona, the FED, Oil, Earnings, RE-Start of the economy, etc. The long weekend came and went. We didn’t learn anything really new at all. Corona cases continue to decline in Europe, UK PM BoJo is alive and well and out of the hospital, US East Coast prepares for the worst of it this week. We appear to be in the 2650/2920 range for now. That may change when earnings start this week. I still expect the market to test lower again (~2500 ish) before we can say it has fully bottomed out, but I also think the lows of March – S&P 2200 are the lows for this cycle– stay tuned.
Take good care
Farfalle w/Sausage, Tomatoes, Peas and Cream
This makes you feel like you are in Nonna’s house… comfort food – read on.
For this you need: Farfalle Pasta, vidalia onion, can of plum tomatoes, garlic, s&p, heavy cream, frozen peas and sweet Italian sausage (out of the casing) and some white wine.
Heat olive oil in a pot… add crushed garlic and one diced onion (Vidalia if you can get it). Sauté until soft and sweet, next add the sausage meat – which you have removed from the casing – until brown. Next add 2 cups of dry white wine and let the alcohol burn off… open 28 oz. can of plum tomatoes and rough crush – so that it is a bit lumpy. Add to the sausage and let simmer for 20 mins… season with s&p…
Now add 1 cup plus a little more of heavy cream (you can use lite cream if you prefer – but heavy cream gives it a richer taste). Let simmer until thickens… only about 4 or 5 mins…. Now add in the frozen peas… stir and simmer.
In a separate pot bring salted water to a boil and add pasta – cook until aldente – 8 / 10 mins… strain – reserving a mugful of the pasta water… Add the pasta directly into the sauce and stir – making sure to coat well. Add a handful or two of parmegiana cheese and mix. If it looks like it needs some more liquid, add a bit of the pasta water to moisten. Serve immediately – offering more grated cheese to your guests.
It doesn’t get any better than this…