What Did the Fed Do? (And Why Are Stocks Down Again)

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What’s in Today’s Report:

  • What Did The Fed Do And Why Are Stocks Down?
  • What to Make of This Market Now? (Buy/Sell/Hold)
  • Two Key Indicators to Watch This Week

Futures are limit down this morning despite the Fed cutting rates to 0% and restarting its QE program.

On Sunday night the Fed cut rates to 0% and announced a new 700 billion dollar QE program, along with other measures designed to boost liquidity.

Coronavirus news over the weekend wasn’t good as case counts continue to rise, especially in Italy.  That country is the new center of the coronavirus outbreak.

Today all eyes will be on the bond market.  Treasury yields need to stay down, and if the price action in LQD isn’t too bad, stocks can rally out from these early lows.  Economically, there is a notable report this morning,  Empire Manufacturing Survey (E: 4.8), as it will give us the first look at juts how bad economic activity has been in March.

What Makes It Better and What Makes It Worse

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What’s in Today’s Report:

  • Why Did Stocks Drop 10% Yesterday?  (It Wasn’t Coronavirus)
  • What Makes It Better (Four Factors)
  • What Makes It Worse (This Is Important)
  • Key Support and Resistance Levels to Watch

Futures are sharply higher as stocks rebound from yesterday’s historic collapse.

Most of the morning rally is just a typical oversold bounce, although there is a lot of “chatter” that global governments are planning to unveil economic stimulus plans over the weekend.

In the U.S., expectations are rising for an economic stimulus plan to be announced as early as this morning.  This needs to happen by the open on Monday and the plan needs to be substantial, because as we explain in the issue, this crisis has morphed into a crisis of confidence in  Washington’s ability to support the economy, and that’s the real reason stocks went into free fall yesterday.

Today all eyes will be on Washington, because the market is expecting a substantial economic relief package from Congress, and if we don’t get one by Monday (or it’s small and ineffectual) then we should all brace for more volatility.

Sevens Report Co-editor Tyler Richey Quoted in MarketWatch on March 12, 2020

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“Oil is the only market that is more volatile than stocks right now, as futures traders continue to digest the implications of the new price war…” said Tyler Richey, co-editor at Sevens Report Research. Click here to read the full article.

Oil rig

Tom Essaye Interviewed with Yahoo Finance’s Brian Sozzi on March 11, 2020

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Yahoo Finance’s Brian Sozzi and Alexis Christoforous discuss what’s behind this morning’s market action with Tom Essaye of The Sevens Report Research. Click here to watch the full interview.

Yahoo Finance Interview

Tom Essaye Interviewed with TD Ameritrade on March 11, 2020

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Tom Essaye interviewed with TD Ameritrade’s Ben Lichtenstein to discuss earnings, stock markets, consumer staples, coronavirus, concerns, unknowns and much more…Click here to watch the full interview.

TD Ameritrade Interview

 

The Panic Worsens

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What’s in Today’s Report:

  • What Trump’s Speech Means for Markets (Not As Bad As The Market Reaction)
  • March Economic Breaker Panel (Important Insights)
  • Is It Time To Panic?

Apologies for the slightly tardy delivery.  A lot has happened since the close.

Futures are limit down once again as markets were disappointed by President Trump’s speech and proposed economic initiatives.

President Trump announced a travel ban from Europe in an effort to curtail the spreading of the disease, as well as several economic policies aimed at stimulating growth including deferral of income tax payments, more SBA loans, and paid sick leave.  All of these initiatives will help the economy, but none are a silver bullet for coronavirus, and as such the market is reacting with short term disappointment.

Econ Today: Jobless Claims (E: 216K), PPI (E: 0.5%). There are no Fed speakers speak today however the Treasury will hold a 30-Yr Bond Auction at 1:00 p.m. ET.

Looking forward, this is a market gripped in panic so we’ll continue to watch the headlines, and we need some good news to break the negative feedback loop in the form of positive corporate commentary or optimism on the transmission of the virus, but those types of headlines have been hard to come by lately.

Sevens Report co-editor Tyler Richey Quoted in MarketWatch on March 10, 2020

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Tuesday’s rebound for oil is “relatively modest” compared to Monday’s plunge, said Tyler Richey, co-editor at Sevens Report Research. “We could easily see a retracement higher in prices in the days and weeks ahead…” Click here to read the full article.

Oil Rig

Tracking the Key Variable

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What’s in Today’s Report:

  • Tracking the Key Variable
  • What Could the Government Do (and Would It Help)?

Futures are lower this morning as hopes for timely fiscal stimulus measures from the U.S. government to combat the negative impact of the coronavirus fade while a “Biden bounce” failed to materialize after the former VP had another strong showing in primary elections yesterday.

Overseas, European shares traded higher after an emergency rate cut by the BOE while Asian markets remained under pressure due to COVID-19 fears with the Nikkei falling into bear market territory overnight.

Today, there is one economic report to watch: CPI (E: 0.1%) while no Fed speakers are scheduled to speak. The only other potential catalyst on the calendar is a 10-Yr Note Auction by the Treasury at 1 p.m. ET that could move bond markets and subsequently, the stock market.

With limited market moving events on the schedule, investors will be looking for further details on the U.S. government’s plans to support the economy through the coronavirus outbreak as well as any further news about the confirmed cases/related deaths as well.

Technically speaking, a break either above yesterday’s highs or below yesterday’s lows in the S&P 500 will likely trigger a follow through move as the market is in a state of indecision and susceptible to a momentum based squeeze either way.

Sevens Report Co-editor Tyler Richey Quoted in MarketWatch on

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U.S. oil futures settled more than 10% higher on Tuesday, rebounding a bit a day after posting the largest percentage loss since 1991. Tuesday’s rebound for oil is “relatively modest” compared to Monday’s plunge, said Tyler Richey, co-editor at Sevens Report Research. “We could easily see a retracement higher in prices in the days and weeks ahead…Click here to read the full article.

Tyler Richey

Sevens Report Quoted in Market Beat on March 9, 2020

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The positive feedback started off with B. of A. Securities strategists who noted that—once the panic finally died off—there was room for “huge rotation to growth stocks and bond proxies” to kick in. The Sevens Report noted that, currently, the S&P 500 was trading at 17 times estimated earnings for 2020, down from just under…Click here to read the full article.