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What to Make of This Rally

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What’s in Today’s Report:

  • What To Make Of The Rally.
  • Coronavirus Update – Is Italy Peaking?

Futures are sharply lower (down about 2%) following a generally quiet night as markets digest the big three day rally.

The U.S. passed China in total number of coronavirus cases on Thursday, although there is some hope emerging that the spread of the virus is peaking in Italy.

Politically, there was no notable news overnight and passage of the stimulus bill will happen later today.

Today the key event is the passage of the stimulus bill in the House, but that is universally expected.  Outside of that, the key economic report will be Consumer Sentiment (E: 92.0), because that will give us some preliminary insight into how bad consumer spending might be in the coming months.  We also get the Fed’s preferred measure of inflation,  Core PCE Price Index (E: 1.8%), but at this point that number will be ignored as no one is worried about high inflation right now.

Additional Fed QE Takeaways

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What’s in Today’s Report:

  • Additional Fed QE Takeaways

Futures are limit up this morning and money flows were decidedly risk-on overnight as several sources, including individual Senators, suggested that the near $2T stimulus package will be passed today.

Additionally, the spread of the coronavirus showed signs of slowing in the last 24 hours while economically, global Flash PMI data was not as bad as feared overnight with manufacturing components universally topping estimates.

Today, there are two economic reports due to be released: PMI Composite Flash (E: 44.2) and New Home Sales (E: 743K), and one Fed official scheduled to speak: Bullard (9:45 a.m. ET). There is also a 2-Yr Treasury Note Auction at 1:00 p.m. ET.

With two of the three “keys to market stabilization” either accomplished (Fed stimulus) or in progress (slowing spread of the virus), all eyes will remain on Capitol Hill today. And if the massive economic stimulus package passes a vote in the Senate, expect a relief rally to follow as investor sentiment should become decidedly less gloomy.

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.

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.

Tom Essaye Interviewed with TD Ameritrade on March 10, 2020

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Tom Essaye interviewed with Oliver Renick from TD Ameritrade to discuss the market, oil, coronavirus, and much more. Click here to watch the full interview.

TD Ameritrade Interview

Market Multiple Update

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What’s in Today’s Report:

  • Market Multiple Update

Futures are trading higher this morning while international markets were mixed overnight as investors weighed stimulus hopes against the continued spread of the coronavirus.

As cases of COVID-19 topped 90,000, the RBA was the first central bank to cut its official “cash rate” to a record low of 50 basis points overnight largely due to the outbreak.

Economically, the Eurozone HICP Flash for February and Unemployment Rate for January both met expectations overnight at 1.2% and 7.4%, respectively.

Today, there are a few potential catalysts to watch including one economic data point: Motor Vehicle Sales (E: 16.8M) and one Fed speaker after the close: Evans (6:30 p.m. ET), while politically, “Super Tuesday” will be in focus.

The coronavirus outbreak remains the single most important factor for global markets right now, however, and if there is a significant rise in reported cases of deaths related to the virus, this week’s risk-on money flows could begin to fade and potentially give way to more volatility.

Conversely, any news regarding emergency stimulus measures, especially by G7 nations could help this week’s rally extend higher.

Where Do Markets Go From Here?

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What’s in Today’s Report:

  • Where Do Markets Go From Here?
  • Weekly Market Preview:  Coronavirus news first, but it’s an important week from a data standpoint too
  • Weekly Economic Cheat Sheet:  Why Wednesday is the Most Important Day of the Week

Markets are trying to stabilize and futures are down modestly, but they have been volatile as futures have been down 1% and up 1% before trading back closer to flat.

If there’s a “reason” for the attempted rebound, it’s the surging expectation for a globally coordinated central bank response sometime later this week (possibly a 50 bps cut).

Coronavirus news remained negative in aggregate as cases increased in the U.S., although the news is no worse than what the market’s priced in last week.

Economically, the Chinese Feb. Manufacturing PMI imploded to 35.7 vs. (E) 46.0, but that wasn’t a surprise.  The data from the EU and Britain was solid.

Today the market will be driven by the latest coronavirus headlines, but there is an important economic report, the ISM Manufacturing PMI (E: 50.4), and a better than expected number would give the market a needed confidence boost.

Tom Essaye Interviewed with Yahoo Finance on February 28, 2020

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Tom Essaye intereviewed with Brian Sozzi and Alexis Christoforous from Yahoo Finance to discuss the debate on whether the Federal Reserve must hold an emergency meeting this weekend and cut interest rates to arrest the coronavirus stock market crash.

Click here to watch the full interview.

Tom Essaye Interview with Yahoo Finance

What to Make of Yesterday’s Selloff

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What’s in Today’s Report:

  • What To Make Of Yesterday’s Collapse
  • Yield Curve Update (Steepening But for the Wrong Reasons)

Futures are down sharply  but well off the overnight lows as markets digest yesterday’s collapse in stocks.

Coronavirus continues to spread (new cases in Nigeria and New Zealand) but China announced the fewest number of new cases since January 23rd, so there is progress occurring.

Economically, Japanese Retail Sales (-0.4% vs. (E) –1.0%) and Industrial Production beat estimates.

Coronavirus headlines will continue to dominate trading and today will be another volatile day (Friday’s in corrections always are), but outside of coronavirus markets will be focused on the Core PCE Price Index (E: 1.8%), Consumer Sentiment (E: 100.9) and one Fed speaker Bullard (9:15 a.m. ET).