Market Recap Week Ending March 28
Monday – Dow (582) to 18,591, NDAQ (18) to 6,860, and the S&P (67) to 2,237. Despite the Fed announcing it would buy an unlimited amount of Treasuries, make small loans to business, and purchase corporate bonds (for the first time in its history), the indices could not overcome the disappointment that Congress failed to agree on a massive $1.8 trillion Phase 3 stimulus bill…States that have issued stay at home edicts account for 133 million or 40% of the US population. States include; CA, CT, DE, IL, IN, LA, MA, MI, NJ, NY, OH, OR, WA (just ordered tonight) WV…Nordstrom (JWN) suspended its dividend, halted share buybacks, and drew down a $800 million revolving credit facility…Twitter (TWTR) suspended its Q1 guidance but noted that user numbers have been growing as people look for updates on the crisis…Fiat Chrysler (FCA) announced they would begin manufacturing more than 1 million protective masks per month. Production to start in the “coming weeks…”Zoom Video (ZOOM) rose 22% today as traders searched for stocks that are working during the crisis…Dow futures are trading up 250 points. Can we put together a few positive trading sessions in succession?
Tuesday – Dow +2,113 to 20,704, NDAQ +557 to 7,417 and the S&P +209 to 2,447. Hope of an imminent $2 Trillion stimulus being negotiated by Congress whipped the markets into a frenzy today. The result was the Dow’s largest point gain in its history and 4th best day in percentage terms. The other two indices were up 8% (NDAQ) and 9% (S&P). The stimulus package was later agreed upon by both houses of Congress shortly before 1AM EDT…India’s Prime Minister decreed a 21 day lockdown for the entirety of his country of 1.3 billion people…Seeking Alpha reported some cause for hope; “new cases and deaths dropped for two days running in Italy. “43 days was exactly the same amount of time as it took South Korea to reach its apex. And if such is the case, the U.S. would be 14 days behind Italy,” said Thomas Lee, head of research at Fundstrat Global Advisors.”…Nike (NKE) beat Q3 numbers as North America growth outweighed weakness in China. NKE CEO John Donahoe said the company is beginning to see a “recovery” in China…Square (SQ) cut its Q1 guidance and withdrew full year 2020 guidance due to the pandemic. The company also announced it would be refunding all March software subscription fees for its clients…Facebook (FB) announced a 50% increase in messaging usage but admitted that its ad business is weakening in countries that are aggressively battling Covid-19…The Olympic Committee has agreed to postpone the Tokyo Summer Games until 2021…All eyes turn to tomorrow. Will there be a sequel to today’s massive rally? The last time we have had consecutive up days on the Dow was Feb 10-12 (and that even comes with an asterisk as the 11th was technically a down day but in minuscule terms). After tomorrow, we will turn to Thursday’s jobless benefits claims. How will the market react to what promises to be a historically bad number?
Wednesday – Dow +495 to 21.200, NDAQ (33) to 7,417 and the S&P +28 to 2,475. The markets exploded to the upside again today as news swept over the nation that Congress had come to an agreement on the $1.8 Trillion stimulus package. However, with 30 minutes left in the trading session, all three indices turned over and started giving up their gains as three Republican Senators voiced their displeasure with an aspect of the unemployment benefits in the package. The end result was a fairly thin, as opposed to broad based rally with little more than half the 30 stocks of the Dow providing the heavy lifting. Boeing (BA) +31%, United Health (UNH) +14%, United Technologies (UTX) +9% and Nike (NKE) +6% along with a handful of others, lead the charge. However, it was the first consecutive positive days on the Dow since Feb 10-12. About an hour ago (12 AM EDT), news broke that the Senate had managed to pass the stimulus bill and it now will go to the House for approval. Oddly, the futures traded off on the news, perhaps signaling that the focus now is squarely on the jobless claims print tomorrow (8:30am EDT). Last week’s print of 281,000 claims will be surpassed exponentially. The question is “by how much?” Estimates range from 860,000 (UBS) to 4 million (Citi). Between the 5 estimates I could find online, my consensus estimate number is 2.7 million. California Governor Newsom stated Wednesday that his state has already received 1 million jobless claims in fewer than two weeks.
Thursday – Dow +1,352 to 22,552, NDAQ +413 to 7,797 and the S&P +154 to 2,630. Despite a historic jobless claims number of 3.3 million, the markets rallied for the third consecutive day today. Unlike yesterday, which was a very narrow rally, today’s was extremely broad based…In the meantime the virus continues to take its toll on the world and in Italy and New York in particular. Italy’s mortality rate is over 10% (vs China 4%, Iran 7%, Spain 7% and the US @ 1.4%). The U.S. tonight surpassed both Italy and China and has the most infections of Covid-19 in the world. New York City’s hospitals expect all 1800 ICU beds in the city to be filled by Friday. A 1,000 bed hospital ship is not expected to arrive until mid April…Cheesecake Factory (CAKE) informed landlords that they won’t be able to make rent due April 1…Salesforce (CRM) promises no “significant” layoffs…Apple (APPL) considers 5G iPhone delay…Ford (F) credit rating cut to junk @ S&P…The futures as of this writing are trading down 351 points signaling a possible challenge to a fourth straight day of gains.
Friday – Dow (913) to 21,636, NDAQ (295) to 7,502 and the S&P (88) to 2,541. Despite the best week for the Dow since 1938, it and the other indices could not manage a fourth straight day of gains. The news that the United States has surpassed all other countries with regard to Covid-19 infections and the worsening situation in New York City was responsible for today’s loss of confidence. Infections now stand at just under 105k here in the United States with 1,711 fatalities. Our number of infections has doubled in three days…GM announced a deal with ventilator maker Ventec Life Systems to produce ventilators at cost at one of their parts plants in Kokomo, IN….
The week in review…Dow +2,463 or 12.8%, NDAQ +623 or 9%, S&P +237 or 10.2%. This week was all about the Phase 3 $2 Trillion stimulus bill that was signed by the President today. Even a historic jobless claims number couldn’t stop the 3 day rally. However, when the smoke cleared and the drama ended in Congress, the market’s attention refocused on the state of the pandemic which is growing rapidly in strength in the United States. As such, we gave up between 3-4% of the weekly gains today. Without another stimulus package to focus on next week, I fear that the spread of the virus will dominate the headlines and as such we may be looking at additional volatility back to the downside. On Thursday, we will have another jobless claims report and many economists fear it will be worse than Thursday’s shocking print.