Market Recap Week Ending March 6
Monday – Dow +1,294 to 26,703 (single day points record), NDAQ +384 to 8,952 and the S&P 136 to 3,090. What a wild ride! Based on the belief that we may see coordinated easing action by the Fed and other central banks, the markets roared back today and accelerated their ascent in the last hour of the day. The US 10 year Treasury closed at a new record low yield of 1.08% (remember the price of bonds and their yields move inversely to each other). Demand continued to be strong for the 10 year today which pushed their prices higher but the interest rate (yield) they pay lower) as markets priced in as many as three expected rate cuts from the Federal Reserve…All three indices are now out of “correction territory” meaning they are down less than 10% from their recent record highs…Robinhood, the startup fintech firm, suffered a complete lockout of all users during all of today’s trading…COVID – 19 update: the CDC announced they will authorize 93 public health labs to analyze tests. The association of Public Health estimates that will allow 10,000 tests per day by the end of the week. The former Commissioner of the FDA stated that by the end of the next two weeks we should have testing capacity of as much of 20,000 per day. This will mean that infection rates will increase dramatically but the mortality rate will fall most likely still elevated, but much more similar to that of influenza…Prepare yourself for continued volatility in the markets as this plays out.
Tuesday – Dow (785) to 25,917, NDAQ (268) to 8,684 and the S&P (86) to 3,003. Despite an emergency 0.50% (50 basis points) cut by the Federal Reserve, the markets plunged back into correction territory today as Covid-19 infections continued to grow outside of China. There were multiple reports out challenging the testing numbers put forth yesterday by the CDC and the Association of Public Health…As expected, companies continued cutting guidance; Visa (V), Microchip (MCHP) and Hewlett Packard Enterprise (HPE) all cut their 2020 numbers today…The Dow futures are indicating a 300 point pop tomorrow as former senator and Vice President Joe Biden notched victories in at least 8 states and leads in both Texas and Main. Wall Street would prefer the more moderate Biden to the progressive policies of Sanders and thus the potential rally to at least begin the day tomorrow.
Wednesday – Dow +1173 to 27,090, NDAQ +334 to 9,018 and the S&P +126 to 3,130. Joe Biden’s seeming return from the dead to win 10 states on Super Tuesday had the markets jumping for joy at the prospect of a moderate Democratic Presidential nominee. Healthcare led the way with UnitedHealth Group (UNH) +10.72% and accounting for 185 of the DJIA’s 1173 point rise. Additionally Anthem (ANTM) +15%, Humana (HUM) +14%, Centene (CNC) +15% and Cigna (C) 3.6%…The yield on the benchmark 10 year US Treasury continued to set new lows and closed today below 1% (0.994%) for the first time as traders continue to believe that more rate cuts are forthcoming…American Eagle Outfitters (AEO) traded up on 5% on better than expected Q4 numbers…Zoom Video (ZOOM) dipped 4% despite exceeding Q4 expectations (don’t cry for ZOOM though, they are still up 70% YTD!)…Splunk (SPLK) fell 15% after hours offering weak Q1 guidance…Marvell Technology(MRVL) jumped 10% after hours after it beat earnings and revenue expectations…CA Governor Newsom declared a state of emergency after the state suffered its first Covid-19 fatality…Research firm IHS Markit said that oil demand will experience its steepest decline on record during this quarter, worse than during the 2008 financial crisis as flights are cancelled, schools and offices close, and people remain at home. They expect demand to drop 3.8% this quarter. The energy sector is down 23% YTD…Hang on again because the futures are indicating another drop of over 200 points at the open tomorrow!
Thursday – Dow (969) to 26,121, NDAQ (279) to 8,738 and the S&P (106) to 3,023. It’s all Covid-19 all the time. The US Senate passed an $8 billion spending package that the President has said he will sign to provide medical supplies and pay for vaccine research. Tourism and travel continue to be the hardest hit areas of the market. Northshore School District in the state of Washington will close 33 campuses for up to two weeks, leaving their 23,500 students to work online. Facebook (FB) and Amazon (AMZN) are asking their Seattle based employees to work from home until the end of March. In Italy, all schools are closed until March 15, soccer matches are being played in shuttered, empty stadiums and public gatherings including theaters have been banned until April 3. Starbucks (SBUX) reported that 80% of their stores in China have reopened but expects the store shuttering and current anemic demand to cost them $415mn and 17.5c/share when they report Q2 results…American Outdoor Brands (AOBC formerly known as Smith and Wesson) plunged 23% in after hours trading after missing earnings and revenue expectations for their fiscal 3rd quarter…H&R Block (HRB) traded down 7% post close after reporting a larger loss than expected…Costco crushed all their metrics and attributed much of the gains to customers preparing to hunker down during the Covid-19 crisis…Jamie Dimon, CEO of JPMorgan Chase (JPM) is recovering after emergency heart surgery to repair acute aortic dissection.
Friday – Dow (256) to 25,864, NDAQ (162) to 8,575 and the S&P (51) to 2,972. Similar to last Friday, the indices rallied strongly into the close cutting a 900 point loss on the Dow down to a “mere” 256 point drop…US employers added 273k jobs in February but the report was largely discarded as many of the gains were in the hospitality sector which has been ravaged since by Covid-19 fears…The US 10 year Treasury which started the year yielding 1.90% closed Friday yielding 0.73%, representing a 61% drop in yield (this means that the price to buy the 10 year has soared as investors seek safe havens in which to park cash as they ride out the virus). A Banc of America (BAC) analyst wrote that Treasury and stock market prices are implying a 75% chance that the Fed cuts rates to ZERO…The world is awash in oil; crude was down another 10% after OPED and Russia failed to agree to production cuts. Crude has fallen over 25% since the outbreak of Covid-19.
The week that was…4,477 points of volatility on the Dow this week? Sound and fury signifying nothing? All that volatility added up to flat to slightly positive results. The Dow +455 (up 1.8%) for the week, the Nasdaq was +8 (0.09%) and the S&P was up +18 (0.60%). We finished the week back in correction territory (down 10% from the highs). While we received a brief respite during Super Tuesday, Covid-19 dominated the headlines and drove the volatility in the market. My best guess is that next week will be more of the same in terms of headlines and while I expect the markets will be wild but I don’t expect multiple 4% moves like we experienced this week. A few things to remember, infections will continue to increase as testing becomes more widely available. Most likely, this will also drive down the mortality rate as the denominator in the equation grows. Also, while not making light of the disease nor the risks it poses nor the lives it has cost, the fact is that the great majority of people who contact this disease recover. The people at greatest risk are those above 80 years of age and all those with pre existing health conditions. As far as my research led me, there has not been a single fatality of someone between the ages of 0-9 years of age (https://www.worldometers.info/coronavirus/coronavirus-age-sex-demographics/).