Market Recap Ween Ending March 20
Monday – Dow (2997) to 20,188, NDAQ (970) to 6,904 and the S&P (324) to 2,386. Despite the Fed jumping in over the weekend, cutting rates to near zero and announcing a $700 billion asset purchasing program, the news that multiple cities and states were shuttering bars, restaurants, gyms and schools overwhelmed the indices. The Dow finished with its largest point loss in its history by far and its second worse percentage drop, surpassed only by Black Monday of October 1987. This afternoon, six Bay Area counties (SF, Alameda, San Mateo, Santa Clara, Marin, and Contra Costa) were ordered to “shelter in place” for the next three weeks…The Trump administration announced today that interest on federal student loans would be waived indefinitely…Boeing (BA) continues to get hammered. A large component of the DJIA, the aerospace giant, was down another 24% today and currently trades at 6x expected 2022 earnings…The US Airlines industry today requested a $55 billion bailout package including $30 billion for passenger and cargo carriers and another $25 billion in loans and temporary tax relief…Ford (F) is a $5 stock…Macy’s (M) is a $6 stock…The crucial low recorded in December 2018 on the S&P is 2351…As of this writing, the Dow futures are up 800 points. Will this be the beginning of a bottoming out or just another”dead cat bounce?”
Tuesday – Dow +1049 to 21,237, NDAQ +430 to 7,334 and the S&P +143 to 2,529. The Federal government threw massive quantities of money at the Covid-19 virus today. The New York Fed announced that it will conduct two $500 billion overnight repurchase operations EACH DAY for the rest of the week (from Investopedia; “A repurchase agreement (repo) is a form of short-term borrowing for dealers in government securities. In the case of a repo, a dealer sells government securities to investors, usually on an overnight basis, and buys them back the following day at a slightly higher price”). In addition, the Fed has intervened in the commercial paper market and will be the buyer of last resort to an unlimited degree. This should help in unfreezing the corporate commercial paper market that is the lifeline of larger corporations. Meanwhile Congress and the President seem to be in agreement to send at least $1000 to each American adult although some means testing may be negotiated. All of these announcements served to move markets higher…Facebook (FB) announced they would be sending each of their 45,000 employees $1000. Macy’s (M) announced it would close all of its stores…Nearly all the nation’s cinemas are shuttered…New York City is considering shelter in place. Marriott (MAR) began furloughing thousands of their employees due to lack of demand…The bad news just won’t stop for Boeing (BA); the company said it had maxed out their $13 billion credit line it drew in February and is seeking “tens of billions” in government loans. The stock traded down 4% today and is trading down an additional 9% in extended hours trading…The Dow futures at the time of this writing are down 3% indicating a down open tomorrow morning.
Wednesday – Dow (1338) to 19,898, NDAQ (344) to 6,989 and the S&P (131) to 2,398. Despite yesterday’s news of more massive Federal government stimulus, the markets continued trending down today. Around 10am PDT all markets halted as we hit the first circuit breaker of down 7%. This was the 4th time trading has been halted since last Monday. When trading resumed the slide continued with the Dow falling below 19k and the S&P breaching the all important 2351 low established in December of 2018. However, all indices rallied into the close still finishing down 5%-6% but a far cry from being down nearly 10% at the lows and more importantly, the S&P crossed back above the 2,351 level and finished at 2,398…The Senate finally (the House passed the bill late Friday night/Saturday morning while the Senate took the weekend off) passed the Families First Coronavirus Response act which President Trump has said he will sign. Despite major loopholes, the $100 billion legislation package expands Medicaid and unemployment benefits, orders free coronavirus testing, and mandates paid sick leave and childcare leave but only
for certain employees. Both houses of Congress are now working on a “Phase 3” bill that may provide up to $1 Trillion in aid for the airline industry, small business, and direct payments to Americans (who and how much remains to be negotiated)…The big 3, Ford (F), General Motors (GM) and Fiat Chrysler (FCA) have agreed to halt production on their assembly lines after the second shift tomorrow…Representative Mario Diaz-Balart (R-FL), has become the first member of Congress to test positive for Covid-19…The President invoked the Defense Production Act which allows the government to order American manufacturers to make critically needed equipment such as ventilators, respirators, and protective gear for health care workers…The New York stock exchange announced that as of Monday, they will close their trading floor and move to electronic trading at least temporarily…Brent crude dropped another 13% today to close at $24.88, the lowest since May 2003…Fannie Mae, Freddie Mac, and the Housing and Urban Development Department (HUD have suspended all foreclosures and evictions through April…The European Central Bank (ECB) announced a 750 billion Euro stimulus package which has sent the Dow futures up 500 points as of this writing.
Thursday – Dow +188 to 20,087, NDAQ +160 to 7,150 and the S&P +11 to 2,409. Although the Dow opened and promptly plunged 700 points, all three indices reversed and finally seemed to settle in today. The S&P broke an 8 day streak of gains or losses of 4% or greater…The Fed opened swap lines with central banks of nine new countries to continue to facilitate liquidity…Crude oil spiked 25%, its largest one day gain on record…Ford (F) drew down more than $15 billion from existing credit lines and announced that it is suspending its dividend. Estimates are that Ford now has a cash hoard of approximately $30 billion…As shutdowns and shelter in place policies begin to ripple through the economy, jobless claims rose 70k to 281k last week, surging to their highest levels since September 2017…California Governor Newsome this afternoon ordered the entire state to shelter in place…The Senate released their version of the $1 trillion Phase 3 stimulus plan. Negotiations will now begin with the House…The Dow futures opened down 600 points or so but have rallied and are now down 150 points or 85 basis points at the time of this writing. Can we continue to consolidate at these levels tomorrow or will we test that all important 2351 level on the S&P again?
Friday – Dow +(913) to 19,173, NDAQ (271) to 6,879 and the S&P (104) to 2,304. Despite an early rally of 500 some points on the Dow, the announcement that the state of New York was essentially ordering a shelter in place situation took all the wind out of the market’s sails. Immediately upon Governor Cuomo’s announcement, the entire rally dissipated and we eventually we drifted lower, broke the all important Dec 2018 low on the S&P and finished on the lows of the day…The Congress continues to negotiate a $1 trillion aid deal…There have been conflicting reports, some from the President himself as to whether he has actually used the Defense Production Act which he invoked on Wednesday but has or has not used to order private industry to produce masks, ventilators, and other protective gear for health workers…Delta’s (DAL) CEO reports that the airline is losing $50 million a day…The Fed expanded its bond purchase program to include municipal bonds…According to the New York Times, in addition to CA and NY, New Jersey, Connecticut and Illinois are all preparing to issue stay at home decrees.
The week in review…Dow (17%), NDAQ (12.6%), S&P (13%). Despite massive stimulus packages provided by the Fed and Congress, the markets continued their swift and violent sell off. Today the crucial 2351 level on the S&P was broken as it closed at 2,304. This will be be a crucial level to monitor next week. The markets will be eagerly awaiting news on an agreement on the $1 trillion stimulus package being negotiated between the House and the Senate. Thursday will see weekly jobless claims. This week’s print was 281k, up 33% over the week prior. Goldman Sachs is estimating that the number this Thursday will be 2.1 million.
Michael J. Castro