Wednesday, at 2:18 pm Eastern Time, the Dow Jones Industrial Average sank into bear market territory on an intraday basis when it broke below 23,654.72, officially marking the end of the 11-year bull run since the Great Financial Crisis of 2008-09.
By the close of trading, the Dow also fell into bear market territory on a closing basis, finishing below 23,641.14.
Falling as low as 23,338.96 shortly after 3:00 pm, a brief attempt at a rally was undertaken, but eventually failed, leaving the market in tatters, and the future uncertain.
Wednesday night, President Trump made a brief televised appearance, outlining the government's steps to curb the global pandemic that is COVID-19, banning all travel from Europe to the United States for 30 days, beginning at midnight, Friday, the 13th of March. The president also instructed the Small Business Administration to extend loans to small businesses and to increase funding for the program by $50 billion.
These measures are being implemented to help slow the spread of COVID-19, the coronavirus that has spread globally to 115 countries, sickening more than 127,000 people and killing 4,717. There have been 1323 cases of COVID-19 in the United States and 38 deaths. The numbers have jumped dramatically over the past week, both in the US and around the world, especially in Italy, Spain, France, and Germany.
With markets opening in minutes, and stock futures at distressed levels, this evolving story will be updated.
At the Close, Wednesday, March 11, 2020:
Dow Jones Industrial Average: 23,553.22, -1,464.94 (-5.86%)
NASDAQ: 7,952.05, -392.20 (-4.70%)
S&P 500: 2,741.38, -140.85 (-4.89%)
NYSE: 11,177.29 -615.99 (-5.22%)
Thursday, March 12, 2020
Wednesday, March 11, 2020
Record Rise on NASDAQ; Big Gains on Dow, S&P Relieve Bear Market Fears... for Now
(Simultaneously published at Downtown Magazine)
In case anybody is growing weary of the recent volatility that has sent stocks soaring and diving over the past three to four weeks, prepare for more of the same. There will be no respite in daily swings of two percent, three percent or more, as yesterday proved, as stocks staged a monumental rally in the latter part of the the session, the Dow rising more than 1000 points in the final two hours.
At the end of the day, all major indices were approaching gains of five percent. Keeping with the trend of record-breaking sessions, the Dow's rise was the third largest point gain in market history. The other two occurred earlier this month. On March 2nd, the Industrials set the mark with a gain of 1,293.96 points. Tow days later, it came close to breaking that, up by 1,173.45 points.
With an eye toward the VIX - the market's preferred measure of volatility - this kind of roller coaster ride should continue until there's resolution to the downside. The VIX has recently hovered in the 40-50 range, ripping as high as 55. Normal volatility is usually measured in the teens.
The NASDAQ and S&P also experienced massive upside Tuesday afternoon, resulting in a record point gain on the NASDAQ, up 393.58 points, surpassing the record set just over a week ago, on March 2nd (+384.80). The S&P's gain of 135.67 points fell just shy of the record mark, also recorded on March 2nd, at +136.01.
In this regime of wild swings, it's probable that some traders are going to make massive profits while others fail miserably. It's all about timing and nerves. Anybody with poor timing and a thin appetite for risk is likely to be wiped out in short order. Those who relish the thrill of the hunt and have money to burn should come out ahead in the end, varying trades between long and short, at least until the market overseers ban short sales or profiting on put options.
It may not be obvious to the general public, but where this is head seems pretty clear. The coronavirus, COVID-19, has wreaked havoc on human society, thus disrupting the normal flow of business, a trend that's only just begun. Businesses are only beginning to feel the effects of breaks in the supply chain from China, and soon enough the entire planet's trade will be paralyzed by delays, outages, work stoppages, quarantines, deaths, and all the assorted maladies that accompany global pandemics, the likes of which have not presented themselves in the lifetimes of anybody alive today.
Estimates from medical experts are frightening, which is why the numbers being released by the CDC in the United States are nothing short of a bad joke. Over the past week, the CDC has "officially" recorded anywhere between 2 and 19 new cases of COVID-19 daily, this in a country with a projected population of 333,546,000.
Actual incidence of infection is orders of magnitude higher; that can be safely assumed. With the aid of the CDC, the US government has chosen to protect the economy rather than the people, a strategy doomed to fail. Without effective measures for controlling and containing the spread of the disease - as has been accomplished to a relatively high degree in places like Hong Kong, Singapore, and South Korea - via testing, contact tracking, and quarantine - it will spread virtually unchecked through a population. The evidence from the epicenter in Wuhan, China is compelling in this regard. Akin to what happened there, the US approach is dangerously close to causing a widespread outbreak in any number of cities by ignoring simple precautions and putting money ahead of human health.
What would an economy look like with 200 deaths per day, hospitals overwhelmed and people forced to stay indoors and away from others for weeks at a time? We, and some European nations are about to find out. With a population spoiled by the luxuries of freedom, it's not going to be much fun watching entitled populations melt down under the imposition of travel bans, quarantines, and other draconian measures.
As for stocks, well, their pathway will be all but assured. The Dow Jones Industrials bounced off a mark of declination on Tuesday when it bottomed out at 23,690.34. It was down 19.88% from the intraday high of 29,568.57, recorded on February 12 of this year. It was about to fall into bear market territory. The day's gains may have staved off capitulation for now, but it's coming, and soon. The end of the 11-year bull market and the beginning of what could be a prolonged bear market is at hand.
At the Close, Tuesday, March 10, 2020:
Dow Jones Industrial Average: 25,018.16, +1,167.14 (+4.89%)
NASDAQ: 8,344.25, +393.58 (+4.95%)
S&P 500: 2,882.23, +135.67 (+4.94%)
NYSE: 11,793.27, +494.84 (+4.38%)
In case anybody is growing weary of the recent volatility that has sent stocks soaring and diving over the past three to four weeks, prepare for more of the same. There will be no respite in daily swings of two percent, three percent or more, as yesterday proved, as stocks staged a monumental rally in the latter part of the the session, the Dow rising more than 1000 points in the final two hours.
At the end of the day, all major indices were approaching gains of five percent. Keeping with the trend of record-breaking sessions, the Dow's rise was the third largest point gain in market history. The other two occurred earlier this month. On March 2nd, the Industrials set the mark with a gain of 1,293.96 points. Tow days later, it came close to breaking that, up by 1,173.45 points.
With an eye toward the VIX - the market's preferred measure of volatility - this kind of roller coaster ride should continue until there's resolution to the downside. The VIX has recently hovered in the 40-50 range, ripping as high as 55. Normal volatility is usually measured in the teens.
The NASDAQ and S&P also experienced massive upside Tuesday afternoon, resulting in a record point gain on the NASDAQ, up 393.58 points, surpassing the record set just over a week ago, on March 2nd (+384.80). The S&P's gain of 135.67 points fell just shy of the record mark, also recorded on March 2nd, at +136.01.
In this regime of wild swings, it's probable that some traders are going to make massive profits while others fail miserably. It's all about timing and nerves. Anybody with poor timing and a thin appetite for risk is likely to be wiped out in short order. Those who relish the thrill of the hunt and have money to burn should come out ahead in the end, varying trades between long and short, at least until the market overseers ban short sales or profiting on put options.
It may not be obvious to the general public, but where this is head seems pretty clear. The coronavirus, COVID-19, has wreaked havoc on human society, thus disrupting the normal flow of business, a trend that's only just begun. Businesses are only beginning to feel the effects of breaks in the supply chain from China, and soon enough the entire planet's trade will be paralyzed by delays, outages, work stoppages, quarantines, deaths, and all the assorted maladies that accompany global pandemics, the likes of which have not presented themselves in the lifetimes of anybody alive today.
Estimates from medical experts are frightening, which is why the numbers being released by the CDC in the United States are nothing short of a bad joke. Over the past week, the CDC has "officially" recorded anywhere between 2 and 19 new cases of COVID-19 daily, this in a country with a projected population of 333,546,000.
Actual incidence of infection is orders of magnitude higher; that can be safely assumed. With the aid of the CDC, the US government has chosen to protect the economy rather than the people, a strategy doomed to fail. Without effective measures for controlling and containing the spread of the disease - as has been accomplished to a relatively high degree in places like Hong Kong, Singapore, and South Korea - via testing, contact tracking, and quarantine - it will spread virtually unchecked through a population. The evidence from the epicenter in Wuhan, China is compelling in this regard. Akin to what happened there, the US approach is dangerously close to causing a widespread outbreak in any number of cities by ignoring simple precautions and putting money ahead of human health.
What would an economy look like with 200 deaths per day, hospitals overwhelmed and people forced to stay indoors and away from others for weeks at a time? We, and some European nations are about to find out. With a population spoiled by the luxuries of freedom, it's not going to be much fun watching entitled populations melt down under the imposition of travel bans, quarantines, and other draconian measures.
As for stocks, well, their pathway will be all but assured. The Dow Jones Industrials bounced off a mark of declination on Tuesday when it bottomed out at 23,690.34. It was down 19.88% from the intraday high of 29,568.57, recorded on February 12 of this year. It was about to fall into bear market territory. The day's gains may have staved off capitulation for now, but it's coming, and soon. The end of the 11-year bull market and the beginning of what could be a prolonged bear market is at hand.
At the Close, Tuesday, March 10, 2020:
Dow Jones Industrial Average: 25,018.16, +1,167.14 (+4.89%)
NASDAQ: 8,344.25, +393.58 (+4.95%)
S&P 500: 2,882.23, +135.67 (+4.94%)
NYSE: 11,793.27, +494.84 (+4.38%)
Tuesday, March 10, 2020
Stocks Lose Record Amounts, Treasury Bond Yields Smashed As COVID-19 Begins Taking Its Toll
All of the major US indices posted record losses as coronavirus (COVID-19) continues to rage through 115 countries, with 114,595 confirmed cases and a death toll now over 4,000 (4,028).
Adding to market grief, Saudi Arabia, in an effort to harm other oil producers sent crude futures plunging as it unilaterally slashed prices and raised production output. WTI crude fell below $30 a barrel, recovering slightly to above $34.00 a barrel prior to Tuesday's opening bell. Still, the price cut was mammoth, on the order of a 24.6% decline. WTI closed at $41.28 Friday, finishing at $31.13 on Monday.
The Dow, S&P, NASDAQ, and NYSE all recorded record point losses, blowing away earlier marks. The Dow's 2,013.76 loss nearly doubled the previous record from February 27 of this year (−1,190.95). On The NASDAQ, the 624.94-point loss topped the list, easily surpassing the February 9 drop of −414.30.
Losing 225,81, the S&P vaulted over its previous mark of −137.63, also on February 27 of this year, less than two weeks ago.
The treasury bond complex was not spared, with yields falling across the entire curve by enormous amounts. The 30-year bond finished at 0.99% yield, the first time ever it has been below one percent. The day's decline was an unprecedented 26 basis points. At the other end, one-month bills dropped 22 basis points, from 0.79 to 0.57%.
Offering the lowest yield is the six-month bill, at 0.27%. The 10-year note was absolutely shattered, down 20 basis points, from 0.74 to 0.54%. In terms of curve, the complex is exceedingly flat, with just 72 basis points between the top and bottom yields.
Gold and silver both were higher initially, but were beaten down over the course of the day.
In the United States, the number of new, confirmed cases are rising rapidly as tests from the CDC begin arriving in massive quantities to state and local hospitals and labs. There are now 755 cases of coronavirus in the US, and 26 deaths.
After China, the US ranks 8th overall. Italy has reported 9,172 cases with 463 deaths. Italy's death figures are the highest outside mainland China, as are the number of cases. The Italian government closed its borders completely on Monday after efforts to contain the virus to the northern provinces failed.
The other countries topping the list of most infected are, in order, South Korea, Iran, France, Spain, and Germany, after which comes the United States. All of the aforementioned countries are reporting more than 1,000 cases. Confirmed cases outside China has exceeded those inside China for nearly the past week and are doubling every three to four days.
In addition to the human tragedy, large events are being canceled worldwide. Ireland has canceled all St. Patrick's Day parades, and around the world sporting events, concerts and other large-crowd gatherings are being put on hold or canceled, including the huge South-by-Southwest (SXSW) conference in Austin, Texas. The NCAA basketball tournament, commonly known as March Madness, which begins in a week, NBA basketball, and Major League Baseball, which opens its regular season on March 26, are all mulling the idea of playing games with no fans in the stands.
Businesses are gearing down due to the crisis, with many major firms instructing employees to work from home. School cancelations are on the rise globally, and will be widespread in the US in coming days and weeks.
The after-effects of the virus on the business community and the economy are just beginning to be felt according to many in finance, including hedge fund manager Kyle Bass, who believes the crisi will peak in about a month.
Even though the World Health Organization (WHO) is reluctant to call the worldwide spread of the pathogen a pandemic, it is surely one. The WHO does not want to use the world pandemic as it would trigger the default of "pandemic bonds," designed to provide $500 million to the organization should a pandemic be declared.
With less than an hour before the opening bell in the US, stocks seem to have caught a bid. Japan's NIKKEI was lower for most of the day but finished marginally higher on Tuesday. Other Pacific Rim bourses finished with gains of one to one-and-a-half percent, while European indices are currently sporting gains of around 2.5%.
US stock futures point to a higher open, as traders prepare for another stressful session. The so-called "dead cat bounce" applies, as the markets don't seem to have actually bottomed out. When all is said and done, many countries are going to report GDP losses for the first and likely, second quarters, plunging the world into what may be a prolonged recession.
At the Close, Monday, March 9, 2020:
Dow Jones Industrial Average: 23,851.02, -2,013.76 (-7.79%)
NASDAQ: 7,950.68, -624.94 (-7.29%)
S&P 500: 2,746.56, -225.81 (-7.60%)
NYSE: 11,298.43, -1,053.60 (-8.53%)
Adding to market grief, Saudi Arabia, in an effort to harm other oil producers sent crude futures plunging as it unilaterally slashed prices and raised production output. WTI crude fell below $30 a barrel, recovering slightly to above $34.00 a barrel prior to Tuesday's opening bell. Still, the price cut was mammoth, on the order of a 24.6% decline. WTI closed at $41.28 Friday, finishing at $31.13 on Monday.
The Dow, S&P, NASDAQ, and NYSE all recorded record point losses, blowing away earlier marks. The Dow's 2,013.76 loss nearly doubled the previous record from February 27 of this year (−1,190.95). On The NASDAQ, the 624.94-point loss topped the list, easily surpassing the February 9 drop of −414.30.
Losing 225,81, the S&P vaulted over its previous mark of −137.63, also on February 27 of this year, less than two weeks ago.
The treasury bond complex was not spared, with yields falling across the entire curve by enormous amounts. The 30-year bond finished at 0.99% yield, the first time ever it has been below one percent. The day's decline was an unprecedented 26 basis points. At the other end, one-month bills dropped 22 basis points, from 0.79 to 0.57%.
Offering the lowest yield is the six-month bill, at 0.27%. The 10-year note was absolutely shattered, down 20 basis points, from 0.74 to 0.54%. In terms of curve, the complex is exceedingly flat, with just 72 basis points between the top and bottom yields.
Gold and silver both were higher initially, but were beaten down over the course of the day.
In the United States, the number of new, confirmed cases are rising rapidly as tests from the CDC begin arriving in massive quantities to state and local hospitals and labs. There are now 755 cases of coronavirus in the US, and 26 deaths.
After China, the US ranks 8th overall. Italy has reported 9,172 cases with 463 deaths. Italy's death figures are the highest outside mainland China, as are the number of cases. The Italian government closed its borders completely on Monday after efforts to contain the virus to the northern provinces failed.
The other countries topping the list of most infected are, in order, South Korea, Iran, France, Spain, and Germany, after which comes the United States. All of the aforementioned countries are reporting more than 1,000 cases. Confirmed cases outside China has exceeded those inside China for nearly the past week and are doubling every three to four days.
In addition to the human tragedy, large events are being canceled worldwide. Ireland has canceled all St. Patrick's Day parades, and around the world sporting events, concerts and other large-crowd gatherings are being put on hold or canceled, including the huge South-by-Southwest (SXSW) conference in Austin, Texas. The NCAA basketball tournament, commonly known as March Madness, which begins in a week, NBA basketball, and Major League Baseball, which opens its regular season on March 26, are all mulling the idea of playing games with no fans in the stands.
Businesses are gearing down due to the crisis, with many major firms instructing employees to work from home. School cancelations are on the rise globally, and will be widespread in the US in coming days and weeks.
The after-effects of the virus on the business community and the economy are just beginning to be felt according to many in finance, including hedge fund manager Kyle Bass, who believes the crisi will peak in about a month.
Even though the World Health Organization (WHO) is reluctant to call the worldwide spread of the pathogen a pandemic, it is surely one. The WHO does not want to use the world pandemic as it would trigger the default of "pandemic bonds," designed to provide $500 million to the organization should a pandemic be declared.
With less than an hour before the opening bell in the US, stocks seem to have caught a bid. Japan's NIKKEI was lower for most of the day but finished marginally higher on Tuesday. Other Pacific Rim bourses finished with gains of one to one-and-a-half percent, while European indices are currently sporting gains of around 2.5%.
US stock futures point to a higher open, as traders prepare for another stressful session. The so-called "dead cat bounce" applies, as the markets don't seem to have actually bottomed out. When all is said and done, many countries are going to report GDP losses for the first and likely, second quarters, plunging the world into what may be a prolonged recession.
At the Close, Monday, March 9, 2020:
Dow Jones Industrial Average: 23,851.02, -2,013.76 (-7.79%)
NASDAQ: 7,950.68, -624.94 (-7.29%)
S&P 500: 2,746.56, -225.81 (-7.60%)
NYSE: 11,298.43, -1,053.60 (-8.53%)
Monday, March 9, 2020
Weekend Wrap: This Is Bad; Oil Crashes; Stock Futures Limit Down; Global Market Panic in Progress
Thanks to a late-day ramp on Friday afternoon, the week turned out to be mostly positive for the investor class, though it certainly didn't seem to be that way most as the days wore onward.
With a 600-point buying spree on the Dow Jones Industrial Average - which pulled all the other indices higher as well - stocks finished with gains instead of substantial losses. After a week of wild swings, the mood had turned ugly, accentuated by cascading drops on Thursday and Friday at the opening bells both days and concerted selling in airline stocks, banks, and hospitality.
As pronounced as the near-panic over the prior five trading sessions was, what's ahead on Monday will be worse by orders of magnitude.
Beginning with the coronavirus (COVID-19) decimating economies and social structure from China to Italy to South Korea, Iran, and beyond, slumping demand and forecasting of a bleak near-term future prompted extreme action from Saudi Arabia over the weekend. On Friday, when Russia refused to go along with a planned 1.5 million barrels a day reduction in crude production by OPEC+ nations, the Saudis decided to put the screws to everyone in the oil business by slashing their rates and ramping up production.
The impact of this momentous decision on Saturday was immediately felt across not just the oil futures markets but equity and credit markets around the world. With all major indices closed as usual on Sunday, focus was attuned to futures, which were being hammered lower by as much as seven percent in some cases. In the US, futures trading was halted when the Dow, S&P, and NASDAQ futures fell by five percent, otherwise known as limit down.
Crude futures were down by extreme amounts. WTI crude was last seen at $32.07 per barrel, a 22% loss from Friday, when it was selling in the low 40s per barrel.
Bonds were being battered as well, with reports that the benchmark 10-year note was trading with a yield below 0.48% (at one point yielding an all-time low of 0.31%) and other bond yields were being destroyed in markets that began to open, first in Japan, China and the Far East, then to Europe. If fear of COVID-19 contagion was palpable, the contagion from the economic fallout had become all to real.
With US markets set to open in an hour, the condition is dire.
A quick rundown of the carnage on major indices around the world:
Suppression of the precious metals, the only remaining asset class that may hold some value, continues unabated as global economies come under severe pressure. Gold gained marginally, to $1678.00 per ounce, following a banner performance last week. Silver is under even more pressure, trading at $16.83 on futures markets, making a mockery of the gold/silver ratio, which is nearly 100:1. In more measured times - as in all centuries prior to this one - the gold silver ratio was pretty steady at 12:1 to 16:1. The current measure is a bad joke on a bad day, told by bad people with nothing but evil intentions (central banks).
Silver would have to rise to $100 per ounce for the gold/silver ratio to be anywhere near historical norms. With gold on the verge of a major breakout above $2000 per ounce, silver should - some day, maybe - be worth over $150 per ounce or similar equivalent in some other currency.
Monday's open should be epic. The aftermath, and the expected coordinated response by central banks figures to be a complete clown show, highlighted by massive injections of cash, POMO, TOMO, market-neutral rates, negative rates, and eventually, some collapsing banks. Couldn't happen to a more deserving crowd.
Money Daily will provide updates as time allows. Panic is a mild term for what's about to occur.
At the Close, Friday, March 6, 2020:
Dow Jones Industrial Average: 25,864.78, -256.52 (-0.98%)
NASDAQ: 8,575.62, -162.97 (-1.86%)
S&P 500: 2,972.37, -51.57 (-1.71%)
NYSE: 12,352.03, -240.97 (-1.91%)
For the Week:
Dow: +455.42 (+1.79%)
NASDAQ: +8.25 (+0.10%)
S&P 500: +18.15 (+0.61%)
NYSE: -28.94 (-0.23%)
With a 600-point buying spree on the Dow Jones Industrial Average - which pulled all the other indices higher as well - stocks finished with gains instead of substantial losses. After a week of wild swings, the mood had turned ugly, accentuated by cascading drops on Thursday and Friday at the opening bells both days and concerted selling in airline stocks, banks, and hospitality.
As pronounced as the near-panic over the prior five trading sessions was, what's ahead on Monday will be worse by orders of magnitude.
Beginning with the coronavirus (COVID-19) decimating economies and social structure from China to Italy to South Korea, Iran, and beyond, slumping demand and forecasting of a bleak near-term future prompted extreme action from Saudi Arabia over the weekend. On Friday, when Russia refused to go along with a planned 1.5 million barrels a day reduction in crude production by OPEC+ nations, the Saudis decided to put the screws to everyone in the oil business by slashing their rates and ramping up production.
The impact of this momentous decision on Saturday was immediately felt across not just the oil futures markets but equity and credit markets around the world. With all major indices closed as usual on Sunday, focus was attuned to futures, which were being hammered lower by as much as seven percent in some cases. In the US, futures trading was halted when the Dow, S&P, and NASDAQ futures fell by five percent, otherwise known as limit down.
Crude futures were down by extreme amounts. WTI crude was last seen at $32.07 per barrel, a 22% loss from Friday, when it was selling in the low 40s per barrel.
Bonds were being battered as well, with reports that the benchmark 10-year note was trading with a yield below 0.48% (at one point yielding an all-time low of 0.31%) and other bond yields were being destroyed in markets that began to open, first in Japan, China and the Far East, then to Europe. If fear of COVID-19 contagion was palpable, the contagion from the economic fallout had become all to real.
With US markets set to open in an hour, the condition is dire.
A quick rundown of the carnage on major indices around the world:
- NIKKEI (Japan) -5.07%
- Straits Times Index (Taiwan, Pacific Rim) -6.03%
- SSE Composite (China) -3.01%
- Hang Seng (Hong Kong) -4.23%
- BSE Sensex (India) -5.17%
- All Ordinaries (Australia) -7.40%
- KOSPI (South Korea) -4.19%
- MOEX (Russia) -3.45
- Jakarta Composite (Indonesia) -6.58%
- FTSE Bursa (Malaysia) -3.97%
- DAX (Germany) -7.00%
- CAC-40 (France) -7.14%
- FTSE 100 (England) -6.93%
- EuroNext 100 (Europe composite) -7.50%
Suppression of the precious metals, the only remaining asset class that may hold some value, continues unabated as global economies come under severe pressure. Gold gained marginally, to $1678.00 per ounce, following a banner performance last week. Silver is under even more pressure, trading at $16.83 on futures markets, making a mockery of the gold/silver ratio, which is nearly 100:1. In more measured times - as in all centuries prior to this one - the gold silver ratio was pretty steady at 12:1 to 16:1. The current measure is a bad joke on a bad day, told by bad people with nothing but evil intentions (central banks).
Silver would have to rise to $100 per ounce for the gold/silver ratio to be anywhere near historical norms. With gold on the verge of a major breakout above $2000 per ounce, silver should - some day, maybe - be worth over $150 per ounce or similar equivalent in some other currency.
Monday's open should be epic. The aftermath, and the expected coordinated response by central banks figures to be a complete clown show, highlighted by massive injections of cash, POMO, TOMO, market-neutral rates, negative rates, and eventually, some collapsing banks. Couldn't happen to a more deserving crowd.
Money Daily will provide updates as time allows. Panic is a mild term for what's about to occur.
At the Close, Friday, March 6, 2020:
Dow Jones Industrial Average: 25,864.78, -256.52 (-0.98%)
NASDAQ: 8,575.62, -162.97 (-1.86%)
S&P 500: 2,972.37, -51.57 (-1.71%)
NYSE: 12,352.03, -240.97 (-1.91%)
For the Week:
Dow: +455.42 (+1.79%)
NASDAQ: +8.25 (+0.10%)
S&P 500: +18.15 (+0.61%)
NYSE: -28.94 (-0.23%)
Friday, March 6, 2020
Stocks Struck, Bonds Bought, Gold Soaring As COVID-19 Coronavirus Continues to Prompt Worldwide Response; Fed Powerless
While no records were broken on Thursday, US stocks gave back most of the gains made on Wednesday, as volatility remained elevated. The most-widely quoted measure of volatility, the VIX, spiked to 46.25, a level not seen since the onset of the Great Financial Crisis (GFC) in October 2008. A normal range for the VIX is between 12 and 18. The measure is currently indicating extreme stress in equity markets.
Another gauge of how severe this latest foray into and out of correction territory is the treasury yield curve and individual duration yields. The benchmark of the treasury complex is the 10-year note, which continues to be bought, sending the yield spiraling downward to unprecedented levels.
On Thursday, yields across the treasury complex were hammered lower. The 10-year-note fell from 1.02% on Wednesday to as low as 0.87% on Thursday, finally settling at another new record low of 0.92%. As long as equities remain under pressure - a timeline which could extend not just days or weeks, but months - bonds will be the safe haven and yields will fall.
The 30-year bond, which began the year at 2.33% and was at 2.09% as recently as February 12, crashed another nine basis points on the day, to a record low 1.56%. Shorter duration bills and notes were also being bought, sending yields skidding. The 2-year note was yielding 1.44% a month ago, closed out Thursday at 0.59%. The 1-year continues to offer the lowest yield, 0.48%, while the shortest duration, the 1-month bill yields 0.92. The short end is inverted, signaling economic chokepoints dead ahead.
All of this market turmoil has been the cause of the widely-spread coronavirus, or COVID-19, its official name. With worldwide cases now over 100,000, deaths over 3,400, and the increase in daily infections outside of mainland China now surpassing those from inside China, there's little doubt that the pandemic has reached crisis proportions.
The current hotspots continue to be South Korea (6,593 cases), Iran (4,747) and Italy (3,858), though countries in Europe are beginning to spike higher, especially in Germany, France, Spain, and Switzerland.
The United States is currently reporting 233 cases, though the lack of preparedness and test kits assures that the number is higher by orders of magnitude. With an asymptomatic (not showing obvious symptoms of infection) period of up to 27 days in which the carrier can spread the virus, the number of cases in the United States - as wel as everywhere else - is likely to spike higher within the next week or two. While this is speculation, it is based upon recognizable patterns of the virus, from evidence gathered in South Korea, Italy and on the cruise ship, Diamond Princess, which was ported in Japan for a month and served as a kind of petri dish for study of the disease.
With quarantine the most effective measure to mitigate the spread of coronavirus, the fear in markets is that entire communities will become isolated, workplaces shuttered, large events cancelled. Those scenarios and more have already been evidenced in China, South Korea, Italy and elsewhere. There's no escaping the realities of this global outbreak.
Along the lines of seeking out safe havens, gold has been a superstar, at a seven year high, $1,686.30 per ounce. Silver has lagged, but continues to appreciate, the current price $17.46 per ounce.
Crude oil continues to languish as global demand has collapsed. Even after OPEC announced a cut of half a million barrels a day, the price of WTI crude oil slipped further, currently at $44.06 per barrel.
In what has to be the most inconsequential data release in recent memory, the Labor Department released the February non-farm payroll report, which showed employers added 273,000 jobs nationwide, dropping the unemployment rate to 3.5%, though all of this data is viewed through a lens that was looking prior to the extreme global outbreak of COVID-19.
Markets will remain unsettled as long as the virus remains in its virulent form. With no good remedies or a vaccine readily available, fear will dominate financial markets and it is more likely to get worse before it gets any better. The United States has not yet seen the effects of widespread outbreak, which is all but certain to occur.
Even with Thursday's large losses, stocks are still ahead for the week from two to three percent, depending on the index in question. Bank stocks have suffered tremendous losses, as have airlines, but the damage to stocks has been pretty much an all-in matter. 90% of stocks on the S&P 500 are trading below their 10-day moving averages.
As of Friday morning, the Dow is still ahead by 2.80% on the week, but the market is poised for another down day and the near-term bottom of 24,681.01 (intraday) is certain to be tested in short order.
The Federal Reserve, which cut the federal funds rate by 50 basis points in an emergency cut on Tuesday, meets on March 17-18, with the market calling for a 50 to 75 basis point cut, which would bring the rate down below one percent. Even though the Fed will likely cut the rate at the meeting - and again at its April meeting - it is unlikely to offer much in the way of relief. The Fed cannot print a vaccine, nor halt the spread of an invisible, virulent virus which is rampaging around the world.
At the Close, Thursday, March 5, 2020:
Dow Jones Industrial Average: 26,121.28, -969.58 (-3.58%)
NASDAQ: 8,738.59, -279.49 (-3.10%)
S&P 500: 3,023.94, -106.18 (-3.39%)
NYSE: 12,593.03, -416.93 (-3.20%)
Another gauge of how severe this latest foray into and out of correction territory is the treasury yield curve and individual duration yields. The benchmark of the treasury complex is the 10-year note, which continues to be bought, sending the yield spiraling downward to unprecedented levels.
On Thursday, yields across the treasury complex were hammered lower. The 10-year-note fell from 1.02% on Wednesday to as low as 0.87% on Thursday, finally settling at another new record low of 0.92%. As long as equities remain under pressure - a timeline which could extend not just days or weeks, but months - bonds will be the safe haven and yields will fall.
The 30-year bond, which began the year at 2.33% and was at 2.09% as recently as February 12, crashed another nine basis points on the day, to a record low 1.56%. Shorter duration bills and notes were also being bought, sending yields skidding. The 2-year note was yielding 1.44% a month ago, closed out Thursday at 0.59%. The 1-year continues to offer the lowest yield, 0.48%, while the shortest duration, the 1-month bill yields 0.92. The short end is inverted, signaling economic chokepoints dead ahead.
All of this market turmoil has been the cause of the widely-spread coronavirus, or COVID-19, its official name. With worldwide cases now over 100,000, deaths over 3,400, and the increase in daily infections outside of mainland China now surpassing those from inside China, there's little doubt that the pandemic has reached crisis proportions.
The current hotspots continue to be South Korea (6,593 cases), Iran (4,747) and Italy (3,858), though countries in Europe are beginning to spike higher, especially in Germany, France, Spain, and Switzerland.
The United States is currently reporting 233 cases, though the lack of preparedness and test kits assures that the number is higher by orders of magnitude. With an asymptomatic (not showing obvious symptoms of infection) period of up to 27 days in which the carrier can spread the virus, the number of cases in the United States - as wel as everywhere else - is likely to spike higher within the next week or two. While this is speculation, it is based upon recognizable patterns of the virus, from evidence gathered in South Korea, Italy and on the cruise ship, Diamond Princess, which was ported in Japan for a month and served as a kind of petri dish for study of the disease.
With quarantine the most effective measure to mitigate the spread of coronavirus, the fear in markets is that entire communities will become isolated, workplaces shuttered, large events cancelled. Those scenarios and more have already been evidenced in China, South Korea, Italy and elsewhere. There's no escaping the realities of this global outbreak.
Along the lines of seeking out safe havens, gold has been a superstar, at a seven year high, $1,686.30 per ounce. Silver has lagged, but continues to appreciate, the current price $17.46 per ounce.
Crude oil continues to languish as global demand has collapsed. Even after OPEC announced a cut of half a million barrels a day, the price of WTI crude oil slipped further, currently at $44.06 per barrel.
In what has to be the most inconsequential data release in recent memory, the Labor Department released the February non-farm payroll report, which showed employers added 273,000 jobs nationwide, dropping the unemployment rate to 3.5%, though all of this data is viewed through a lens that was looking prior to the extreme global outbreak of COVID-19.
Markets will remain unsettled as long as the virus remains in its virulent form. With no good remedies or a vaccine readily available, fear will dominate financial markets and it is more likely to get worse before it gets any better. The United States has not yet seen the effects of widespread outbreak, which is all but certain to occur.
Even with Thursday's large losses, stocks are still ahead for the week from two to three percent, depending on the index in question. Bank stocks have suffered tremendous losses, as have airlines, but the damage to stocks has been pretty much an all-in matter. 90% of stocks on the S&P 500 are trading below their 10-day moving averages.
As of Friday morning, the Dow is still ahead by 2.80% on the week, but the market is poised for another down day and the near-term bottom of 24,681.01 (intraday) is certain to be tested in short order.
The Federal Reserve, which cut the federal funds rate by 50 basis points in an emergency cut on Tuesday, meets on March 17-18, with the market calling for a 50 to 75 basis point cut, which would bring the rate down below one percent. Even though the Fed will likely cut the rate at the meeting - and again at its April meeting - it is unlikely to offer much in the way of relief. The Fed cannot print a vaccine, nor halt the spread of an invisible, virulent virus which is rampaging around the world.
At the Close, Thursday, March 5, 2020:
Dow Jones Industrial Average: 26,121.28, -969.58 (-3.58%)
NASDAQ: 8,738.59, -279.49 (-3.10%)
S&P 500: 3,023.94, -106.18 (-3.39%)
NYSE: 12,593.03, -416.93 (-3.20%)
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