Stocks Retreat on Technical Profit-Taking, Lower Oil Prices

New York, N.Y. (PPD) — Retail sales for March declined an astounding -8.7%. Industrial Production in March saw the largest decline since 1946. The Empire State Manufacturing report for April was -78.2 (NOT a typo).

Q1 earnings reports were equally breathtaking, as a hand full of banks added an aggregate $20 Billion to their loan loss reserves.

Guess what?

Not one investment professional was surprised by this. Briefing.com had consensus for March retail sales at -10% and their own private forecast at -12%. Industrial Production was forecast to be -4. It was -5.4%. When we get the revision for March retail sales, it will be revised to a double digit loss and no one will notice.

Economic forecasts and earnings estimates, for any or all of 2020 belong in the trash bin, not in print; either paper or digital, as they would if they have any predictive value.

Stocks are Trading off Technicals, Geo-Economic Data and Progress Fighting the Virus.

Technicals: Stock market averages had rallied between +25% and +30% in 3 weeks and a day since the March 23 lows. We were due for a pause. Even a retrace on half of that 3 week rally would be not only acceptable, but healthy.

Let’s take a closer look at Wednesday’s market:

The Dow Jones Industrial Average (^DJI) settled at 23504.35; -445.41 or -1.9%. That comes after a +2.4% gain on Tuesday.

The S&P 500 (^SPX) declined -62.70 or -2.2% to close at 2783.36. On Wednesday, the S&P 500 gained +3.1%. That’s a net gain of nearly +1% over 2 days…..We’ll take it!! Also let’s watch to see in 2800 becomes a meaningful resistance level on any further market strength the next few days.

The NASDAQ Composite (^IXIC) closed at 8393.18, a decline of -122.56, or -1.4%. The Nasdaq closed fractionally below the 200 day moving average of 8400. After a +4% gain on Tuesday, we’ll watch closely if that 200 day MA becomes an important technical inflection point the next few days.

Geo-Economic

Crude Oil WTI (CL) closed below the critical $20 benchmark for the first time since 2002. That was 2 years after the dot-com bubble burst in the early spring of 2000. The Energy sector had the worst performance; -4.7%, (followed by financials, -4.3%) among the 11 industry sectors in the S&P 500. If Oil can develop a meaningful move off the $20 level there will be critical long term damage to the global economy. Only a significant increase in demand will accomplish this.

Fighting the Virus

While Governor Cuomo proclaimed Wednesday that “the worst is behind us” we just had the 2 highest death count days nationally, since the onset of the crisis. While clearly deaths lag tallies for infection counts and hospitalizations, it was a depressing optic. We’ll look for more positive data on this front the remainder of this week and next.

Later today we will get updated guidelines from the CDC as a first step toward reopening the economy.

We got an early hint yesterday when Governor Cuomo issued an executive order that people in public places wear face masks when they are unable to adhere to social distancing guidelines. Read this as mass transit for starters!

I view this as a positive, not a draconian measure like we are seeing from other state governors……If you’re not on the verge of getting people back to