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Markets

Graphic concept of the S&P 500 (^SPX) trading up in the green for gains. (Photo: AdobeStock)
Graphic concept of the S&P 500 (^SPX) trading up in the green for gains. (Photo: AdobeStock)

Right on cue, stock index futures were sporting gains close to +5%, three hours before the opening of trading in New York. As we saw Monday and numerous times over the last 2 weeks, the market has had a very difficult time holding early gap opening gains.

My gut feel is that we’re deeply enough oversold to hold at least a decent chunk of this morning’s gains through the end of the day.

After posting sharp declines during three of the last four trading days — the S&P 500 (^SPX) has lost -11.6% during that span — markets are due for at minimum a reflex rally. Market internals began to show an exhaustion of the selling pressure last Friday, and backed that up on Monday.

Yes, an early rally once again failed on Monday, despite the FED bringing out the Big Bazooka, in the form of the mother of all QE; we’ll call it QE-C for coronavirus, but keep in mind that initiatives by the Federal Reserve make their true impact overtime.

More on that later.

We listened with great interest to the daily White House press briefing early Monday evening on fighting the coronavirus. It was very clear from the outset that President Trump was intent on managing expectations for the end of the self imposed siege of basic commerce and the American way of life.

True to form, his messaging was not surreptitiously subtle. Within the first few minutes, two lines jumped out front and center.

“We can ot make the cure worse than the virus,” he stated, followed by, “This country was not built to be shut down.”

It will not take an outrageous leap of faith for financial markets to “get” that we’re talking weeks, not months, until the Self Siege begins to scale back.

Particularly, the Stock Market is and always has been the greatest predictive tool and leading indicator of reality in the history of the world.

Clearly, we still need to see a further escalation of testing, particularly in current “hot spots” and densely populated areas of the country.  We also need to see the rate of positive test results and the mortality rate normalize per demographic as the number of people tested increases exponentially.

Reasonable Expectations

Just to be clear, I’m not talking about a rocket ship move by the stock market back to 200 day moving average on the S&P 500 (^SPX) which is just above the 3000 level. As sharp and swift as the decline was, the recovery will take time.

A large majority of earnings expectations for S&P 500 (^SPX) companies have been rightfully scrapped for the year. Likewise, models on economic growth and other metrics for the macro economy need to be completely reworked.

Regardless of the heavy lift required to revive the bull market, simply an abatement of the selling pressure would be enough to lift the market somewhere in the range of +15%.

That would bring us above the 2500 level, maybe into a trading range to 2500 – 2700 on the S&P 500 (^SPX) as an initial recovery zone.

Graphic concept of the S&P 500 (^SPX)

Politics

President Donald Trump said during the press briefing for the Coronavirus Task Force on Monday that “this country was not built to be shutdown.”

“We will get through this challenge. The hardship will end. It will end soon. Normal life will return and our economy will rebound very strongly,” he said. “But right now in the midst of this trial, Americans must remain united and focused on victory.”

“To every single American, please know the sacrifice you’re making at this time is saving lives.”

The president’s remarks clearly signal he is trying to strike a balance between the competing data from economic and medical experts. While “Stop the Spread” called for a nearly two-week pause, a growing chorus of economists are warning about the longterm economic damage the shutdown will cause.

“America will open again and soon be back in business. Very soon, a lot sooner than people thought,” the president said. “We cannot let the cure be worse than the problem, itself.”

“At the end of the 15-day period, we’re going to make a decision on which way we want to go, where we want to go. Essentially the opening of our country.”

President Donald Trump said during the press

Politics

A graphic concept of the coronavirus on a yellow police tape against the backdrop of the Capitol Building in Washington DC. (Photo: AdobeStock)
A graphic concept of the coronavirus on a yellow police tape against the backdrop of the Capitol Building in Washington DC. (Photo: AdobeStock)

Washington, D.C. (PPD) — A coronavirus response bill has been stalled in the U.S. Senate by political gamesmanship, as Democrats block emergency relief to force concessions.

The Dow Jones Industrial Average (^DJI) and other major market indexes fell precipitously at the opening bell on Monday after the bill failed.

Multiple sources tell People’s Pundit Daily (PPD) Democrats were resigned to voting for the bill until Republican lawmakers — including Senator Rand Paul, R-Kty. — tested positive for the coronavirus. Senate Democrats are now leveraging the required vote count to push for a wishlist.

The current laundry list of demands includes parts of the Green New Deal (GND), new fuel emission standards for airlines, collective bargaining rights for unions and election reforms long pushed by the left.

Senate Minority Leader Chuck Schumer, D-N.Y., said Senate Democrats blocked the bill in large part because it included corporate bailouts and didn’t include enough funding for hospitals.

“We voted no on the McConnell-GOP bill because among other problems it includes huge bailouts without protections for people and workers and without accountability, and because it shortchanges our hospitals and healthcare workers who need our help,” he tweeted after more than the minimum 41 votes needed to stop the bill were cast.

While Democrats said the bill skewed too heavily toward helping corporations at the expense of workers and families, comments by Democratic lawmakers in private tell a different tale.

“This is a tremendous opportunity to restructure things to fit our vision,” Majority Whip James Clyburn, D-S.C., told his colleagues on a conference call last Thursday, according to a source on the call.

The Trump Administration responded to the criticism on Monday. Larry Kudlow, the Director of the National Economic Council at the White House, said the loans are key to preventing economic collapse and will be transparent.

“It’s not a slush fund. That will get money to small- and medium-sized businesses. It will also get money to key parts of the economy that are distressed. That will all be done transparently,” he said.

“This is something that’s the corner, the keystone. The Treasury will run it with the FED. It will inject liquidity. That’s probably the fastest way to get liquidity and credit into the economy.”

The Federal Reserve said the bill will provide loan relief for student loans, automobile loans, credit card loans, small business loans, money market loans and corporate bonds.

“This is what will keep us whole while the virus flattens out,” Mr. Kudlow added.

Senate Leader Mitch McConnell, R-Kty., slammed Democrats for forcing the country into “a war without ammunition.”

“This is the day it has to stop,” Leader McConnell said. “The country is out of time.”

The coronavirus response bill has been stalled

Markets

The New York Stock Exchange (NYSE) from the corner of Wall Street Nassau Street during the Conoravirus (COVID-19) outbreak on March 19, 2020. (Photo: People's Pundit Daily)
The New York Stock Exchange (NYSE) from the corner of Wall Street Nassau Street during the Conoravirus (COVID-19) outbreak on March 19, 2020. (Photo: People’s Pundit Daily)

New York, N.Y. (PPD) — Week four of the coronavirus selloff saw the largest weekly declines for market averages yet, as many states imposed highly restricted travel, hundreds of business shuttered stores and plants, and likely a few million people found themselves unemployed.

On late Sunday, the U.S> Senate failed to advance a $1.4 trillion “Phase Three” financial assistance plan. Shortly thereafter, stock index futures opened down the -5% limit for off hours trading.

Three hours before the opening of the trading day, stock index futures have lifted off their “limit down” peg from early last evening. While still projecting a lower opening, we’re talking ~-3% rather than -5% to -6%.

While the weekly market data has widely headlined, we would be remiss to ignore it, with of course relevant comparables, and for the optimists, what may be a few initial signs of positive divergence hidden beneath the headlines.

The Dow Jones Industrial Average (^DJI) finished the week with a decline of -17.3% to settle at 19173.98. As a crude point of reference from over 30 years ago, the DJIA declined -22% on October 19, 1987, typically referred to as Black Monday.

The S&P 500 (^SPX) declined -15% on the week to settle at 2304.98, the first close below the December 24, 2018 low of 2351. The Ackman low, midday Wednesday last week was 2280.

The NASDAQ Composite (^IXIC) at 6879.52 saw a decline on the week of -12.6%. This was the lowest close for the NASDAQ since January 7, 2019, two weeks after the December 24, 2018 close of 6192.92. The Ackman low from last Wednesday is 6686.36.

The Russell 2000 (^RUT) fell -16.2% this week to settle at 1013.98. The Russell has declined -40.2% from February 20 when it closed at 1696.07 just four weeks ago.

The Dow Jones Transportation Average declined -14% on the week to settle at 6837.72. The DJTA is lower by -38% in four weeks since closing at 11032.96 on February 20.

Just before the coronavirus selloff began, many of these market averages were posting all-time highs, or close to it during the third week of February. Shortly thereafter the proverbial s**t hit the fan.

Looking at the declines from February 20 through March 20, the numbers are astounding. We’re talking 22 trading days on the calendar — that’s 4 weeks, plus a couple days.

During the coronavirus selloff, the DJIA, S&P500 and NASDAQ composite have declined -35%, -32% and -30%, respectively.

Going back to the Global Financial Crisis in 2008, the worst 3 weeks saw the S&P 500 decline -33% from September 19 to October 11. Very interesting point of reference.

Maybe you’re starting to feel worn out by the daily barrage of negative news, and feeling a bit inundated with “trading halts to the downside” and “record daily declines”, the obvious question is: “Isn’t down over 30% in a month enough?

I’m Glad You Asked that Question!

On Friday, after a gap opening higher failed miserably (they always do), major market averages sold off steadily throughout the afternoon to close at their lows of the day. Losses ranged from -3.7% on the NASDAQ composite to -4.5% on the DJIA. The S&P 500 lost -4.3%, as all averages closed at new lows for this move, while the DJIA and S&P 500 settled just above the intraday Ackman Lows from Wednesday.

For the first time, on a day of sharp declines, market internals may be showing signs that the selling is at an exhaustion point.

Market breadth was not nearly as negative as other 4%+ declines over the last month. While declining issues led advancers by 17 to 13, those stats were running 10 to 1 or greater as recently as Monday and Wednesday of last week.

On Friday we had 299 new 52 week lows on the NYSE. On both Monday and Wednesday of last week we had over 2000 new lows each day.

Down volume was 63% of total volume. We’ve had at least 8 days in the last month that were 90% down volume days.

The CBOE Volatility Index (^VIX) closed at 66. Earlier in the week it hit 82, which was equivalent to the all time highs from the depths of the Global Financial Crisis in 2008.

Just to be Clear…..

I’m not saying to expect an imminent V shaped market rally …..yet. First we need congress to pass the “Phase Three” economic relief package. Then a leveling off in the number of infection cases, particularly in densely populated “hot spots”.

In the meantime, if market internals show more stabilization like Friday, it will support that the selling pressure is becoming exhausted.

During the coronavirus selloff, the DJIA, S&P500

Economy

Existing Home Sales +6.5% in February, Highest Level Since February 2007

Washington, D.C. (PPD) — Existing home sales surged 6.5% in February to the highest level in 13 years, easily beating the consensus forecast and high end of the range. The National Association of Realtors (NAR) said only the Northeast saw a decline, “while other areas saw increases, including sizable sales gains in the West.”

Forecasts ranged from a low of 5.39 million to a high of 5.65 million. The consensus forecast was 5.50 million.

File photo: A sold sign on an existing home. (Photo: AdobeStock)
File photo: A sold sign on an existing home. (Photo: AdobeStock)

Total existing-home sales — which are completed transactions that include single-family homes, townhomes, condominiums and co-ops — rose to a seasonally-adjusted annual rate of 5.77 million in February. Overall sales rose significantly year-over-year for the eighth straight month, up 7.2% from a year ago (5.38 million in February 2019).

“February’s sales of over 5 million homes were the strongest since February 2007,” said Lawrence Yun, NAR’s chief economist. “I would attribute that to the incredibly low mortgage rates and the steady release of a sizable pent-up housing demand that was built over recent years.”

The median existing-home price for all housing types in February was up 8.0% from February 2019 ($250,100) to $270,100. Prices rose in every region and it marks 96 straight months of year-over-year gains.

Existing home sales surged 6.5% in February

Polls

Trump’s Approval Ratings Reverse and Spike Amid Growing Concerns

President Donald J. Trump announces he will invoke the Defense Production Act (DPA) during the daily press conference by the Coronavirus Task Force on March 18, 2020. (Photo: People's Pundit Daily)
President Donald J. Trump announces he will invoke the Defense Production Act (DPA) during the daily press conference by the Coronavirus Task Force on March 18, 2020. (Photo: People’s Pundit Daily)

New York, N.Y. (PPD) — A new ABC News/Ipsos poll finds 55% of Americans approve of President Donald Trump’s handling of the coronavirus crisis. while only 43% disapprove. That’s almost a complete reversal from last week, when 54% disapproved and 43% approved.

Interestingly, roughly double the percentage of Democrats (30%) now approve this week from the last, and 69% disapprove, down from 86%. An overwhelming 92% of Republicans approve, which up from 86% last week, and only 8% disapprove, compared to 11% last week.

That may or may not have something to do with 87% of Democrats being concerned about getting the coronavirus, including 37% who are very concerned. Republicans remain the least concerned, with 66% saying they are concerned, including 23% who are very concerned.

Only 12% of Democrats and 34% of Republicans are not concerned.

Eighty-five percent (85%) of Independents are concerned about getting the coronavirus and 15% are not concerned.

“Aside from the swing in the president’s approval rating on the crisis from last week, it’s remarkably high given this is a sample of adults, not registered voters or likely voters,” said Richard Baris, the director of Big Data Poll and the PPD Election Projection Model. “It is almost certainly higher among both of those populations.”

This ABC News/Ipsos poll was conducted by Ipsos Public Affairs‘ KnowledgePanel® March 18-19, 2020, in English and Spanish, among a random national sample of 512 adults. Results have a margin of sampling error of 5.0 points, including the design effect. See the article here and the poll’s topline results and details on the methodology here.

A new ABC News/Ipsos poll finds 55%

Markets

Bill Ackman, CEO of Pershing Square Capital Management and well-known hedge fund manager. (Photo: Screenshot via CNBC)
Bill Ackman, CEO of Pershing Square Capital Management and well-known hedge fund manager. (Photo: Screenshot via CNBC)

New York, N.Y. (PPD) — Mid-trading day Wednesday, well-known fund manager Bill Ackman appeared on a widely viewed financial news network with an epic, emotionally charged rant, pleading for the most draconian, martial law-on-Steroids prescription at the national level.

This rant, concluding with “Hell is Coming!” went on for maybe close to 15 minutes. His message — from someone who alleges to be not only a responsible adult, but a Billion Dollar fund manager — had obvious market impact.

In short order the market spiralled lower; first, triggering the 15 minute Market Wide Circuit Breaker at -7% on the S&P 500 cash. Upon reopening, stocks continued lower until ~2:30 pm. The last 90 minutes of trading saw a rally of over +5%, including nearly a 1000 point recovery for the DJIA.

The Wednesday intraday lows, courtesy of Mr. Ackman, of DJIA 18,920 and S&P 500 2,280.50 will be know for years, maybe decades, as the #AckmanLows.

The Dow Jones Industrial Average (^DJI) managed a gain of +188.27, or +0.95% to close at 20,087.19, reclaiming the benchmark 20,000 level.  While the ~+1% gain appears meager at best, the DJIA had threatened the 19,000 level during sharp declines in the first 30 minutes of trading.

The remainder of the trading day saw a range of over 1,250 points for the Blue Chip average. After settling much much closer to the day’s highs than lows, market watchers were frankly thrilled with the morning reversal off the “Ackman Lows” from Wednesday.

The S&P 500 (^SPX) settled at 2,409.39, a gain of +11.29 or +0.5%. Never mind the modest gain, for the second day, the index rallied off intra day lows to close above the December 24, 2018 close of 2,351.10.

Should the S&P 500 continue to hold both 2,351.10 on a closing marker, and the intraday “Ackman Low” of ~2,280 from Wednesday, that declines of ~-30% in a month are enough to establish a tradeable level, at least in the near term.

The Nasdaq Composite (^IXIC) built on its relative strength from Wednesday with a gain of +160.73, or +2.3% to close at 7,150.58. We’ve seen numerous comments this week that FANG and related companies in the digital space are likely to fare slightly better during a “Virus Shakeout” and that theme has gained a bit of support the last couple days.

The Russell 2000 (^RUT) was clearly the outperformer Thursday, and it was overdue. The small cap benchmark gained +67.58 points, or +6.8%. On Wednesday, the Russell posted it’s lowest close; 991.16 since the February 12 2016 close of 971.99.

On February 20, the Russell closed at 1,696.07. Wednesday’s close marked a -41.5% decline for the Russell 2000 in 19 Trading Days!! Time for some Mean Reversion!!

The Early Line

Stock index futures are projecting a higher opening later this morning after stocks rallied off the #AckmanLows yesterday.

Throughout this selloff, stocks have struggled to hold early openings that gap higher. We will have very high volumes both on the opening and in the last 15 minutes of the day, courtesy of a quadruple expiration of stock options, stock index options and stock index futures.

There is no doubt investors would be thrilled with any positive price action to end the week.

Stock index futures are projecting a higher

Economy

Initial Jobless Claims Highest Since September 2, 2017; 4-Week Average Highest Since January 27, 2018

The U.S. Labor Department (DOL) reported initial jobless claims rose far more than expected to 281,000 for the week ending March 14, attributable to the coronavirus (COVID-19). That’s an increase of 70,000 from the previous week’s unrevised 211,000.

This is the highest level for initial claims since September 2, 2017 when it was 299,000. Forecasts ranged from a low of 218,000 to a high of 240,000. The consensus forecast was 220,000.

The 4-week moving average was 232,250, an increase of 16,500 from the previous week’s revised average. That’s the highest level for the average since January 27, 2018 when it was 234,500.

The previous week’s average was revised up by 1,750 from 214,000 to 215,750.

Lagging Jobless Claims Data

U.S. initial jobless claims graph on a tablet screen. (Photo: AdobeStock)
U.S. initial jobless claims graph on a tablet screen. (Photo: AdobeStock)

The advance seasonally adjusted insured unemployment rate was unchanged at a very low 1.2% for the week ending March 7. The advance number for seasonally adjusted insured unemployment during the week ending March 7 was 1,701,000, rising 2,000 from the previous week’s revised level.

The previous week’s level was revised down by 23,000 from 1,722,000 to 1,699,000. The 4-week moving average came in at 1,703,250, a decline of 7,000 from the previous week’s revised average. The previous week’s average was revised down by 17,250 from 1,727,500 to 1,710,250.

No state was triggered “on” the Extended Benefits program during the week ending February 29.

The highest insured unemployment rates in the week ending February 29 were in Alaska (2.7), New Jersey (2.7), Connecticut (2.5), Montana (2.4), Pennsylvania (2.4), Rhode Island (2.4), West Virginia (2.4), Illinois (2.3), California (2.2), Minnesota (2.2), and Puerto Rico (2.2).

The largest increases in initial claims for the week ending March 7 were in California (+1,707), Texas (+1,663), Washington (+846), North Carolina (+808), and Florida (+472), while the largest decreases were in New York (-17,173), Ohio (-3,371), Georgia (-969), Virginia (-740), and Wisconsin (-606).

Initial jobless claims rose 70,000 to 281,00

Polls

Party Affiliation Does Not Impact Opinion on Postponing Election in November

3D graphic illustration of a virus infecting a ballot box during an election, while voting. (Photo: AdobeStock)
3D graphic illustration of a virus infecting a ballot box during an election, while voting. (Photo: AdobeStock)

One in four voters are ready to postpone the election in November — for the first time in U.S. history — if the coronavirus threat continues. Interestingly, there’s no statistical significance in opinion based on party affiliation.

According to a new Rasmussen Reports national online and telephone survey, 25% of likely voters think the election should be delayed “if necessary” due to the threat from the coronavirus, or COVID-19. Sixty-two percent (62%) are opposed and 13% are undecided.

Republicans (26%), Democrats (25%) and unaffiliated voters (25%) agree on delaying the election, and that unanimity is even higher on the question of delaying upcoming primaries.

Nearly half (48%) of all likely voters support delaying upcoming state primaries due to the coronavirus, and 37% disagree and 15% are not sure. Republicans (52%), Democrats (48%) and unaffiliated voters (45%) agree on delaying the primaries, while 35%, 37% and 37%, respectively, disagree.

Poll: 8 in 10 Americans Support Travel Bans on China and Europe to Limit Coronavirus Spread

The survey of 1,000 Likely Voters was conducted March 17-18, 2020 by Rasmussen Reports. The margin of sampling error is +/- 3 percentage points with a 95% level of confidence.

One in four voters support postponing the

Markets

New York, N.Y. (PPD) — Traders on the New York Stock Exchange (NYSE) and around the U.S. are assessing the damage to the stock markets only one month after the coronavirus outbreak.

The European Central Bank announced a new €750 billion bond-buying program early Thursday morning to combat the coronavirus-related economic slowdown.

European markets have only moderate gains of +1% to +3%  a couple hours into European trading.

Oil prices traded at an 18 year low, barely holding the benchmark $20 level.  Early this morning Oil is having a reflex rally, trading in the $22 – $23 range.

U.S. Treasury yields continue to move higher as the yield curve continues to steepen. The U.S. 10-Year T-Note (US10YTN) hit a yield of 1.26% overnight. At 7:00 AM EST the yield has backed off to 1.16%.

The Dow Jones Industrial Average (^DJI) closed below the psychological 20000 level for the first time since Groundhog Day 2017 (seriously, look it up!). Closing at 19,898.92, the DJIA lost -1,338.46 or -6.3%. If you’re looking for a green shoot, the DJIA rallied nearly 1000 points off its intra-day low during the last 90 minutes of the trading day.

The DJIA has declined -32.7% since the high of 29,568 five weeks ago.

The S&P 500 (^SPX) declined -131.09, or -5.2% to close at 2398.10. Rallying over +5% in the last 90 minutes, the S&P 500 held its December 24, 2018 close of 2351. The index also closed more than +2% above where the market wide circuit breaker triggered a 15 minute trading halt minutes before 1:00 pm.

On any “back and fill” action the next few days, watch the 2,350 level, and below that, 2,280 as a test of near term technical support that should hold, if Wednesday is to mark a tradable low, at least going into the end of March and Q1.

The S&P 500 has declined -29% from its February 19 high of 3,386.15 one month ago.

The Nasdaq Composite (^IXIC) fell -335 points, or -4.7% to close at 6,989.84. This is slightly higher than the Monday close of 6,904.59. The NASDAQ is still +13% higher than the December 24, 2018 close at 6,192.92.

If you’re looking for near term resistance on any reflex rally, the intraday highs of 7,422 and 7,406 from Monday and Tuesday of this week are right in line with the dual reaction lows of 7,411.52 and 7,333.02 from March 8 & June 3, 2019.

The NASDAQ composite has declined -29% from its high of 9817.18 one month ago today.

The Russell 2000 (^RUT) at 991.16, has had the most dramatic decline over the last month, declining a mind boggling -41.5% over the last month. On February 20, the Russell closed at 1,696.07, its second highest close over the last 18 months.

The Early Line

With stock index futures trading -1% to -2% lower in early trading, we may challenge the intraday lows from earlier this week. That being said, wild price swings have become the norm over the last 3 weeks.

Clearly, most investors and traders will take their cue from the late morning White House briefing, as well as movement from congress on National Assistance Legislation.

Assessing the damage to the stock markets,

People's Pundit Daily
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