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Politics

Washington, D.C. (PPD) — President Donald J. Trump announced at the White House on Wednesday that he will invoke the Defense Production Act (DPA) to combat the spread of the coronavirus (COVID-19) that originated in Wuhan, China.

The announcement came during the daily press conference by the Coronavirus Task Force.

“We’ll be invoking the Defense Production Act just in case we need it,” the president said. “Right after we’re finished with this conference I’ll be signing it. We have it all prepared and ready to go.”

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)

The Defense Production Act (DPA) is the primary source of Presidential authorities to expedite and expand the supply of resources from the U.S. industrial base to support a number of agencies and programs.

Programs eligible for DPA support include everything from counter terrorism efforts within the United States to emergency preparedness activities conducted pursuant to title VI of the Stafford Act.

That includes the protection and restoration of critical infrastructure and the continuity of government. Put plainly, it allows the president to ramp up the production of items such as respirators, masks, etc.

Typically, it is used in the event of a Great War such as World War II and the Korean War.

President Trump also teased there are “some very exciting things” in the works at the Food and Drug Administration (FDA), and that his administration is working on removing bureaucratic barriers to speed up the process.

He announced the Coronavirus Task Force will hold a second press conference either later today or early tomorrow.

“I’ve asked the FDA to cut the red tape and reduce regulatory barriers,” he said. “We’ve been working very hard on some developments and we’ll be discussing them with you later today or tomorrow.”

Defense Secretary Mark Esper said the Pentagon will make available up to 5 million N-95 respirator masks and other personal protective equipment from strategic reserves at DoD to the Department of Health and Human Services (HHS) for distribution.

“The first 1 million masks will be available immediately,” he said. “We’re also prepared to distribute to HHS up to 2,000 operational deployable ventilators for use as needed.”

President Trump announced on Wednesday that he

Polls

Americans Also Widely Support Closures, Though Unity Strongest on Travel Bans

Green ribbon barrier inside an airport with the warning of travel restrictions due to the spread of the Coronavirus, or COVID-19. (Photo: AdobeStock)
Green ribbon barrier inside an airport with the warning of travel restrictions due to the spread of the Coronavirus, or COVID-19. (Photo: AdobeStock)

Asbury Park, N.J. (PPD) — Eight in 10 Americans adults agree with the president’s decision to impose travel bans on China and Europe to prevent the spread of the coronavirus. Only 12% disagree with the decision, according to a new Rasmussen Reports national online and telephone survey.

Overwhelming majorities across nearly all demographic blocs — to include partisan identification — support the temporarily travel bans from China and Europe.

While Republicans (91%) are more likely than Democrats (78%) and voters not affiliated with either major party (75%) to support the travel ban, all three are in at least three-fourths agreement.

Americans are also widely and solidly supportive of school closures, though not to the extent we see regarding the travel bans.

Seventy percent (70%) think the schools in their state should be closed in response to the coronavirus. Just 19% disagree and 11% are undecided. 

Democrats (82%) are more likely than Republicans (68%) and unaffiliated voters (61%) to support closing the schools in their state.

When asked which is closer to their own thinking, 64% of Americans say the numerous event closures and postponements in response to coronavirus are good thinking. Twenty-six percent (26%), however, view them as a panicked overreaction. Ten percent (10%) are not sure.

Interestingly, even among Americans who view the closures and postponements as panic and overreaction, 74% still agree with the travel bans from China and Europe.

However, only 39% of these adults favor closing the schools in their state.

The survey of 1,000 American Adults was conducted March 15-16, 2020 by Rasmussen Reports. The margin of sampling error is +/- 3 percentage points with a 95% level of confidence.

Eight in 10 Americans adults agree with

Elections

President Donald J. Trump speaks to young conservative activists at CPAC 2020 in National Harbor, Maryland on February 29, 2020. (Photo: People's Pundit Daily)
President Donald J. Trump speaks to young conservative activists at CPAC 2020 in National Harbor, Maryland on February 29, 2020. (Photo: People’s Pundit Daily)

Tallahassee, Florida (PPD) — President Donald Trump has clinched the 2020 Republican nomination scoring decisive wins against token opposition in Florida and Illinois. The president will now surpass the 1,276 delegate threshold.

While largely uncontested and only facing token challengers from NeverTrump, it was the earliest calendar date mathematically for a Republican to clinch the nomination.

He set records for votes received by an incumbent in nearly every contest thus far. It began in Iowa and New Hampshire and is likely to include the contests Tuesday in the Sunshine State and the Land of Lincoln.

President Trump had 1,141 delegates heading into Tuesday and only needed 135 more to clinch the nomination. Florida and Illinois award delegates on a winner-take-all basis, meaning the call in the president’s adopted home state put him over in the count.

This article will be updated shortly.

President Donald Trump has clinched the 2020

Markets

New York, N.Y. (PPD) — The Dow Jones Industrial Average (^DJI) roared more than 5% higher on Tuesday. The rally comes just one day after the index suffering its largest point drop on record and the second largest percentage drop.

The Dow closed up +1,048.79, or 5.19% higher at 21,237.31. That coups a little less than half the losses from Monday, when it closed down −2,997.10, or 12.93% at 20,188.52.

The percentage drop was rivaled only by Black Monday in 1987. It was filled largely by negative data out of China. The SSE Composite Index (^SSE) was down -98.18, or -3.40% to ¥2,789.25.

The National Bureau of Statistics reported data on Monday showing the “devastating” impact on the Chinese economy due to the coronavirus outbreak. Analysts warn the damage to the world’s second largest economy is likely far worse than initial indicators suggest.

But American markets surged at the opening bell and ticked higher on the daily press briefing from President Donald Trump and the Coronavirus Task Force.

U.S. Treasury Secretary Steve Mnuchin said the press conference that the Federal Reserve in conjunction with the U.S. Treasury Department will guarantee A1 P1 Commercial Paper.

It is a money-market security issued (sold) by large corporations in order to obtain funds to meet short-term debt obligations, to include payroll.

“Everything is going to come back,” the president vowed at the presser. “A life cannot come back. Our economy is going to come roaring back.”

The S&P 500 (^SPX) closed up +143.06, or 6.00% to 2,529.16. That’s a recovery of just over half the losses from Monday, when it was down −324.89, or 11.98% to 2,386.13.

The Nasdaq Composite (^IXIC) closed higher +430.19, or 6.23% to 7,334.78. That’s also about half the previous day’s losses, when it closed down −970.28, or 12.32% to 6,904.59.

The Russell 2000 (^RUT) closed up +61.60, or 5.94% at 1,099.02.

New York, N.Y. (PPD) — The Dow

Economy

Housing Market Index (HMI) Holds Firm in Low 70s

The NAHB/Wells Fargo Housing Market Index (HMI) finds builder confidence eased two points to 72 but remained solid amid rising uncertainty. Sentiment levels for newly-built single-family homes have held in a firm range in the low- to mid-70s for the past six months.

“Builder confidence remains solid, although sales expectations for the next six months dropped four points on economic uncertainty stemming from the coronavirus,” said NAHB Chairman Dean Mon. “Interest rates remain low, and a lack of inventory creates market opportunities for single-family builders.”

Builder confidence and residential construction, hew homes, housing starts, building permits, depicted on blueprints. (Photo: AdobeStock)
Builder confidence and residential construction, hew homes, housing starts, building permits, depicted on blueprints. (Photo: AdobeStock)

The NAHB has conducted the HMI for 30 years to gauge builder confidence in the current market for single-family home sales and sales expectations for the next six months. It asks them to rate each as “good,” “fair” or “poor.”

The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to derive a seasonally adjusted index. A reading over 50 indicates that more builders view conditions as good than poor.

“It is important to note that half of the builder responses in the March HMI were collected prior to March 4, so the recent stock market declines and the rising economic impact of the coronavirus will be reflected more in next month’s report,” said NAHB Chief Economist Robert Dietz. “Overall, 21% of builders in the survey report some disruption in supply due to virus concerns in other countries such as China. However, the incidence is higher (33%) among builders who responded to the survey after March 6, indicating that this is an emerging issue.”

The HMI index gauging current sales conditions fell only two points to 79, while the component measuring sales expectations in the next six months dropped four points to 75. The gauge of traffic for prospective buyers also fell one point to 56.

Builder Confidence By Region (3M Average)

Looking at the three-month moving averages for regional HMI scores, the Midwest fell two points to 66, the South moved one point lower to 77 and the West posted a one-point decline to 82. The Northeast rose two points to 64.

The NAHB/Wells Fargo Housing Market Index (HMI)

Economy

The Federal Reserve reported industrial production rose 0.6% in February, rebounding from a 0.5% in January to beat the consensus forecast. The forecast range was a low of -0.4% to a high of 0.7%, with a consensus 0.4%.

Manufacturing output ticked up 0.1% excluding a large gain for motor vehicles and parts and a large drop for civilian aircraft. Factory output was unchanged. The forecast range was a low of -0.5% to a high of 0.5%, with a consensus 0.2%.

The index for mining fell 1.5%, but the index for utilities soared 7.1%, as unseasonably warm temperatures in January returned to typical levels.

At 109.6% of its 2012 average, the level of total industrial production in February was unchanged from a year earlier.

Capacity utilization for the industrial sector increased 0.4 percentage point in February to 77.0%, a rate that is 2.8 percentage points below its long-run (1972–2019) average.

The forecast range was a low of 76.5% to a high of 77.5%, with a consensus 77%.

The Federal Reserve reported industrial production rose

Markets

Wall Street at the New York Stock Exchange (NYSE), the world's largest stock exchange by market capitalization of listed companies. (Photo: AdobeStock)
Wall Street at the New York Stock Exchange (NYSE), the world’s largest stock exchange by market capitalization of listed companies. (Photo: AdobeStock)

Stock market indices began the week with their largest percentage declines since the “Black Monday” stock market crash on October 19, 1987. Losses on Major Market Averages easily wiped out the record gains from last Friday, all posting record daily point declines.

The Bond Market was relatively calm. While the yield on the U.S. Treasury 10 year Note and 30 year Bond fell to 0.745% and 1.32% respectively, these are well above the record low yields from a week ago.

The Dow Jones Industrial Average (^DJI) fell nearly 3000 points, -2997.10 or -12.9% to settle at 20188.52, the lowest close for the Blue Chip benchmark since February 9, 2017, three months after the 2016 Presidential Election.

The S&P 500 (^SPX) settled at 2386.13 a loss on the day of a whopping -324.89 points or -12%. While a -13% decline would have triggered a second, or Level II Circuit Breaker, keep in mind that after 3:25 pm circuit breakers do not get activated and stocks are left to trade freely into the 4:00 pm close.  The S&P 500 close of 2386.13 was the lowest close since December 24, 2018 when the index closed at 2351.10.

The NASDAQ Composite (^IXIC) fell -970.28 points or -12.3% to close at 6904.59, the lowest close for the NASDAQ since January 8, 2018 when the index closed at 6897.00. As a point of reference, on December 24, 2018, the NASDAQ comp closed at 6192.92, over 700 points lower than yesterday’s close.

Oil prices added to the universal selloff in stocks as futures contracts for both Crude Oil WTI (WTI) and Brent Crude (CO) hit their lowest levels since the oil price shock from Saudi Aramco a week ago (feels like a month ago). WTI and Brent Crude traded below $30 and $32, respectively. The spread between the two shrank to less an $1 from approximately $4 the day after the price cut was announced.

I have to mention that the VIX volatility index, or the CBOE VIX, posted an all time high closing level of 82.7.  This eclipses prior highs from the 2008/09 Global Financial Crisis era.  I mention the VIX reluctantly, because It’s a terribly destructive product for market stability, and no one other than the most seasoned options and futures trading professionals should ever consider trading it.

The Bond Market Is a Sea of Calm

In contrast to the headline grabbing daily swings in the stock market, the Bond Market has been relatively calm. Since hitting record low yields a week ago Monday of 0.4% on the 10 year note and 0.9% on the 30 year bond, not even yesterday have bond yields come close to threatening those record low yields.

The Bond Market is many multiples larger than the Stock Market, even with the constant appreciation we’ve seen in equity values over the last few decades. The Bond Market is also infinitely more homogenous, with the U.S. Treasury Bills, Notes and Bonds being the benchmark that all sovereign and corporate debt is referenced to.

With all due respect to equity investors, the Bond Market has a long established track record of being a bit smarter than the stock market. The price action over the last 6 trading days may be telling us that bonds reached “Peak Panic” last Monday.

Stocks on the other hand are still in the process of “resetting” valuation levels to both the unknown economic implications from the Coronavirus and oil prices at a 25% to 30% discount to the last 5 years.

Stock market indices began the week with

Markets

Coronavirus Selloff Drives Dow Jones to Second Largest Percentage Drop on Record

New York, N.Y. (PPD) — The Dow Jones Industrial Average (^DJI) suffered its largest point drop on record Monday, amid concerns the economically constricting coronavirus restrictions could last until July or August.

While the major market indexes had been down at least 5% the entire trading session, a last-minute selloff was driven by remarks from President Donald Trump and the Coronavirus Task Force at the daily press briefing.

The Dow closed down −2,997.10, or 12.93% at 20,188.52. The percentage drop was rivaled only by Black Monday in 1987. Interestingly, it’s also only 2 of 13 large selloffs that were not followed by a recession.

The S&P 500 (^SPX) was down −324.89, or 11.98% to 2,386.13. The Nasdaq Composite (^IXIC) was down −970.28, or 12.32% to 6,904.59.

Coronavirus concerns triggered market-wide circuit breakers (MWCB) that halted trading twice last week. It took one minute after the opening bell on Monday for the market-wide circuit breakers to trip again.

The National Bureau of Statistics reported data on Monday showing the “devastating” impact on the Chinese economy due to the coronavirus outbreak, even though the spread of the virus appears to have turned a corner in China.

The SSE Composite Index (^SSE) was down -98.18, or -3.40% to  ¥2,789.25. Analysts warn the damage to the world’s second largest economy is likely far worse than initial indicators suggest. The data were averaged with January and excludes March, the period most impacted.

New York, N.Y. (PPD) — The Dow

Economy

Analysts Warn Coronavirus Impact to Chinese Economy Worse than Initial Indicators

China coronavirus cells to illustrate epidemic pandemic flu virus infection, with a Chinese flag background. (Photo: AdobeStock)
China coronavirus cells to illustrate epidemic pandemic flu virus infection, with a Chinese flag background. (Photo: AdobeStock)

Economic data on Monday showed the “devastating” impact the coronavirus outbreak had on the Chinese economy, though the spread of the virus appears to have turned a corner in China.

The National Bureau of Statistics reported that industrial output for the January to February period fell 13.5% on a year-over-year (YoY) measure. Fixed asset investment plunged by almost 25% and retail sales tanked 20.5% over the same period.

However, analysts warn the damage to the Chinese economy is far from over and indeed likely worse than initial reports indicate. The recent data was averaged between January and February, meaning a period excluding the vast majority of economic disruption in March.

Ting Lu, chief China economist for Nomura, said the impact to the Chinese economy in the first quarter (Q1) was “devastating.”

“In our view, the only question is how negative [Q1 GDP] will be.”

On Monday, the People’s Bank of China pumped ¥100 billion ($14.3 billion) into the financial system by introducing cheap loans to banks. On Friday, they also injected ¥550 billion ($78.6 billion) into the banking system by cutting the amount of cash banks must hold as reserves.

But as we saw in the U.S., central bank action didn’t stop the bleeding in the Shanghai index. The SSE Composite Index (^SSE) was down -98.18, or -3.40% to  ¥2,789.25.

The unemployment rate in China jumped to 6.3% in February from 5.2% in December. While the National Bureau of Statistics stated the economic picture could improve in Q2, the spike in unemployment will depress consumer spending.

Unlike the U.S. economy, the Chinese economy is still largely a goods-producing economy and not driven by consumer spending on the same level.

Mao Xinyong, a spokesman for the National Bureau of Statistics, said Monday at the press conference the government will take further action to stimulate the economy and counter the virus’ impact.

He said those actions will not include increasing liquidity to avoid gains in consumer prices. The government will look at fiscal and monetary measures such as lowering taxes, boosting government spending, lowering borrowing costs, job protection policies.

However, Mao conceded the actions will not mirror those in the wake of the 2008 Global Recession. It’s not feasibly given China’s debt has since surged, while the current account surplus and foreign exchange reserves have fallen.

Economic data on Monday showed the "devastating"

Markets

Futures Indicate Market-Wide Circuit Breakers Could Halt Trading

Graphic concept of the S&P 500 (^SPX) trading down in the red for losses. (Photo: AdobeStock)
Graphic concept of the S&P 500 (^SPX) trading down in the red for losses. (Photo: AdobeStock)

At 7:30 AM EST, S&P 500 (^SPX) futures pressed down the limit — 5% for off-hours trading — where they had been for most of the overnight session. The level thresholds to trigger market-wide circuit breakers (MWCB) for the index are as follows for March 16, 2020:

  • Level 1 = 2521.24 (7%)
  • Level 2 = 2358.58 (13%)
  • Level 3 = 2168.81 (20%)

Market-wide circuit breakers (MWCB) are important, automatic mechanisms invoked if markets experience extreme broad-based declines. Last week, trading was halted not once but twice on oil price collapse and coronavirus fears.

They are designed to slow the effects of extreme price movement through coordinated trading halts across securities markets when severe price declines reach levels that may exhaust market liquidity.

(i) If a Level 1 Market or a Level 2 decline occurs after 9:30 AM EST and up to and including 3:25 PM EST, the New York Stock Exchange (NYSE) shall halt trading in all stocks for 15 minutes. Trading shall be halted based on a Level 1 or Level 2 decline only once per trading day.

The Exchange will not halt trading if a Level 1 or a Level 2 decline occurs after 3:25 PM EST.

(ii) If a Level 3 decline occurs at any time during the trading day, the Exchange shall halt trading in all stocks until the primary listing market opens the next trading day.

Here are the S&P 500 (^SPX) level

People's Pundit Daily
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