Wall Street Breakfast

Author: bmotrader   |   Latest post: Fri, 3 Apr 2020, 8:59 AM


Wall Street Breakfast: Dow Ends Historic 11-Year Bull Run

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S&P 500 and Nasdaq futures fell another 5% in overnight action, hitting the so-called limit down threshold, as the two indexes look to join the Dow Jones Industrial Average in bear market territory. The latter, which tumbled another 1,200 points in recent hours, crashed on Wednesday after the WHO classified the coronavirus outbreak as a pandemic for the first time. Threatening more disruptions to the world economy, President Trump said all travel from Europe to the U.S. would be suspended for 30 days. Efforts were also announced on deferred tax payments, payroll tax relief and low interest business loans, but investors seemed to have been looking for more.

How long will the bear market last?

Markets seem to be moving on three data points: oil, coronavirus headlines and fiscal stimulus. "Consumers sitting at home and not out spending money is the ultimate negative outcome," added Scott Wren, senior global market strategist at Wells Fargo Investment Institute. The average bear market wipes about 36% off the S&P 500 and lasts for about seven months, according to Dow Jones Market Data. Some traders say it won't be there for long, but others say it depends on whether the economy heads into recession, which is typically accompanied by steep share-price declines.

Latest coronavirus updates

Around 70M to 150M people in the U.S. will become infected with COVID-19, according to Dr. Brian Monahan, the attending physician of Congress and the U.S. Supreme Court. The Fed is raising the maximum offering of its daily operations in the repo market to $175B (from $150B) through mid-April, while the NBA announced it will suspend the season until further notice. Italy has also tightened its nationwide lockdown - after the nation's coronavirus death toll jumped 30% in 24 hours - ordering all non-essential shops and services to close (supermarkets and pharmacies will remain open).

Eyes on ECB's Lagarde

Europe is awash with red, with the Euro Stoxx 50 tanking nearly 7% during the session, after President Trump blamed the continent for not taking adequate action to control the spread of the coronavirus. The plunge arrives ahead of the latest monetary policy decision from the ECB, which is expected to announce stimulus measures to mitigate the economic impacts of Covid-19 (the BOE cut rates earlier this week). During the session in Asia, BOJ Governor Haruhiko Kuroda said the central bank was ready to respond with further steps without hesitation.

Latest blow to airlines

This is "probably worse" than the demand experienced after 9/11, said JetBlue (NASDAQ:JBLU) CEO Robin Hayes. An unprecedented 30-day ban on foreigners arriving from most of Europe is set to further roil the travel industry, especially ahead of the peak spring and summer travel season. The State Department has further issued a Level 3 warning that recommends U.S. citizens to reconsider all travel abroad, "even countries, jurisdictions, or areas where cases have not been reported may restrict travel without notice."

Cash problems

Boeing (NYSE:BA) is freezing new hiring and overtime except in certain critical areas to preserve cash as the coronavirus compounds the fallout from a year-old grounding of its 737 MAX. News that Boeing was planning to draw down the rest of a $13.8B loan it took last month sent shares tumbling 18% on Wednesday, their biggest one-day percentage drop since 1974. Other issues: Boeing booked 46 cancellations last month, resulting in a net loss of 28 orders, as carriers switch from the grounded MAX to other planes.

Proxy battle

Carl Icahn is doubling down on a fight to take control of Occidental Petroleum (NYSE:OXY), upping his stake in the embattled oil-and-gas producer to 10%, from 2.5% at the end of last year. The activist investor has long-criticized the company for its $38B acquisition of Anadarko Petroleum and is seeking to replace OXY's entire board, which includes CEO Vicki Hollub, at its annual meeting this spring. Occidental's market value has shrunk to less than $11B from more than $46B just before the deal was struck, prompting the company this week to slash its dividend and cut FY 2020 capex spending.

Working from home is mandatory

"We are moving beyond our earlier guidance of 'strongly encouraging work from home' provided on March 2 and have now informed all employees globally they must work from home," Twitter (NYSE:TWTR) wrote in a blog post. The company will also provide reimbursement toward additional daycare expenses, home office set up costs and continue to pay salaries to contractors and hourly workers who are not able to perform their responsibilities from home. The new policy applies to all employees globally, or 4,900 workers.

Coronavirus ad policy reversed

YouTube (GOOG, GOOGL) will discontinue classifying COVID-19 content as a "sensitive event," enabling ads on some videos discussing coronavirus, according to CEO Susan Wojcicki. "It's becoming clear this issue is now an ongoing and important part of everyday conversation, and we want to make sure news organizations and creators can continue producing quality videos in a sustainable way," reads a blog post. YouTube previously did not allow monetization if a video includes more than "a passing mention" of the coronavirus.

Amazon Relief Fund

The company is providing up to two weeks of pay for employees who are diagnosed with the coronavirus or placed into quarantine. It's also establishing the Amazon Relief Fund with an initial $25M to support delivery service partners, Flex workers, and seasonal employees experiencing financial stress due to the virus. "The health and safety of our employees and contractors around the world continues to be our top priority as we face the challenges associated with COVID-19," said Beth Galetti, Amazon (NASDAQ:AMZN) VP of human resources.

Today's Markets

In Asia, Japan -4.4%. Hong Kong -3.7%. China -1.5%. India -8.2%.
In Europe, at midday, London -5.4%. Paris -5.4%. Frankfurt -5.6%.
Futures at 6:20, Dow -5%. S&P -5%. Nasdaq -5%. Crude -5.9% to $31.02. Gold -0.3% to $1638.10. Bitcoin -13% to $6781.
Ten-year Treasury Yield -1 bps to 0.68%

Today's Economic Calendar

8:30 Initial Jobless Claims
8:30 Producer Price Index
10:00 Quarterly Services Report
10:30 EIA Natural Gas Inventory
1:00 PM Results of $16B, 30-Year Note Auction
4:30 PM Money Supply
4:30 PM Fed Balance Sheet


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