Highlights

Wall Street Breakfast

Author: bmotrader   |   Latest post: Fri, 14 Aug 2020, 7:19 AM

 

Wall Street Breakfast: Volatility At Record Highs

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The rollercoaster on Wall Street continued overnight as U.S. stock index futures climbed 5% to hit 'limit up' levels. A day late? Equities plunged Monday despite unprecedented efforts by the Fed to expand purchases of U.S. Treasurys and MBSs "as needed," and implement measures to backstop credit for households, small businesses and major employers. While the U.S. Senate is still at odds over a coronavirus stimulus package, there is some hopeful news as both new cases and deaths dropped for two days running in Italy. "43 days was exactly the same amount of time as it took South Korea to reach its apex. And if such is the case, the U.S. would be 14 days behind Italy," said Thomas Lee, head of research at Fundstrat Global Advisors.

Fed surprises again

The "whatever it takes" attitude was also seen by the Fed's willingness to buy corporate bonds and corporate bond exchange traded funds. The buying spree is not unlimited - the Fed cannot own more than 20% of any one ETF, or 10% of individual corporate bonds - and purchases will only be made in investment grade corporate bonds, not high yield. While this is new for the U.S., Japan has been buying ETFs (even equity funds) for several years.
 

American business may reopen soon

The White House is discussing easing social distancing guidelines as early as next week as advisers and business leaders push President Trump to boost an economy beset by deepening job losses nationwide, WSJ reports. "We're not going to let the cure be worse than the problem," Trump said at a press briefing late Monday, echoing an earlier tweet. "America will again and soon be open for business. It won't be that long."
 

Easing the coronavirus lockdown

Chinese authorities are planning to lift the mass quarantine on the central province of Hubei, where the coronavirus first emerged last December. The news comes days after Hubei reported that new infections dropped to zero (if you can believe the statistics). Only locals deemed free from contagion risk will be allowed to leave, while restrictions on the capital city of Wuhan will last two more weeks.

Over in Europe

"Once the crisis is over - and we hope this will be the case in several months - we will return to austerity policy," German Economy Minister Peter Altmaier declared after unveiling a €750B stimulus package. Meanwhile, Italy is reportedly in favor of giving the bloc's countries access to the eurozone's ESM bailout fund with "no conditionality." GDP in France is already "collapsing at an annualized rate approaching double digits," according to IHS economist Eliot Kerr, as Markit's composite PMI came in at 30.2 for March, the lowest figure since the series began in 1998.

Nike reports after the bell

While essentials retailers have seen an uptick in deliveries, it remains to be seen what kind of demand there is for expensive sneakers. Nike's (NYSE:NKE) results may not entirely reflect the effect of the coronavirus (coming in the May quarter), but they will provide some picture of what's going on with the company and how the crisis will impact consumers and the economy. On March 16, Nike shuttered all of its stores in the U.S., Canada, Western Europe, Australia and New Zealand and the closures will be in effect until Friday (unless extended).
 

U.S. airlines could ground themselves

Major U.S. carriers are prepping plans for a potential voluntary shutdown of passenger flights across the U.S. if air traffic controller staffing emergencies continue to crop up or demand falls much further, Dow Jones reports. Also on the table... the federal government could at some point halt all U.S. flights in an effort to deal with the pandemic. Air traffic is already at a minimal level, with the TSA reporting a drop of 80% on Sunday compared to the same day a year ago. Related stocks: American (NASDAQ:AAL), Delta (NYSE:DAL), United (NASDAQ:UAL), Southwest (NYSE:LUV), JetBlue (NASDAQ:JBLU), Spirit (NYSE:SAVE), Hawaiian (NASDAQ:HA), Alaska Air (NYSE:ALK).

Insider trading vigilance

The SEC has issued a sharp warning against trading on nonpublic information related to COVID-19 following stock sales that have sparked calls for investigations. NYSE (NYSE:ICE) Chairman Jeff Sprecher and his wife Sen. Kelly Loeffler sold up to $3M worth of securities in the weeks before market indexes plunged, and on the heels of a private, all-senators briefing about the virus outbreak on Jan. 24. Sales by senators Richard Burr, James Inhoffe and Diane Feinstein have also come under scrutiny.

Postponing the Olympics

More countries are coming out in support of postponing the Olympics, like the U.S. and New Zealand. "The parameters going forward have not been determined, but the Games are not going to start on July 24, that much I know," said longtime International Olympic Committee member Dick Pound. Any postponement would be a blow for host country Japan, which has pumped in more than $12B of investment, and huge sums are also at stake for sponsors and broadcasters, including Comcast (NASDAQ:CMCSA) and Discovery (NASDAQ:DISCA).

A community effort

As General Motors (NYSE:GM) accelerates 'Project V' to build ventilators in Indiana, another Big Three automaker is looking to do its part to combat the coronavirus pandemic. Fiat Chrysler (NYSE:FCAU) is beginning to manufacture more than 1M protective face masks per month, which will be donated to police, EMTs, firefighters and healthcare workers. The company, which is also giving support to increase ventilator production, will disclose "further actions related to the fight against the coronavirus in the coming days."
 

Today's Markets

In Asia, Japan +7%. Hong Kong +4.5%. China +2.3%. India +2.7%.
In Europe, at midday, London +4.2%. Paris +5.7%. Frankfurt +6.7%.
Futures at 6:20, Dow +5%. S&P +5.1%. Nasdaq +5.4%. Crude +7.2% to $25.03. Gold +4.5% to $1638. Bitcoin +16.4% to $6802.
Ten-year Treasury Yield +6 bps to 0.83%

Today's Economic Calendar
8:55 Redbook Chain Store Sales
9:45 PMI Composite Flash
10:00 New Home Sales
10:00 Richmond Fed Mfg.
1:00 PM Results of $40B, 2-Year Note Auction

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