Friday Morning Reads
- Leave Investors Cold
- Italy’s Nightmare
- Bitcoin Drops 50%
- The Pitiful Oil Market
- Buffett Bet That Infuriated Icahn
- Clamor Grows for Trump to Cut China Tariffs
- Fed’s Economic Forecasts
- New York Will Go Dark Next Week
- 3 Things I Learned from the Coronavirus Crash
- Creating an Overreaction Plan for the Coronavirus
Volatility is returning to Wall Street after the major averages suffered their worst sessions since the "Black Monday" market crash in 1987. Dow futures started the night indicating an opening loss of 700 points at the lows, but are now pointing to gains of 900 points, while S&P 500 and Nasdaq futures are ahead by 4.3% and 4.7%, respectively. Coronavirus uncertainty quickly morphed into panic on Thursday as the S&P 500 plummeted 9.5%, joining the Dow (which fell 2,300 points) in a bear market. The plunge also highlighted the diminishing ability of stimulus to dampen shockwaves as the Fed announced over $1T in repo operations, while the ECB expanded its asset purchase program by €120B.
New York City has declared a state of emergency, choosing to ban events over 500 people (that includes closing Broadway theaters). The Supreme Court Building is now closed to the public, the MLB has delayed the regular season by at least two weeks and the NCAA has canceled March Madness. Canadian Prime Minister Justin Trudeau will also remain in isolation for two weeks after his wife tested positive for the virus. In some better news, all of Apple's (NASDAQ:AAPL) 42 stores in China reopened today.
Go deeper: Coronavirus Roundtable: Diagnosing The Market Situation.
Circuit breakers were triggered in many exchanges across Asia overnight following the mayhem seen yesterday, though things settled down (somewhat) by the end of the session. The Nikkei closed 6% lower (after falling 10%), the KOSPI was off 3.4% (after hitting a low of 8.4%) and Australia's ASX 200 reversed course to gain 4.4% (after sinking more than 8%). European stocks jumped 4% at the open Friday amid temporary short-selling bans and pledges from France to support state-backed firms, though the gains still paled in comparison to the record-setting declines in the previous session.
Despite a 5% rise this morning to $33/barrel, crude oil is set to record a nearly 21% drop this week, marking the worst week since the financial crisis (it's down almost 50% YTD). Just as travel bans, canceled events and other coronavirus disruptions eat into demand, Russia and the Saudis are also digging in deeper in their oil price war. Even safe-haven assets such as gold and bonds were ditched to cover losses in yesterday's wipeout, while Bitcoin (BTC-USD) fell as much as 50% in two days.
Go deeper: Shale hedges are in focus amid the oil downturn.
Traders now expect the Fed to cut rates by 100 basis points at its March meeting, which would bring the Federal Funds target range to 0%-0.25% from 1.00%-1.25% currently. The CME FedWatch Tool puts the probability of a 1 percentage point rate cut at 86.7% vs. 50.2% a day ago and 0% a week ago. Bank stocks reflected that expectation in trading on Thursday, with the Financial Select Sector SPDR ETF (NYSEARCA:XLF) sinking 11%.
Go deeper: Norway latest to cut interest rates.
"Without a lifeline from governments we will have a sectoral financial crisis," according to the International Air Transport Association, which called for extending lines of credit to airlines, reducing infrastructure costs and cutting taxes. IATA last week estimated that the crisis could wipe out some $113B of industry revenue, in a forecast that did not include the U.S. clampdown on European travel. "There is a heightened concern there will be increased airline bankruptcies in 2020 given the fallout from the coronavirus," added Cowen analyst Helane Becker. "We expect some governments to step in to help some airlines, but ultimately we expect more airlines to fail this year than last year."
Millions more Americans are expected to work from home as employers increasingly issue telecommute directives due to the coronavirus. As a result, AT&T (NYSE:T) is waiving data overage fees for all home internet users who are not currently on unlimited data plans, while Comcast (NASDAQ:CMCSA) said it would up the data speeds on the internet service it offers to low-income customers. Verizon (NYSE:VZ) similarly announced it would boost its capital guidance range from $17B-18B to $17.5B-18.5B in 2020 to accelerate its "transition to 5G and help support the economy during this period of disruption."
New Disney (NYSE:DIS) CEO Bob Chapek is facing his first major challenge as fallout from the coronavirus affects many areas of the company. It announced Thursday the closure of Disneyland and Disney California Adventure from March 14 through the end of the month, while Walt Disney World is shuttering until April. The firm is also likely to take a hit at the box office: Mulan, The New Mutants and Antlers have been pulled off Disney's film schedule for now.
Impacting 18 ships, Carnival (NYSE:CCL) is halting all ship operations for Princess Cruises for 60 days due to the coronavirus. "While this is a difficult business decision, we firmly believe it is the right one and is in alignment with our company's core values," CEO Jan Swartz declared. "Rest assured the long-serving and dedicated professionals at our company will make best use of this time to prepare Princess Cruises' fleet of cruise ships for a successful return to operation."
What else is happening...
Pentagon asks to reconsider JEDI decision.
Adobe (NASDAQ:ADBE) -2% AH giving soft Q2 outlook.
Broadcom (NASDAQ:AVGO) -9.7% AH logging a rare profit miss.
DocuSign (NASDAQ:DOCU) +2.8% posting upside revenue guidance.
Dollar General (NYSE:DG) -9.9% amid broader market selloff.
Gap (NYSE:GPS) +1.3% AH beating expectations.
Oracle (NYSE:ORCL) +4.4% AH on strong cloud demand.
Slack Technologies (NYSE:WORK) -19.3% AH despite Q4 beats.
In Asia, Japan -6%. Hong Kong -1.1%. China -1.2%. India +4%.
In Europe, at midday, London +4.7%. Paris +4.5%. Frankfurt +3.8%.
Futures at 6:20, Dow +4.3%. S&P +4.3%. Nasdaq +4.7%. Crude +5.1% to $33.10. Gold -0.4% to $1583.50. Bitcoin -22.6% to $5602.
Ten-year Treasury Yield +2 bps to 0.88%