Friday Morning Reads

Friday Morning Reads



Open Interest Changes:



At the beginning of the month, there were roughly 100 confirmed COVID-19 cases in the U.S., but now there are more confirmed cases than both China and Italy, making it the country with the largest outbreak in the world. As testing ramps up, there are also efforts to reopen the economy, with President Trump hearing recommendations from the White House coronavirus task force this weekend. Plans include classifying counties by low, medium and high "risk" levels, though state governors will have the ultimate say on whether to relax stay-at-home orders and business closures.

Near-term bottom?

A sharp rally on Thursday saw the Dow climb for a third straight session, recording a 21% surge that put the index back in bull territory. Others argue that the term "bull" can only be applied after notching a new high or can only be identified long after the event. Market participants appeared hopeful about the House's expected approval of a $2T coronavirus relief bill and brushed off (along with Steve Mnuchin) weekly unemployment claims that soared to a record 3.28M.
Go deeper: Eric Parnell explores key indicators of the bounce.

Economic fallout

A pullback was seen overnight as Dow futures slid 575 points, while S&P 500 and Nasdaq futures fell 2.5%. Investors may have been reminded that the world economy isn't in great shape as China reported a huge tumble in factory profits for the first two months of the year - down 38.3% Y/Y to 410.7B yuan ($57B). That's the steepest decline on record. Consumer confidence figures are due out later this morning in the U.S., gauging how hard households have been hit by the coronavirus crisis despite efforts to get back to work.
Go deeper: 'Bottom Timers... Start Your Engines' by Gary Gordon.

Fed balance sheet tops $5T

The Fed's balance sheet exploded by more than half a trillion dollars over the past week, roughly twice the pace of the next-largest weekly expansion during the global financial crisis. Total assets held by the central bank topped $5T for the first time as it attempts to keep credit flowing to all corners of the market, including Treasurys, commercial paper and municipal bonds. In an interview aired yesterday on the The Today Show, Jerome Powell said there was essentially no limit to the Fed's emergency lending ability and doesn't see inflation resulting from current policies.

...and $5T for the global economy

"The virus respects no borders," leaders from G20 nations said after an emergency meeting on Thursday, declaring a commitment to inject over $5T into the global economy and do "whatever it takes" to overcome the coronavirus pandemic. "We will continue to conduct bold and large-scale fiscal support. The magnitude and scope of this response will get the global economy back on its feet and set a strong basis for the protection of jobs and the recovery of growth."

Coronavirus support

Retailers are attempting to fill a void as hospitals and healthcare facilities throughout the U.S. experience shortages of personal protective equipment. Gap (NYSE:GPS), HanesBrands (NYSE:HBI), Ralph Lauren (NYSE:RL) and Canada Goose (NYSE:GOOS) are all shifting production lines from making apparel to manufacturing face masks, scrubs and gowns, as well as utilizing connections in their supply chains. Other companies like Target (NYSE:TGT), Lowe's (NYSE:LOW) and Home Depot (NYSE:HD) are redirecting supply to frontline healthcare workers.
Go deeper: Tesla starts delivering ventilators to NY hospitals.

Coronavirus testing

Verily now has more than 1,000 volunteers from across Alphabet (GOOGGOOGL) working on COVID-19 as it readies a ramp-up across additional regions. The life sciences unit launched a coronavirus screening website last week, which directs people to local testing centers, and has opened "drive-thru" locations itself, manned by employees. Next step? Verily co-founder Jessica Mega said the company is considering integrating the screening process through wearables.
Go deeper: 'Alphabet: 50% Upside' by Anh Hoang.

No help for big cruise lines

The major cruise ship lines are shut out of the $2T coronavirus stimulus package headed for a vote today in the U.S. House, despite President Trump's desire to help them. The package limits aid to U.S.-incorporated companies with a majority of workers based in the U.S., two criteria that effectively exclude Carnival (NYSE:CCL), Norwegian (NYSE:NCLH) and Royal Caribbean (NYSE:RCL). "There's a risk that cruise ships are laid up for an extended period of time," said Wedbush analyst James Hardiman. "They'll continue to burn cash without any revenue coming in the door."
Go deeper: Adding Value runs the numbers on Carnival.

Who's zoomin' who?

The SEC suspended trading in the largely defunct Zoom Technologies (OTC:ZOOM) - once a distributor of wireless products - after widespread confusion with popular videoconferencing company Zoom Video Communications (NASDAQ:ZM), which has seen a sharp rise in usage and stock price amid the COVID-19 pandemic. That suspension lasts until April 8 - hopefully giving everyone enough time to learn who's who. Over the past three months, Zoom Video Communications has risen 109%, while Zoom Technologies went from $1.26 to an intraday high of $60 last Friday.

Don't forget the oil price war

A new OPEC+ deal to balance oil markets might be possible if other countries join in, according to Kirill Dmitriev, head of Russia’s sovereign wealth fund. Dmitriev and Energy Minister Alexander Novak were Russia's top negotiators in the production cut deal with OPEC (the existing pact expires on March 31). Who would be the new members? President Trump said last week he would get involved in the Saudi-Russia oil price war at the appropriate time amid Moscow's longstanding frustration with rapidly growing U.S. shale.

What else is happening...

General Motors (NYSE:GM) to cut pay 20% for salaried workers.

Ford (NYSE:F) eyes April dates for plant restarts.

Tesla (NASDAQ:TSLA) to slash staff by 75% at Gigafactory 1.

India's RBI joins 'whatever it takes' rhetoric.

UTC (NYSE:UTX), Raytheon (NYSE:RTN) deal wins U.S. antitrust approval.

United Airlines (NASDAQ:UALtaps $500M term loan from Goldman.

Citi (NYSE:C) pauses job cuts during coronavirus uncertainty.

Facebook (NASDAQ:FB) nears complete overhaul of board.

Thursday's Key Earnings
GameStop (NYSE:GME+10% turning a profit despite revenue dip.
Lululemon (NASDAQ:LULU-2.4% pulling outlook after strong sales.

Today's Markets
In Asia, Japan +3.9%. Hong Kong +0.6%. China +0.3%. India -0.4%.
In Europe, at midday, London -3.8%. Paris -3.2%. Frankfurt -2.%.
Futures at 6:20, Dow -2.6%. S&P -2.5%. Nasdaq -2.5%. Crude +0.3% to $22.67. Gold -1.5% to $1626.90. Bitcoin +0.8% to $6677.
Ten-year Treasury Yield -4 to 0.77%

Today's Economic Calendar
8:30 Personal Income and Outlays
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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