Monday Morning Reads
- S&P 500 ETF opens down 7%
- Fed cuts to zero, launches huge new QE
- Fiat -20% as production suspended across much of Europe
- France slaps €1.1B fine on Apple
- Why the selloff after Fed's emergency action?
- Domestic air travel ban is on the table
- BioNTech up 55% premarket on advancement of coronavirus vaccine
- Amazon running out of some household items
- U.S. stocks set to gap down at open
- Mallinckrodt down 23% premarket after court ruling on Acthar Medicaid rebates
- Tesla falls sharply as U.S. coronavirus anxiety ramps up
- STORE Capital declares $0.35 dividend
- autious views on AAL, UAL, DAL, LUV, JBLU, SAVE. Barron's
- Positive views on CXO, COG, PSX, VLO, EURN, INSW, STNG. Barron's
- Positive views on ORCL, UPS, MRK, NVS, AMAT, BDX, SCHW, PSX, NGVT, UNH, MRK, AMGN, CME, KWR, WST, ILMN, HRI, CR. Barron's
- Netflix (NFLX) and Disney (DIS) will stop production on current films and TV shows to prevent spread of coronavirus. Verge
- A complaint alleged Google (GOOG) is sharing user data between services without consent. FT
- Grocery stores begin to lower hours as panic-buying continues (WMT, TGT, KR, COST, GIS). NPR
- White House aims to bring forward third coronavirus relief bill to help cruise and airline industries (JETS, UAL, AAL, JBLU, LUV, SAVE, HA, RCL, NCLH, CCL). CNBC
- Ford (F) aims to close factory in Spain for one week due to coronavirus. Reuters
- Illinois orders all restaurants closed with exception or delivery or drive-up options (MCD, QSR, WEN, GRUB, UBER). NBC Chicago
- Southwest (LUV) says it is "seriously considering" cutting flights in the short term. Reuters
- US prosecutors believe Credit Suisse (CS) is culpable in $2 bln Mozambique scandal. Reuters
- Amazon (AMZN) is courting Walmart (WMT) & Target (TGT) to join group of cashierless stores. WSJ
- New York City and Los Angeles to close bars, restaurants, and movie theaters due to coronavirus (MCD, WEN, QSR, UBER, GRUB, AMC). WSAU
- House passes coronavirus relief package to provide paid sick leave, unemployment benefits, free virus testing, increased food stamp benefits, and small business tax relief. Senate will likely pass bill this week and President Trump says he will sign it (SPY). NY Times
- White House doctor says President Trump tested negative for coronavirus. CNN
- The Trump administration will extend travel ban to UK and Ireland. France, Spain, and Greece closed shops, cafes and bars to slow the spread of coronavirus. White House is also mulling restrictions on domestic travel for areas hardest hit (EWU, JETS, UAL, AAL, DAL, JBLU, LUV, SAVE). WSJ
- National Institute of Allergy and Infectious Diseases director Dr. Anthony Fauci says "Americans should be prepared that they are going to have to hunker down significantly more than we as a country are doing." NBC News
- National Institute of Allergy and Infectious Diseases director Dr. Anthony Fauci says worst case coronavirus predictions "unlikely if we do the kinds of things that we're essentially outlining right now." The Hill
- Treasury Secretary Steven Mnuchin aims to ask Congress to reintroduce powers scaled back in 2010 Dodd-Frank legislation (XLF). NY Times
- Democrats spoke about healthcare, coronavirus, economy, and other issues during last night's debate. CNN
- Most Americans feel the worst is yet to come on coronavirus as President Trump's approval ratings remain unchanged. WSJ
S&P 500 futures triggered another 'limit down' trading halt overnight after tumbling 5%, even after the Fed embarked on a massive monetary stimulus campaign to cushion the U.S. economy from the coronavirus pandemic. Interest rates were slashed to near zero, while the central bank said it would buy $700B in Treasury and mortgage-backed securities. It's also letting banks borrow from the discount window for as long as 90 days and reducing reserve requirement ratios to zero percent.
Go deeper: Mnuchin doesn't see a recession, but Goldman expects 5% contraction in Q2.
"It's basically using up all [the Fed's] ammunition within a three-week span. And there’s nothing left,” said Terence Wong, CEO of Azure Capital. "The policy response is so strong, it's likely to spook investors," added Michael O'Rourke, chief market strategist at JonesTrading. Many investors also want to see coronavirus cases peaking and falling in the U.S. before it is safe to take on risk and buy equities again, while there's concern about earnings for 2020 and a potential recession.
Go deeper: U.S. 'intends' to keep financial markets open.
Crude futures popped nearly 6% after the Fed's emergency action, but the gain quickly evaporated, with futures now tumbling about 5% to under $30/bbl. The action demonstrates the inability of policy support moves to save oil markets mired in a price war on top of the severely contracting global oil consumption. Meanwhile, gold climbed alongside Treasuries, as investors once again turned to safe haven assets.
Go deeper: Hitting home? Saudi Aramco slashes spending plans for 2020.
Data from China overnight provided a first glimpse of what the coronavirus can do to an economy amid a prolonged quarantine of millions of people. Industrial output tumbled by 13.5% and total retail sales plunged by 20.5% Y/Y in January and February, according to the National Bureau of Statistics. The urban unemployment rate surged to 6.2% in February, the highest level ever reported, and fixed asset investment slumped by 24.5% (down from 5.4% in the prior period).
Go deeper: 'Market Crash. Is It Over, Or Is It The Revenant' by Lance Roberts.
In a joint statement, the Federal Reserve, Bank of Canada, Bank of England, Bank of Japan, European Central Bank and Swiss National Bank pledged to use their swap line arrangements to ensure that dollars keep flowing across the globe. They added a weekly offering of the world's reserve currency over a longer maturity, and reduced the cost of the facility. Objective: Meeting the needs of companies and financial institutions rushing for dollars as the global payments system undergoes severe strain due to the coronavirus.
Go deeper: Big monetary stimulus from the BOJ, New Zealand cuts rates.
The largest eight U.S. banks, including BofA (NYSE:BAC), JPMorgan (NYSE:JPM) and Citigroup (NYSE:C), are putting share buybacks on hold through the end of Q1 and all of Q2 as they put capital to use by helping consumers and businesses. The move sounds smart politically, particularly as the Fed has re-launched QE with a vengeance, but it might dash the hopes of some bank investors. After all, what's the point of over-capitalization if a bank can't buy back stock when shares are cheap?
Go deeper: JPMorgan assures it's able to support the financial system.
The center of the coronavirus pandemic is shifting decisively toward the U.S. and Europe, as Italy reported 368 coronavirus deaths in just 24 hours. In fact, coronavirus deaths outside China (3,300+) have surpassed those inside (3,200) for the first time, according to figures compiled by Johns Hopkins University. Similarly, the 81,000 total cases in China have now exceeded the 88,000 outside the country, where cases of the disease were first reported in the Hubei province in December.
The Euro Stoxx 50 (NYSEARCA:FEZ) fell as much as 10% this morning as traders sized up recent developments hitting all sectors of the economy. Spain imposed a 15-day nationwide lockdown, banning its 46M citizens from all-non essential movement, while France and Germany closed large parts of their fortified borders. The U.K. government is also facing growing calls to take more drastic measures after the Trump administration expanded its travel ban to include the U.K. and Ireland.
MGM (NYSE:MGM) joined Wynn Resorts (NASDAQ:WYNN) in temporarily closing Las Vegas casinos, while Colorado ski resorts suspended operations. NYC Mayor Bill de Blasio announced the shutdown of all city schools until April 20, adding that it's possible they may not re-open this year, and city restaurants were restricted to takeaway only. The CDC further recommended that organizers of events that are expected to draw more than 50 people should cancel them for the next two months.
The Trump administration is weighing "all options" to curb the coronavirus outbreak in the U.S., including an outright halt to domestic air travel. That's according to acting DHS secretary Chad Wolf, who added that the administration is following guidance from the CDC. Such a step hasn't been taken since 9/11, and it would raise questions about U.S. airlines' chances for survival without government support. Premarket: AAL -17.5%, UAL -13.5%, DAL -13.2%, LUV -10.4%, JBLU -9.3%.
What else is happening...
COVID-19 - Will there be enough hospital beds?
Worst box office weekend in two decades.
In Asia, Japan -2.5%. Hong Kong -4%. China -3.4%. India -8%.
In Europe, at midday, London -6.7%. Paris -9%. Frankfurt -8.1%.
Futures at 6:20, Dow -4.6%. S&P -4.8%. Nasdaq -4.6%. Crude -5.4% to $29.98. Gold +0.6% to $1525.80. Bitcoin -12.6% to $4555.
Ten-year Treasury Yield -17 bps to 0.78%