Wednesday Morning Reads
- Global Health Crisis 1, Economic Policymakers 0
- The Fed Has No Tools
- Markets Continue Tumbling
- Bonds Hold Gains
- Treasury 10-Year Yield Sets Record
- Trump Balks at Stimulus
- Bets on Higher Rates
- Savior in China
- What Happens in Vegas if No One Stays in Vegas?
- taly closes schools until mid-March
- ADP February jobs tops, but January gains revised down
- GE maintains 2020 forecast despite coronavirus hit
- Bargain hunters jump into health insurers after Biden surge
- AT&T sets new $4B accelerated share buyback
- And the Covid-19 list keeps growing...
- Blackstone buys battery energy storage firm
- Credit Suisse reels in estimates on FedEx
- Crestwood enters Powder River G&P deal with Occidental Petroleum
- All-electric Transit cargo van from Ford
- Skyworks cuts Q2 outlook due to coronavirus
- Potential KC-46 sale to Israel gets clearance
"Stocks skyrocket on stimulus hopes," "tank after the Fed's half-point cut" (could've done more?), then "soar again following Biden's Super Tuesday success," are some of the headlines we've seen over the last few days as market watchers try to assign reasons for the wild movement. While there was more volatility overnight as Dow futures shot up another 561 points, the bottom line is that the market is still trying to find a floor and gauge how the coronavirus will impact various sectors of the economy. On that note, we'll get some further data points today, including auto sales, ISM's non-manufacturing index, final readings of IHS Markit's composite and services PMI, the ADP employment report and Fed's Beige Book.
Go deeper: People ignore valuations until there are no more greater fools, writes Kirk Spano.
Benchmark 10-year U.S. Treasury yields dropped below 1% on Tuesday and touched an all-time low of 0.906%, following the Fed's first emergency move since the depths of the 2008 financial crisis. The central bank has only another percentage point, or 100 basis points, left to ease until it hits zero, triggering some speculation of quantitative easing. Meanwhile, there was huge demand in the repo market, with the New York Fed's (overnight and 14-day) operations totaling $120B. It had hoped to reduce its bill purchases in Q2, but uncertainty over the coronavirus could require the Fed to prolong its balance sheet expansion.
Go deeper: David Templeton highlights the panic narrative.
The European Central Bank and the Bank of England are likely to announce stimulus measures in the coming days after the U.S. Fed surprised with a large emergency rate cut. "The ECB could introduce a special facility targeting SMEs (small and medium enterprises) hit by the crisis with looser terms and conditions than other open-market operations," added Frederik Ducrozet, senior economist at Pictet Wealth Management. The ECB is also providing other types of stimulus to the eurozone via an open-ended bond-purchase program and cheaper funding for banks.
Go deeper: 'Viral Collapse Of Economic Optimism' by Smead Capital Management.
Companies ranging from Google (GOOG, GOOGL) and Twitter (NYSE:TWTR) to Indeed and JPMorgan (NYSE:JPM) have asked many of their employees to work from home to help prevent the spread of coronavirus. Italy (79 deaths, 2,502 cases) is now the worst-affected country from the coronavirus outside Asia, overtaking Iran in terms of the number of fatalities and infections from the virus. WHO added that the coronavirus death rate is 3.4% globally, higher than previously thought (and compared to the less than 1% infected by seasonal flu), but it doesn't spread as efficiently as influenza.
Go deeper: Amazon employee in Seattle tests positive for the virus.
With about 40 employees working on the project, Takeda Pharmaceutical (NYSE:TAK) is joining Gilead Sciences (NASDAQ:GILD) and AbbVie (NYSE:ABBV) as the latest drugmaker to work on developing a coronavirus vaccine. The experimental drug would be derived from the blood of coronavirus patients who have recovered from the respiratory disease. "While we don't know for sure that it will work, we think it's definitely a relevant asset that could be of help here," said Dr. Rajeev Venkayya, president of Takeda's vaccines business.
In a move to appease regulators, Facebook (NASDAQ:FB) has decided on a scaled-back approach to its Libra digital currency, The Information reports. The company would offer digital versions of government-backed currencies (notably the U.S. dollar and euro) alongside its Libra token, which would be emphasized even though Libra will be supported in its wallet. And while Facebook will still launch a digital wallet allowing for purchases and transfers, it will delay that timetable by several months.
Target (NYSE:TGT) shares slipped 3% on Tuesday after comparable sales rose 1.5% in Q4 to fall short of the consensus expectation for a rise of 2.1%. A new strategy from the company will also grow its small-format store concept (with drive up programs) and nearly three dozen new stores are planned for this year. Executives think the even smaller store format will help it add traffic in urban neighborhoods and on college campuses.
General Motors (NYSE:GM) will host a call for investors, starting at 12:30 p.m. ET, to detail the company's full electrification strategy. It will need to persuade is shareholders that it can catch up with Elon Musk and Tesla (NASDAQ:TSLA), whose market cap hovers around $144B, more than three times GM's $45B. Credit Suisse analyst Dan Levy still sees GM (Outperform, $47 PT) as one of the best positioned legacy OEMs amid the transition to an EV world, pointing to the automaker's determination to go big with the accretive business.
Go deeper: All-electric Transit cargo van from Ford.
After initially recommending a cut of 600K barrels per day to support prices, the OPEC+ Joint Technical Committee has proposed slashing oil output by an extra 1M bpd during the second quarter. That would be in addition to 2.1M bpd in current output cuts - including 1.7M bpd in curbs by the group and other voluntary reductions by Saudi Arabia - amid a 27% tumble by Brent crude and WTI since January. OPEC+ is set to meet in Vienna on March 5-6 despite other international conferences being canceled due to the coronavirus.
Go deeper: 'If You Regretted Not Investing More In 2008, Invest In Oil Now' by The Value Portfolio.
What else is happening...
Gold posts largest one-day climb since June.
Supreme Court questions SEC's ability to recoup billions.
In Asia, Japan +0.1%. Hong Kong -0.2%. China +0.6%. India -0.6%.
In Europe, at midday, London +1.4%. Paris +1.3%. Frankfurt +1.2%.
Futures at 6:20, Dow +2.2%. S&P +2%. Nasdaq +2.1%. Crude +1.3% to $47.79. Gold -0.1% to $1643.10. Bitcoin -1.2% to $8751.
Ten-year Treasury Yield -7 bps to 0.95%