Wednesday Morning Reads

Wednesday Morning Reads





Open Interest Changes

Following Monday's plunge and Tuesday's rally, U.S. futures fell another 2% overnight as traders sized up fiscal and monetary policy responses. While President Trump suggested a 0% payroll tax rate that could last until the end of the year, and said cruise and airline industries would be getting aid, the details remained unclear. U.S. coronavirus cases have also topped 1,000 nationwide, according to Johns Hopkins University data, and at least 28 people have died from the disease.

BOE joins rate cut party

Looking to curb the economic impact from the coronavirus outbreak, the Bank of England has cut its main interest rate from 0.75% to 0.25%. "Although the magnitude of the economic shock from Covid-19 is highly uncertain, activity is likely to weaken materially in the United Kingdom over the coming months," according to a press release. The BOE will also introduce a new term funding scheme with additional incentives for small and medium-sized enterprises, financed by the issuance of central bank reserves.

Saudis boosting output even further

While it didn't say when the capacity increase would take place, Saudi Aramco (ARMCO) has received a directive from the kingdom's energy ministry to up its output capacity to 13M barrels a day. On Tuesday, the company said it would raise its crude supply to 12.3M barrels per day starting April 1, only days after it slashed most of its official selling prices. Crude futures slipped 2.4% on the news to $33.54/bbl, following a 24% plunge on Monday and 10% rebound on Tuesday.
Go deeper: Mexico seeks to mediate recent oil row.

Crude crash fallout

Laden with debt following its $38B acquisition of rival Anadarko Petroleum last year, Occidental Petroleum (NYSE:OXY) is slashing its quarterly dividend to $0.11/share from $0.79/share. The company also plans to cut FY 2020 capex to $3.5B-$3.7B from its previous plan for $5.2B-$5.4B, and to implement additional operating and corporate cost reductions. "These actions lower our cash flow breakeven level to the low $30s WTI, excluding the benefit of our hedges, positioning us to succeed in a low commodity price environment," Occidental said in a statement.

Loading up on cash

Corporate America is attempting to bolster its liquidity, plagued by a plunge in oil prices and the global coronavirus outbreak. Exxon (NYSE:XOM) has filed for an unspecified board offering, Royal Caribbean Cruises (NYSE:RCL) increased its credit capacity by $550M and United Airlines (NASDAQ:UAL) raised an extra $2B in financing. "It's companies loading up on cash when you can get it. They are effectively building up that war chest," said Jeremy Swan, managing principal at accounting and tax advisory firm CohnReznick.

Tax Day could be delayed

The Trump administration is likely to extend the April 15 tax deadline for filing income tax returns as part of its fiscal stimulus plan to combat the impact from Covid-19, WSJ reports. That would effectively act as a bridge loan for individuals and businesses facing disruptions from the virus. Delaying tax payments could also force the Treasury to borrow more in the near term as April is the largest month for federal tax payments.

Meeting with bank executives

CEOs from Bank of America (NYSE:BAC), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS) and Truist Financial (NYSE:TFC) are scheduled to meet with President Trump in the White House cabinet room at 3 p.m. Gordon Smith, CEO of JPMorgan's (NYSE:JPM) consumer and community banking division, will also attend the gathering in place of Jamie Dimon, who is recovering from emergency heart surgery. What's being discussed? Estimations on how long and how much the coronavirus can cause markets to fall, as well as plans to waive some fees and offer other assistance to consumers and small businesses.

WFH the new normal?

Google (GOOGGOOGL) has sent a memo to all of its 100,000 North America-based employees recommending they work from home until at least April 10 due to coronavirus. The tech titan had only previously told staff in the San Francisco Bay Area, Dublin, and Seattle to log on remotely. Google offices will remain open to workers if they have to be physically present, but CEO Sundar Pichai urged people to "contribute" to social distancing.

Coronavirus updates

Cases are "coming in so intensely now that we're not able to give a detailed case breakdown," NYC Mayor Bill de Blasio told reporters, as the national guard was sent into New Rochelle, a suburb north of NYC. Washington Governor Jay Inslee further warned that the state's COVID-19 cases could reach 64,000 by May if health officials and the public fail to take action. The Port of Los Angeles reported a 22.9% annual drop in container volume for February as low output from Chinese factories dented trans-Pacific maritime trade, while the New York Auto Show and Coachella music festival have been postponed.

Where is the gains?

Most stocks in the S&P 500 have tumbled over the past month, but shares in the consumer staples and healthcare sectors have generally suffered smaller losses. In fact, only 29 stocks in the S&P 500 have gained over the past month, and most of them are related to the demand jump prompted by the quickly spreading coronavirus outbreak. On the list: Regeneron Pharmaceuticals (NASDAQ:REGN), Kroger (NYSE:KR), AutoZone (NYSE:AZO), Dollar General (NYSE:DG); Campbell Soup (NYSE:CPB), Clorox (NYSE:CLX) and Walmart (NYSE:WMT).

What else is happening...

New Disney (NYSE:DIS) CEO hosts annual shareholders meeting.

Tesla (NASDAQ:TSLA) looks to build Cybertruck in central U.S.

Uber (NYSE:UBER) may suspend accounts of those with coronavirus.

Hilton (NYSE:HLTwithdraws Q1, FY outlook due to Covid-19.

DXC Technology (NYSE:DXC) to sell Medicaid-services business for $5B.

Wells Fargo (WFC) chief executive testifies to Congress.

Tuesday's Key Earnings
Cloudera (NYSE:CLDR+10.6% AH after beats, upside FY outlook.
DICK'S Sporting Goods (NYSE:DKS+4% posting a strong holiday quarter.

Today's Markets
In Asia, Japan -2.3%. Hong Kong -0.6%. China -0.9%. India +0.2%.
In Europe, at midday, London +0.8%. Paris +1.6%. Frankfurt +1.6%.
Futures at 6:20, Dow -1.9%. S&P -2.1%. Nasdaq -2%. Crude -2.4% to $33.54. Gold flat at $1660.80. Bitcoin -1% to $7814.
Ten-year Treasury Yield -6 bps to 0.7%

Today's Economic Calendar
7:00 MBA Mortgage Applications
8:30 Consumer Price Index
10:00 Atlanta Fed's Business Inflation Expectations
10:30 EIA Petroleum Inventories
1:00 PM Results of $24B, 10-Year Note Auction
2:00 PM Treasury Budget

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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