Welcome Stockaholics to the trading week of March 9th! This past week saw the following moves in the S&P: Major Indices End of Week: Major Futures Markets on Friday: Economic Calendar for the Week Ahead: Sector Performance WTD, MTD, YTD: What to Watch in the Week Ahead: T.B.A.
Carnage: Credit, Crude, & The Yield Curve Crushed As Fed Admits "Credibility Eroding" The global equity market cap collapsed by a record $9tn - or two-thirds of China's GDP - in 9 days, while global; sovereign 10-year bond yields crashed below 1.00% for the first time ever... Source: Bloomberg Even the veteran-ist of veteran traders were shocked by this week's moves... Or put another way... But the real shock was from Federal Reserve Bank of St. Louis President James Bullard, who admitted central banks are losing their credibility rapidly: "Many central banks have consistently missed their stated inflation targets to the low side for many years... Critically, the central bank has to be able to actually deliver the required." Which means... "Credibility of central banks, instead of improving over time based on the achievement of stated goals, seems to be eroding instead." That's quite an admission but 100% correct and this week's carnage after an emergency 50bps rate-cut did nothing to calm fears is a perfect example... And despite a huge resurgence in the Fed's balance sheet, stocks were not playing along at all... Source: Bloomberg Today was quite a day across every asset class. We gathered some of the most shocking market move headlines of the day for some perspective: GLOBAL CONFIRMED CORONAVIRUS CASES SURPASS 100,000 EUROPE DEBT RISK GAUGE EXTENDS RISE TO HIGHEST SINCE JUNE 2016 GERMANY'S 10-YEAR BOND YIELD FALLS TO RECORD LOW GERMANY'S 30-YEAR BOND YIELDS FALL TO ALL-TIME LOW EUROPE SENIOR FINANCIAL DEBT-RISK JUMPS MOST SINCE 2018 JPMORGAN EMBIG DIVERSIFIED SOVEREIGN SPREAD RISES ABOVE 400 BPS EMERGING-MARKET USD SOV.-BOND PREMIUM JUMPS MOST SINCE 2011 U.S. TREASURY 5-YEAR YIELD FALLS BELOW 0.50% U.S. 30-YEAR YIELD FELL AS MUCH AS 30BP ON INTRADAY BASIS U.S. 30-YEAR YIELD SET FOR BIGGEST ONE-DAY DROP SINCE 2009 U.S. CREDIT MARKET FEAR GAUGE SURGES MOST SINCE AT LEAST 2011 VIX'S 3-WEEK CHANGE IS BIGGEST EVER - BIGGER THAN LEHMAN WTI CRUDE FUTURES DOWN 10.% - BIGGEST FALL SINCE 2014 For some context - the recent bond market collapse has never, ever happened before... If you can tell from my tone, this troubles me, so I went back and looked into this, we have never had a 50% change in 10y yield levels in either direction over a 2-wk window. We have had larger rallies (yup in 4Q08) but nothing comes close to cutting rates in half this fast... https://t.co/tP2fJAdbvf pic.twitter.com/8308IzVmwW — George Goncalves (@bondstrategist) March 6, 2020 And as The Fed cut rates, the 30Y Yield chased it down, along with the rest of the curve... Source: Bloomberg As Nomura's Charlie McElligott details, panic moves in US Rates as Duration / Convexity goes “offer-less,” with 10Y yields hitting a fresh record low of 0.6932%, multiple “limit-UP” halts in UST Ultra bond futures and 30Y UST yields crashing down -22bps at the extremes (5s30s was flatter by -14bps at one point) in an investor climate that is fixated on “imminent global recession” via pandemic “lock-down”-NYT piece stating that over 2700 people have quarantined themselves in New York City, while new cases in S Korea frighteningly re-accelerate This obviously has the look of a Rates “convexity-event” (forced hedging / buying at the highs from mortgage investors, insurance companies and those who are “short options”—i.e. all the Vol dealer desks selling low-strike receivers for the past few years, or the market makers short those 350k ED$ “Par Calls” for Jun expiry!)... ...but this is also a simple function of OIS markets now pricing-in a full ADDITIONAL 50bps rate cut on March 18th from the Fed already, as well as the obvious dynamic where “Rates are your everything hedge” from cross-asset investors (i.e. Equity L/S investors buying ED$ upside). Source: Bloomberg Today was also the biggest single-day jump in the Ultra Bond Future ever...which prompted fears of a major macro fund blowing up. Source: Bloomberg China is still massively outperforming US and Europe since the start of the Covid-19 crisis... Source: Bloomberg Today's US equity market carnage sent all the majors into the red for the week, but the last 30 minutes saw the machines work ultra-hard to get the Dow, S&P, and Nasdaq green... Was The PPT in the house again? Somebody do something! Another late-Friday panic-buy? The Elon Musk Ramp? "The coronavirus panic is dumb" So are we due for a bounce now? Source: Bloomberg US Banks have now crashed over 27% from their early Jan highs... Source: Bloomberg The biggest US banks have been bloodbath'd... Source: Bloomberg But, more worryingly, Global Systemically Important Banks stocks have crashed to their lowest since 2016... Source: Bloomberg While energy stocks were already getting clubbed like baby seals, the last two weeks have seen them collapse 22%... Source: Bloomberg MAGA Stocks have now lost over $750 billion in market cap (Note that the Q4 2018 collapse wiped just over $1 trillion)... Source: Bloomberg The week saw defensives dominate as cyclicals were hammered... Source: Bloomberg VIX topped 54 intraday for the first time since 2009... This is the biggest 3-week surge in VIX... ever... Source: Bloomberg The VIX term structure is in massive backwardation... Source: Bloomberg The VIX Term structure hasn't been this inverted since Lehman... Source: Bloomberg Europe's VIX exploded this week, closing at its highest since the 2011 crisis... Source: Bloomberg Treasury 'VIX' surged today to its highest since 2011... Source: Bloomberg Credit markets were a bloodbath this week, with both HY and IG blowing out in US and EU... Source: Bloomberg And if you thought that credit's biggest blowout ion a decade was notable, it's nothing if it starts to catch up to its capital structure colleague on risk... Source: Bloomberg US Treasury yields collapse this week was nothing short of stunning with the entire curve down 40-50bps!! Source: Bloomberg 10Y Yields crashed to a stunning 65bps overnight... Source: Bloomberg The 30Y Yield accelerated lower in the last hour, crashing below the Fed Funds Rate! Source: Bloomberg The yield curve flattened drastically,,, Source: Bloomberg Some perspective to where were just over a month ago... Source: Bloomberg Source: Bloomberg On a broad trade-weighted basis, the dollar has been gaining against the rest of its fist peers, but crashing relative to hard money... Source: Bloomberg Cryptos rallied on the week led by Bitcoin Cash... Source: Bloomberg Crude was obviously the week's biggest commodity loser , copper went nowhere as PMs were bid... Source: Bloomberg WTI crashed over 10% today after the collapse of OPEC+ talks, its biggest drop since 2014... Source: Bloomberg Brent was worse, with its biggest drop since Jan 2009... Source: Bloomberg Oil 'VIX' has exploded higher... Source: Bloomberg This is the worst start to a year for crude since 1986... Spot Gold soared up to $1690 - the highest since Jan 2013 Source: Bloomberg Finally, there's this... That's quite a serious out of stock at Costco.... pic.twitter.com/6kh2q5b8ch — Matthew Boyle (@bizboyle) March 5, 2020 And here is the stunning punchline: out of the five historical instances of this week's pattern of trading (leaving out the present case for obvious reasons), Nomura finds that the only instance that was followed by a sustained market rally was that of April 1933, when the US abandoned the gold standard in the midst of the Great Depression. And while it would be next to impossible to confiscate gold, a massive dollar devaluation against the yellow metal may be just what the Fed is planning next (as Harley Bassman suggested in 2016) As Sven Henrich tweeted into the close: "A world without central banks in control is a scary world indeed. People actually have to actively think about their investments." Trade, or hoard, accordingly!
Here are the percentage changes for the major indices for WTD, MTD, QTD & YTD in 2020- S&P sectors for the past week-
A "Run of the Mill" Drawdown Fri, Mar 6, 2020 If you're like us, you've heard a lot of people reference the recent equity declines as a sign that the market is pricing in some sort of Armageddon in the US economy. While comments like that make for great soundbites, a little perspective is in order. Since the S&P 500's high on February 19th, the S&P 500 is down 12.8%. In the chart below, we show the S&P 500's annual maximum drawdown by year going back to 1928. In the entire history of the index, the median maximum drawdown from a YTD high is 13.05%. In other words, this year's decline is actually less than normal. Perhaps due to the fact that we have only seen one larger-than-average drawdown in the last eight years is why this one feels so bad. The fact that the current decline has only been inline with the historical norm raises a number of questions. For example, if the market has already priced in the worst-case scenario, going out and adding some equity exposure would be a no brainer. However, if we're only in the midst of a 'normal' drawdown in the equity market as the coronavirus outbreak threatens to put the economy into a recession, one could argue that things for the stock market could get worse before they get better, especially when we know that the market can be prone to over-reaction in both directions. The fact is that nobody knows right now how this entire outbreak will play out. If it really is a black swan, the market definitely has further to fall and now would present a great opportunity to sell more equities. However, if it proves to be temporary and after a quarter or two resolves itself and the economy gets back on the path it was on at the start of the year, then the magnitude of the current decline is probably appropriate. As they say, that's what makes a market! Long-Term Treasuries Go Haywire Fri, Mar 6, 2020 Take a good luck at today's moves in long-term US Treasury yields, because chances are you won't see moves of this magnitude again soon. Let's start with the yield on the 30-year US Treasury. Today's decline of 29 basis points in the yield will go down as the largest one-day decline in the yield on the 30-year since 2009. For some perspective, there have only been 25 other days since 1977 where the yield saw a larger one day decline. That doesn't even tell the whole story, though. As shown in the chart below, every other time the yield saw a sharper one-day decline, the actual yield of the 30-year was much higher, and in most other cases it was much, much higher. To show this another way, the percentage change in the yield on the 30-year has never been seen before, and it's not even close. Now, before the chart crime police come calling, we realize showing a percentage change of a percentage is not the most accurate representation, but we wanted to show this for illustrative purposes only. Finally, with long-term interest rates plummetting we wanted to provide an update on the performance of the Austrian 100-year bond. That's now back at record highs, begging the question, why is the US not flooding the market with long-term debt? It Doesn't Get Much Worse Than This For Crude Oil Fri, Mar 6, 2020 Crude oil prices are down close to 10% today in what is shaping up to be the worst day for crude oil since late 2014. That's more than five years. Today's decline is pretty much a continuation of what has been a one-way trade for the commodity ever since the US drone strike on Iranian general Soleimani. The last time prices were this low was around Christmas 2018. With today's decline, crude oil is now off to its worst start to a year in a generation falling 32%. Since 1984, the only other year that was worse was 1986 when the year started out with a decline of 50% through March 6th. If you're looking for a bright spot, in 1986, prices rose 36% over the remainder of the year. The only other year where crude oil kicked off the year with a 30% decline was in 1991 after the first Iraq war. Over the remainder of that year, prices rose a more modest 5%. 10-Year Treasury Yield Breaks Below 1% Despite strong market gains on Wednesday, March 4, 2020, the on-the-run 10-year Treasury yield ended the day below 1% for the first time ever and has posted additional declines in real time, sitting at 0.92% intraday as this blog is being written. “The decline in yields has been remarkable,” said LPL Research Senior Market Strategist Ryan Detrick. “The 10-year Treasury yield has dipped below 1%, and today’s declines are likely to make the recent run lower the largest decline of the cycle.” As shown in LPL Research’s chart of the day, the current decline in the 10-year Treasury yield without a meaningful reversal (defined as at least 0.75%) is approaching the decline seen in 2011 and 2012 and would need about another two months to be the longest decline in length of time. At the same time, no prior decline has lasted forever and a pattern of declines and increases has been normal. What are some things that can push the 10-year Treasury yield lower? A shrinking but still sizable yield advantage over other developed market sovereign debt Added stock volatility if downside risks to economic growth from the coronavirus increase A larger potential premium over shorter-term yields if the Federal Reserve aggressively cuts interest rates What are some things that can push the 10-year Treasury yield higher? A second half economic rebound acting a catalyst for a Treasury sell-off As yields move lower, investors may increasingly seek more attractive sources of income Any dollar weakness could lead to some selling by international investors Longer maturity Treasuries are looking like an increasingly crowded trade, potentially adding energy to any sell-off On balance, our view remains that the prospect of an economic rebound over the second half points to the potential for interest rates moving higher. At the same time, we still see some advantage in the potential diversification benefits of intermediate maturity high-quality bonds, especially during periods of market stress. We continue to recommend that suitable investors consider keeping a bond portfolio’s sensitivity to changes in interest rates below that of the benchmark Bloomberg Barclays U.S. Aggregate Bond Index by emphasizing short to intermediate maturity bonds, but do not believe it’s time to pile into very short maturities despite the 10-year Treasury yield sitting at historically low levels. U.S. Jobs Growth Marches On While stock markets continue to be extremely volatile as they come to terms with how the coronavirus may affect global growth, the U.S. job market has remained remarkably robust. Continued U.S. jobs data resilience in the face of headwinds from the coronavirus outbreak may be a key factor in prolonging the expansion, given how important the strength of the U.S. consumer has been late into this expansion. The U.S. Department of Labor today reported that U.S. nonfarm payroll data had a strong showing of 273,000 jobs added in February, topping the expectation of every Bloomberg-surveyed economist, with an additional upward revision of 85,000 additional jobs for December 2019 and January 2020. This has brought the current unemployment rate back to its 50-year low of 3.5%. So far, it appears it’s too soon for any effects of the coronavirus to have been felt in the jobs numbers. (Note: The survey takes place in the middle of each month.) On Wednesday, ADP released its private payroll data (excluding government jobs), which increased by 183,000 in February, also handily beating market expectations. Most of these jobs were added in the service sector, with 44,000 added in the leisure and hospitality sector, and another 31,000 in trade/transportation/utilities. Both of these areas could be at risk of potential cutbacks if consumers start to avoid eating out or other leisure pursuits due to coronavirus fears. As shown in the LPL Chart of the Day, payrolls remain strong, and any effects of the virus outbreaks most likely would be felt in coming months. “February’s jobs report shows the 113th straight month that the U.S. jobs market has grown,” said LPL Financial Senior Market Strategist Ryan Detrick. “That’s an incredible run and highlights how the U.S. consumer has become key to extending the expansion, especially given setbacks to global growth from the coronavirus outbreak.” While there is bound to be some drag on future jobs data from the coronavirus-related slowdown, we would anticipate that the effects of this may be transitory. We believe economic fundamentals continue to suggest the possibility of a second-half-of-the–year economic rebound. Take Caution After Emergency Rate Cut Today’s big rally was an encouraging sign that the markets are becoming more comfortable with the public health, monetary and political handling of the situation. But the history of these “emergency” or “surprise” rate cuts by the Fed between meetings suggest some caution remains in order. The table here shows that these surprise cuts between meetings have really only “worked” once in the past 20+ years. In 1998 when the Fed and the plunge protection team acted swiftly and in a coordinated manner to stave off the fallout from the financial crisis caused by the collapse of the Russian ruble and the highly leveraged Long Term Capital Management hedge fund markets responded well. This was not the case during the extended bear markets of 2001-2002 and 2007-2009. Bottom line: if this is a short-term impact like the 1998 financial crisis the market should recover sooner rather than later. But if the economic impact of coronavirus virus is prolonged, the market is more likely to languish. Down January & Down February: S&P 500 Posts Full-Year Gain Just 43.75% of Time The combination of a down January and a down February has come about 17 times, including this year, going back to 1950. Rest of the year and full-year performance has taken a rather sizable hit following the previous 16 occurrences. March through December S&P 500 average performance drops to 2.32% compared to 7.69% in all years. Full-year performance is even worse with S&P 500 average turning to a loss of 4.91% compared to an average gain of 9.14% in all years. All hope for 2020 is not lost as seven of the 16 past down January and down February years did go on to log gains over the last 10 months and full year while six enjoyed double-digit gains from March to December.
Here are the current major indices pullback/correction levels from ATHs as of week ending 3.6.20- Here is also the pullback/correction levels from current prices- ...and here are the rally levels from current prices-
Stock Market Analysis Video for March 6th, 2020 Video from AlphaTrends Brian Shannon ShadowTrader Video Weekly 3.8.20 Video from ShadowTrader Peter Reznicek
Stockaholics come join us on our stock market competitions for this upcoming trading week ahead!- ======================================================================================================== Stockaholics Daily Stock Pick Challenge & SPX Sentiment Poll for Monday (3/9) <-- click there to cast your daily market vote and stock pick! Stockaholics Weekly Stock Picking Contest & SPX Sentiment Poll (3/9-3/13) <-- click there to cast your weekly market vote and stock picks! ======================================================================================================== It would be pretty sweet to see some of you join us and participate on these! I hope you all have a fantastic weekend ahead!
Here is a look at this upcoming week's Global Economic & Policy Calendar- (GLOBAL ECONOMIC AND POLICY CALENDAR NOT YET POSTED!)
Here are the most anticipated Earnings Releases for this upcoming trading week ahead. ***Check mark next to the stock symbols denotes confirmed earnings release date & time*** Monday 3.9.20 Before Market Open: Spoiler: CLICK HERE TO VIEW MONDAY'S AM EARNINGS TIMES & ESTIMATES! Monday 3.9.20 After Market Close: Spoiler: CLICK HERE TO VIEW MONDAY'S PM EARNINGS TIMES & ESTIMATES! Tuesday 3.10.20 Before Market Open: Spoiler: CLICK HERE TO VIEW TUESDAY'S AM EARNINGS TIMES & ESTIMATES! Tuesday 3.10.20 After Market Close: Spoiler: CLICK HERE TO VIEW TUESDAY'S PM EARNINGS TIMES & ESTIMATES! Wednesday 3.11.20 Before Market Open: Spoiler: CLICK HERE TO VIEW WEDNESDAY'S AM EARNINGS TIMES & ESTIMATES! Wednesday 3.11.20 After Market Close: Spoiler: CLICK HERE TO VIEW WEDNESDAY'S PM EARNINGS TIMES & ESTIMATES! Thursday 3.12.20 Before Market Open: Spoiler: CLICK HERE TO VIEW THURSDAY'S AM EARNINGS TIMES & ESTIMATES! Thursday 3.12.20 After Market Close: Spoiler: CLICK HERE TO VIEW THURSDAY'S PM EARNINGS TIMES & ESTIMATES! Friday 3.13.20 Before Market Open: Spoiler: CLICK HERE TO VIEW FRIDAY'S AM EARNINGS TIMES & ESTIMATES! Friday 3.13.20 After Market Close: Spoiler: CLICK HERE TO VIEW FRIDAY'S PM EARNINGS TIMES & ESTIMATES! NONE.
And finally here is the most anticipated earnings calendar for this upcoming trading week ahead- ($ADBE $DKS $AVGO $THO $ULTA $WORK $DG $SFIX $SOGO $DOCU $INO $CLDR $INSG $SOHU $BTAI $ORCL $HEAR $NVAX $ADDYY $GPS $AKBA $PDD $CYOU $FNV $MTNB $NERV $MTN $BEST $PRTY $NINE $AZUL $UNFI $PRPL $VSLR $KLZE $ZUO $DVAX $EXPR $VRA $AXSM $CDMO $CASY) If you guys want to view the full earnings post please see this thread here- Most Anticipated Earnings Releases for the week beginning March 9th, 2020 <-- click there to view!
Hey guys! I’ve been doing that retirement thing for the last year and a half. Thinking about all of you this last few months and hopefully you all have been capitalizing just a bit from all this volatility. I need to break out some charts and do some t/a but it just feels like a big flush is coming really soon. Stay safe.
Why ever would you say that? Hehehe. You stole my line! What a time to be alive. We will remember these upcoming days for a long time. Hopefully we won't remember them as the days that changed everything. There's always that chance.
Someone was talking about limit down the other day, was it Big Bear? Someone here caused it, that much I know
