The Morning Call
3/3/20
The
Market
Technical
Well with that
moon shot, the Averages (26703, 3090) aren’t
quite so oversold now. However, none of
the major support levels that were successfully challenged last week were violated The S&P did close above its 200 DMA,
voiding last Thursday’s break.
So
far, all we really have is a rally off of an extraordinarily oversold condition
occurring on hopes of QEV at a time of no visibility on the peak
infection/death rate of the coronavirus.
That suggests caution to me.
The long bond traded
down fractionally on vastly lower volume.
However, it maintains its strong upward momentum. Lower rates remain a part of our future. GLD bounced, setting a fifth higher low. So, it appears headed higher but restrained
by the upper boundaries of it very short term and short term uptrends. The
dollar continues to get hammered, losing all its upside momentum. I remain confused by the dramatically mixed
performance of TLT, GLD and UUP.
Monday in the
charts.
Fundamental
Headlines
Yesterday’s data
was mixed. January construction spending
was much better than anticipated while the February manufacturing PMI and the
February ISM manufacturing index were slightly below estimates.
Overseas, Q4 Japanese capital spending was above forecasts. Most of the stats were February manufacturing
PMI’s with Japan, Germany and the EU coming in above expectations while China
(and the Chinese Caixin) and the UK PMI’s were below estimates.
Once
again, there numbers are meaningless because they do not yet reflect the impact
of the coronavirus. Until they do and
until we know the virus has peaked, quantifying its economic consequences is
impossible. Hence, this will remain a
major unknowable overhanging the Market.
***overnight,
update on
the coronavirus.
A not so
positive analysis of the impact of the coronavirus on the US economy.
The impact on
corporate earnings could be deeper and longer than expected.
On
the other hand, everyone knew that central bank intervention was bound to
happen once it became obvious that the economic impact of the virus would be
meaningful. Yesterday, the central banks
of Japan and China took action while the Fed, the IMF and the World Bank
promised action.
Japanese
government steps in to buy Y100 billion in ETF’s.
The IMF and World
Bank pledge support for aid to member countries.
The Fed needs to
cut rates.
But the White House
poo poos fiscal stimulus,
***overnight, the
G7 disappoints. Fails to announce new
action.
Bottom line: we
still have no idea about the timing and extent to which the economic impact of
the coronavirus will start showing up in the numbers. We don’t even know when the negative
infections/deaths headlines will peak.
Investors
got jiggy yesterday apparently because a new round of central bank intervention
appears to be forthcoming. However,
that is not all good news as the overnight repo market appears to be freezing
up again---indicating liquidity issues somewhere (no one seems to have figured
out exactly where yet) in the financial system.
Be
careful. A one day rally off an extremely
oversold condition is not a sign of Market health.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
January
construction spending jumped 1.8% versus forecasts of +0.6%
The
February manufacturing PMI came in at 50.7 versus consensus of 50.8.
The
February ISM manufacturing index was reported at 50.1 versus expectations of
50.5.
Month
to date retail chain store sales grew slower than in the prior week.
International
January
EU unemployment came in at 7.4%, in
line; January PPI was up 0.4% versus estimates of up 0.5%; February CPI was up 0.2% versus +0.3%.
February
Japanese consumer confidence was 38.5 versus projections of 40.6.
Other
What
I am reading today
Tallying
how much the Pentagon really costs.
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