Thursday, March 5, 2020

The Morning Call--I am confused

The Morning Call


The Market

The Averages  (27090, 3130) staged another moon shot yesterday---maintaining its best imitation of the Six Flag’s Texas Tornado.   The principal technical headlines were  (1) the S&P rose back above its 200 DMA voiding Tuesday’s break and (2) the pin action did a lot to alleviate the Market’s oversold condition.

What happens to the S&P after a Fed emergency rate cut?

TLT, GLD and UUP traded directionless, fractionally.  So, nothing changed technically including my confusion over their dramatically mixed performance.

                        Wednesday in the charts.



            Yesterday’s stats were weighed to the positive.  Weekly mortgage applications rose but purchase applications fell; both the February Markit services and composite PMI’s were in line; and the February ISM nonmanufacturing index as well as the February ADP private payroll reports were better than anticipated.
            Overseas, they were negative and dominated by the latest services and composite PMI’s.  The February Japanese, Chinese Caixin, German, UK and EU services and composite PMI’s were all below estimates except tor the EU composite PMI which was in line.  January German retail sales were better than expected while January EU retail sales were in line

            The coronavirus:

                        Latest out of US.

                        ***overnight update.

                        If you are in the coronavirus doomsday crowd, this article is for you.

                        The health crisis versus policy makers.

                        Thoughts on the impact of the coronavirus from Ray Dalio.

            The Fed:

The Fed released its latest Beige Book report.  However, this anecdotal economic survey is based on numbers collected before February 24th; so, it is of little use anticipating the impact of the coronavirus.  Nonetheless, I include it for your reading pleasure.

                        Turmoil continues in repo market.

                        Is the Fed a pawn of the stock market?
                        The Fed is complicit in creating fragilities.

                        Are negative US rates in our future?

            Bottom line: the questions I have are, was the Market’s Trident III shot (1) a sign the Bernie is no longer in the picture or (2) having muscled the Fed on the unscheduled 50 basis point cut on Tuesday, it now thinks that the Fed will give even more at its March FOMC meeting? 

Unfortunately, my answers don’t make any sense in the context of an 1100 Dow point rise.  (1)  [a] Bernie will bury Biden in any debate and [b] the whole Hunter Biden/Ukraine story is yet to be told, (2) what possible difference will another 50 or 100 basis point decline in interest rates have on a company’s decision to close an office/factory or a consumer’s decision to go to the movies or eat out for health reasons.  I stand confused at the end of the day.

            What do you buy in a recession?

    News on Stocks in Our Portfolios
Brown-Forman (NYSE:BF.B): Q3 GAAP EPS of $0.48 misses by $0.01.
Revenue of $899M (-0.6% Y/Y) misses by $54.42M.

Donaldson (NYSE:DCI): Q2 GAAP EPS of $0.50 beats by $0.03.
Revenue of $662M (-5.9% Y/Y) misses by $34.41M.

General Dynamics (NYSE:GD) declares $1.10/share quarterly dividend, 7.8% increase from prior dividend of $1.02.


   This Week’s Data


            The February Markit services PMI came in at 49.4, in line; the composite PMI was 49.6, also in line.

            The February ISM nonmanufacturing index was reported at 57.3 versus estimates of 54.9.



            Estimating the economic impact from a disaster shock.

            OPEC agrees to 1.5 million b/d cut in production.

            February Chinese auto sales down 80% YoY.

What I am reading today
                 The get rich portfolio.

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