The Morning Call
4/2/20
The
Market
Technical
The Averages (20943, 2470) got smacked yesterday, ending in
short term downtrends whose boundaries are ~17145/2209 on the downside and ~22506/2675
on the upside. Given the pin action of
the last two days, it appears that the rally off the 3/23 bottom has run its
course. Which means the Market is will
either make a higher low or test that 3/23 low.
As you know, I don’t believe a Market bottom has been made. It looks like that thesis may about to be
tested.
TLT, GLD and UUP were
up nicely, an indication that investors gravitated to them as safety trades.
Wednesday in the
charts.
Fundamental
Headlines
Yesterday’s US
data was not good, but was better than I thought they would be. The March ISM manufacturing index was higher
than anticipated; the March final manufacturing PMI and the March ADP private
payroll report were down but fractionally while weekly mortgage and purchase
applications were mixed and February construction spending was disappointing.
$81 billion in
rents were due yesterday.
Overseas,
the stats were weighed to the upside. Q1
Japanese large manufacturers, small
manufacturers, nonmanufacturers indices and large manufacturers cap ex were above
expectations while the March Japanese final manufacturing PMI was slightly
below estimates.
February
German retail sales, February EU unemployment and the March Chinese Caixin
final manufacturing PMI were better than projections.
The
March German and EU final manufacturing PMI’s were below consensus while the UK
manufacturing PMI was above.
February
EU unemployment was 7.3% versus forecasts of 7.4%.
The
coronavirus
***overnight
update.
More stats on the
coronavirus.
Coronavirus death
predictions bring new meaning to hysteria.
German
infectologist questions coronavirus doomsday cult
The financial
effects of pandemics.
The bottom line: Trump’s comments about how painful the next
two weeks will be didn’t help stock prices yesterday. You know that I am a cynic---so here is the
cynic’s take: if he forecasts a disaster and it is one, then he what he
predicted came true; but if conditions are nearly that bad, he takes credit for
‘flattening the curve’. If he says that conditions
won’t be that bad and they aren’t, then what
he predicted came true; but if they are worse, he is a bum. In short, there is no percentages in making a
positive forecast.
In addition, the
coronavirus infection/death rate stats as well as the economic data continue to
improve in areas of the world hit earlier than the US. I am not suggesting that the worst is over in
gross terms; but there are enough numbers that analysts can get their pencils
working and quantification efforts began in earnest.
So,
on my lists of worries, corporate insolvency continues to be at the top. To be sure, the Fed has made it clear that it
is prepared to throw unlimited amounts of money at anything that resembles a
credit problem. That will almost certainly
mitigate some potential disasters. But
that said, the Fed has shown itself to be clueless about the how it created the
misallocation of assets. So, the
question is how clueless will it be managing the unwinding of this problem? That is the biggest risk facing the economy
and Market now, in my opinion. In other
words, solving the coronavirus problem may not remove the risk of further downside
in the Market---‘may not’ being the operative words.
An interview with
Jim Grant.
Supercharged debt bets
starting to unravel.
The dollar funding
shortage isn’t over; it has hardly begun.
Foreigners dump
record level of Treasuries.
Subscriber Alert
More bad news yesterday,
WPP (WPP) cut its dividend. As I discussed
with Boeing, I don’t want to own the stock of a company that has cut its
dividend for whatever reason,
Accordingly, the High Yield Portfolio will Sell its position in WPP at
the Market open.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
February
construction spending fell 1.3% versus estimates of a rise of 0.5%.
The
March final manufacturing PMI came in at 48.5 versus forecasts of 49.2.
The
March ISM manufacturing index
was reported at 49.1 versus consensus of 45.0.
The February
trade deficit was $39.9 billion versus expectations of $40.0 billion.
Weekly
jobless claims soared 3.4 million versus projections of 217,000.
International
February
EU PPI was reported down 0.6% versus an anticipated decline of 0.2%.
Other
Update
on median household income.
The
US can’t afford to let shale fail.
China
buying for its strategic oil reserves.
What
I am reading today
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