Stocks Substantially Lower into Final Hour on Coronavirus Fears, Global Recession Worries, Oil Decline, Energy/Airline Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Heavy

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 63.7 +4.7%

• Euro/Yen Carry Return Index 124.25 -.99%

• Emerging Markets Currency Volatility(VXY) 12.69 +4.6%

• S&P 500 Implied Correlation 76.7 +24.0%

• ISE Sentiment Index 100.0 +32
  

• Total Put/Call .99 +2.1%

• NYSE Arms 1.52 +43.4%

Credit Investor Angst:

• North American Investment Grade CDS Index 105.75 +7.5%
  

• America Energy Sector High-Yield CDS Index 1,338.0 -4.15%

• European Financial Sector CDS Index 112.12 +12.5%

• Italian/German 10Y Yld Spread 180.0 +21.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 135.40 +2.69%
  

• Emerging Market CDS Index 293.0 +16.5%
  

• iBoxx Offshore RMB China Corporate High Yield Index 169.94 +.09%

• 2-Year Swap Spread 25.5 +2.25 basis points

• TED Spread 142.0 +9.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap 23.5 -1.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 59.26 -.31%
• 3-Month T-Bill Yield -.04% +5.0 basis points

• Yield Curve .48 -1.0 basis point

• China Iron Ore Spot 82.75 USD/Metric Tonne -1.79%

• Citi US Economic Surprise Index -1.3 -2.3 points

• Citi Eurozone Economic Surprise Index -57.70 +1.2 points

• Citi Emerging Markets Economic Surprise Index -24.2 +20.2 points

• 10-Year TIPS Spread .96 -12.0 basis points
• n/a chance of no change at April 29th meeting, n/a chance of no change at June 10th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -379 open in Japan 
• China A50 Futures: Indicating -154 open in China

• DAX Futures: Indicating +1 open in Germany

Portfolio:

• Higher: On gains in my consumer staple sector longs, index hedges and emerging market shorts

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 50% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +48.1% Above 100-Day Average
• 0 Sectors Rising, 11 Sectors Declining
• 10.7% of Issues Advancing, 88.5% Declining
• 1 New 52-Week Highs, 29 New Lows
• 4.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.0%
• Vix 65.41 +7.2%
• Total Put/Call .97 unch.
• TRIN/Arms .96 -9.4%

Friday Watch

Evening Headlines

Bloomberg:            

• Italy Virus Cases Rise, Fueled by Infections in Lombardy.  

• The Second Virus Shockwave Is Hitting China’s Factories Already.  

• Asia’s Debt-Fueled Boom Threatened By Corporate Credit Meltdown.

• Mexico Downgraded to BBB by S&P on Virus, Oil Price Shocks.

• Stock Rally to Extend in Asia After U.S. Advance: Markets Wrap. Asian stocks climbed after a third straight day of gains on Wall Street, in a tentative sign of optimism among investors encouraged by uprecedented stimulus actions. The S&P 500 rose more than 6% Thursday after the U.S. Senate passed a $2 trillion fiscal package. Equity benchmarks climbed at least 3% in Tokyo and Seoul, and about 2% in Sydney, while U.S. futures saw more modest gains. The MSCI All Country World Index is on course for a 13% rise this week, following a rout that dragged stocks around the globe into bear markets. The dollar stabilized after retreating for three days. Futures on the S&P 500 added 0.6% as of 9:08 a.m. in Tokyo. The S&P 500 rose 6.2% on Thursday. Japan’s Topix Index rose 3.1%. Hang Seng futures added 3.6% earlier. Australia’s S&P/ASX 200 Index rose 2%. Kospi Index jumped 3.6%.  

• Five Things You Need to Know to Start Your Day.  

• Balance Sheet Blowout, Jobless Spike, RBA 1-Week of QE: Eco Day.

• Mnuchin Forms Task Force to Confront Mortgage Firms’ Liquidity.

• Winners and Losers in Winners and Losers in Congress’s $2 Trillion Virus Rescue Plan.

• False Bottom or Start of Something Big: On This Rally’s Stamina.  

• Federal Reserve’s Balance Sheet Tops $5 Trillion for First Time.   

• Oil Set for Weekly Gain as Stimulus Efforts Allay Demand Concern.

Wall Street Journal: 

• Spend Generously, Take Care of Workers: Coronavirus Stimulus Takes Lessons From TARP.

• Big Cruise-Ship Lines Wouldn’t Qualify for Aid Under Stimulus Package.

• China’s Reboot Hits Slow, Rocky Path.

• House Ponders How to Pass Stimulus Without Spreading Coronavirus.

• Nursing Home Staffs Combat Infections and Shortages.

• U.S. Charges Venezuela’s Maduro With Drug Trafficking. 

• Inside a New York ER: ‘We Don’t Know How High the Peak Is Going to Be’. 

• U.S. Moving Forward With Rule to Limit Chips to Huawei.

CNBC.com:

• The coronavirus may be deadlier than 1918 flu: Here’s how it stacks up against other pandemics.

• US now has more coronavirus cases than either China or Italy.

• Dow rallies more than 1,300 points, capping its biggest 3-day surge since 1931.

• GM temporarily cuts pay by 20% for 69,000 salaried workers amid coronavirus pandemic.

• The S&P 500 just hit a level that could spark the next meltdown.

• Many could get a $1,200 stimulus check within three weeks—should you use it to pay off credit card debt?

• Stocks making the biggest moves after hours: GameStop, Lululemon, KB Home & more.

• Lululemon’s earnings top estimates, but it won’t provide outlook due to coronavirus.

• Retailers shift production to make masks, gowns for health-care workers in coronavirus pandemic.

• Fauci says US ‘can start thinking about’ getting back to normal when coronavirus spread slows.

• ‘They’re putting us all at risk’: What it’s like working in Amazon warehouses amid .coronavirus.

Fox News:

• FOX NEWS POLL: Recession fears mount, but Trump approval ticks up.

• Dem blasts stimulus, blames GOP for not granting checks to all immigrants.

MarketWatch.com:         

• Gold is gearing up for a sustained rally, Goldman says — here’s why.

Zero Hedge:

• Tax-Dodging Cruise Industry Begs For Taxpayer Bailout Amid Collapse In Revenue.

• Coronavirus Rescue Bill Includes $350 Million For "Migration And Refugee Assistance".

• At US Epicenter: NY Parks Bustle, Subway Packed, Social Distancing Defied & Flaunted.

• "I’ve Never, Ever, Ever Seen Anything Like This Before".

• Bankrupt Oil Company Trolls Its Banks, Says They May Fail Too.

• Disaster Looms As Millions Of Americans Set To Lose Employer-Sponsored Health Insurance.

• S&P Futures Explode 40 Points Higher In One Tick On $7 Billion Market On Close Imbalance. 

• Fitch Warns USA's AAA-Rating At "Risk Of Near-Term Negative Action".

• Cuomo Approves 'Splitting' Of Ventilators As Some COVID-19 Patients Stay Intubated For Up To 30 Days.

• Chicago Mayor Warns, Those Who Go Outside To Exercise Risk Arrest.

• Is There Wasteful Spending In The Coronavirus Stimulus Bill? (Spoiler Alert: Bigly!).

• Insanity: Stocks Enter New Bull Market On Day Initial Claims Hit 3.3 Million.

John Hopkins University:

• Coronavirus Global Cases. (map)

BNO News:

• Tracking Coronavirus: Map, data and timeline.

Google Docs:

• Coronavirus Testing by State.

Night Trading 

• Asian equity indices are unch. to +1.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 127.0 -7.5 basis points.

• China Sovereign CDS 43.5 -.5 basis point.

• Bloomberg Emerging Markets Currency Index  59.46 +.03%.

• Euro Stoxx 50 futures -.25%.

• S&P 500 futures -.71%.

• NASDAQ 100 futures -.74%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• None of note

After the Close:

• None of note

Economic Releases 
8:30 am EST

• Personal  Income for February is estimated to rise +.4% versus a +.6% gain in January.

• Personal Spending for Feb. is estimated to rise +.2% versus a +.2% gain in Jan.

• The PCE Core MoM for Feb. is estimated to rise +.2% versus a +.1% gain in Jan.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The UK House Price report could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are mostly higher, boosted by financial and technology shares in the region. I expect US stocks to open lower and to rally into the afternoon, finishing mixed. The Portfolio is 25% net long heading into the day.

Stocks Substantially Higher into Final Hour on Global Stimulus Hopes, Less European/Emerging Markets/US High-Yield Debt Angst, Short-Covering, Defense/Utility Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Heavy

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 60.1 -6.3%

• Euro/Yen Carry Return Index 125.33 -.23%

• Emerging Markets Currency Volatility(VXY) 12.41 -.16%

• S&P 500 Implied Correlation 68.23 +10.3%

• ISE Sentiment Index 68.0 -7
  

• Total Put/Call .93 -2.11%

• NYSE Arms 1.36 +22.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 97.95 -5.24%
  

• America Energy Sector High-Yield CDS Index 1,399.0 -5.62%

• European Financial Sector CDS Index 98.05 -3.52%

• Italian/German 10Y Yld Spread 158.75 -21.75 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 132.0 -12.9%
  

• Emerging Market CDS Index 293.0 -5.2%
  

• iBoxx Offshore RMB China Corporate High Yield Index 169.79 -.10%

• 2-Year Swap Spread 23.25 +3.75 basis points

• TED Spread 133.0 +8.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap 24.5 +17.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 59.41 +1.14%
• 3-Month T-Bill Yield -.09% -2.0 basis points

• Yield Curve .48 -1.0 basis point

• China Iron Ore Spot 83.65 USD/Metric Tonne -1.72%

• Citi US Economic Surprise Index 1.0 -60.7 points

• Citi Eurozone Economic Surprise Index -58.50 -3.6 points

• Citi Emerging Markets Economic Surprise Index -44.4 +4.2 points

• 10-Year TIPS Spread 1.08 +3.0 basis points
• n/a chance of no change at April 29th meeting, n/a chance of no change at June 10th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +835 open in Japan 
• China A50 Futures: Indicating +207 open in China

• DAX Futures: Indicating -71 open in Germany

Portfolio:

• Higher: On gains in my tech/biotech/industrial/medical/consumer staple sector longs

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and emerging market shorts, then added some back

• Market Exposure: Moved to 50% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +73.2% Above 100-Day Average
• 11 Sectors Rising, 0 Sectors Declining
• 89.1% of Issues Advancing, 10.0% Declining
• 4 New 52-Week Highs, 11 New Lows
• 3.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 34.1%
• Vix 58.5 -8.8%
• Total Put/Call .780 -15.8%
• TRIN/Arms .58 -46.9%