Wednesday Watch

Evening Headlines

Bloomberg:                      

• Key Part of China’s Shadow Banking Faces Doubling of Defaults.

• U.K. Expands Virus Testing to Residents and Staff of Care Homes.

• Australian Consumer Sentiment Drops by Most in 47-Year History.

• Asian Stocks Open Mixed; Dollar Holds Decline: Markets Wrap. Asian stocks were mixed in early trading as investors scoured earnings reports for evidence of the impact of the coronavirus outbreak. The dollar held its retreat. Japanese stocks slipped while shares in Sydney opened modestly higher. Contracts on the S&P 500 edged lower after the U.S. gauge jumped to a one-month high on Tuesday. Giant technology stocks earlier pushed the Nasdaq 100 through its 50, 100 and 200-day moving averages. Johnson & Johnson surged after posting stronger sales and boosting its quarterly dividend. Meanwhile, JPMorgan Chase & Co. and Wells Fargo & Co. slumped as their profits were hit by major provisions. Treasury yields slipped and the yen edged higher. Futures on the S&P 500 slid 0.4% as of 9:04 a.m. in Tokyo. The index increased 3.1% on Tuesday. Japan’s Topix index fell 0.5%. Australia’s S&P/ASX 200 Index rose 0.2%.

• Oil Holds Above $20 as Demand Gloom Overshadows Production Deal.

• Shale Giants Clash Over Oil-Supply Cut to Survive Crude Rout.  

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

• 2020 Depression, 20% U.S. Jobless, Developed World Help: Eco Day.

• Airlines, Treasury Reach Tentative Deal for Billions in U.S. Aid.

• NYC Adds 3,800 to Death Toll to Count Probable Virus Victims.

• Harvard Researchers Say Some Social Distancing May Be Needed Well Into 2022.

• Trump to Halt WHO Funding; Reopening Plans Weighed: Virus Update.  

• Coronavirus Survivors Hope for Immunity — The Reality Is More Complicated.  

• Worst-Case Fears of 20%-Plus U.S. Jobless Rate Are Now Realistic.  

• World Economy Working From Home Gets a Glimpse of the Virtual Future.  

• One of the World’s Best Quant Funds Plunged 29% in March.

Wall Street Journal:    

• U.S. Will Halt Funding to World Health Organization Over Coronavirus Response.  

• Big Banks’ Profits Sink as They Brace for Loan Defaults. 

• Finding a Summer Internship Amid the Coronavirus Pandemic.

• Thirst for Oil Vanishes, Leaving Industry in Chaos.

• Governors, Trump Clash on Reopening States.

• World Economy Is Likely in Recession.

• A Second Round of Coronavirus Layoffs Has Begun. Few Are Safe.

• Coronavirus Affects the Brain in Many Cases.

• Coronavirus Death Toll Likely Far Higher Than First Reported.

CNBC.com:

• Coronavirus live updates: CA governor outlines guide to reopening state, US airports see $10 billion in aid.

• Tesla jumps after hours as Goldman initiates with buy, sees rally above $800.

• Trump says some state economies may open for business by May 1.

• Coronavirus keeps patients away from US hospitals as ER visits drop: ‘Heart attacks don’t stop’.

• Procter & Gamble stock rises as company raises dividend.

• Stocks making the biggest moves after hours: JB Hunt, American Airlines, P&G and more.

• 7.5 million small businesses are at risk of closing, report finds.

Fox News:

• Trump cuts World Health Organization funding, says group put 'political correctness' before lives.

• Antibody points to potential weak spot on novel coronavirus.

MarketWatch.com:         

• The S&P 500 just posted the most daily swings of 3% or greater in more than a decade—even as the stock market hits a 5-week high.  

• Square and PayPal finally have a chance to prove they can beat the banks.  

• Amazon stock hits record high on hopes for a coronavirus-related boom.  

• The stock market is rebounding because investors are asking the wrong question, analyst says.  

• ‘It’s a complete abomination’ says Wall Street money manager about hedge funds applying for bailouts from small-business recovery funds.

Zero Hedge:

• US COVID-19 Deaths Set Daily Record As 1000s Die, Mostly In NY & NJ; First Amazon Warehouse Worker Dies: Live Updates.

• White House Leaks Draft Plan To Reopen American Economy.

• President Trump Halts US Funding Of World Health Organization.

• Chairman Of Jt. Chiefs Admits US Intel Has Taken 'Hard Look' At Wuhan Lab As Origin Of COVID-19.

• Vince McMahon's XFL Has Shuttered And Filed For Bankruptcy...Again.

• NY Fed Head Trader: "The Scale Of Our Asset Purchases Has Been Unparalleled".

• Investing Is Dead: World's Largest Asset Manager Says "We'll Just Buy Whatever Central Banks Are Buying".

• After Buying The HY Bond Dip, Howard Marks Slams The Fed's "Eradication Of Market's Healthy Fear Of Loss".

• 80% Of Americans Will Wait To Resume Normal Activities After COVID-19 Restrictions Lifted.

• US Airlines, Treasury Department Reach Deal For Billions In Bailout Aid.

• Meet The "Fed Fighters": Junk Bond ETF Shorts Hit An All Time High Despite Fed Backstop.

• "An Unpleasant Truth": Used Auto Market On Verge Of Collapse That Could Cost Companies Billions.

• "We're Crippled At $30" - Oil Prices Hold Big Losses After Massive Crude Build.

• Gold Jumps, Crude Dumps As Nasdaq Squeezes To Best Run In 5 Months.

Business Insider:  

• Costco, Walmart, Target stop selling nonessential items.

• A Colorado town was the site of the first widespread antibody testing in the US. But the results are held up due to coronavirus infections at a New York lab.

• Apple has released a tool that shows how well people in your area are staying home.

• Restarting the economy doesn't mean life will return to normal anytime soon. Here are 5 plans that offer a glimpse of a dystopian future.

• Coronavirus is clobbering the real estate industry. From a frenzy of flex-office layoffs to big deals falling apart, here's everything you need to know.

The Epoch Times:

• Tracking Down the Origin of the Wuhan Coronavirus. (video documentary)

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 -.5% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 113.5 -5.25 basis points.

• China Sovereign CDS 39.25 -1.0 basis point.

• Bloomberg Emerging Markets Currency Index 59.10 +.10%.

• Euro Stoxx 50 futures -.1%.

• S&P 500 futures -.60%.

• NASDAQ 100 futures -.34%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (BAC)/.60

• (SCHW)/.61

• (C)/1.44

• (GS)/3.33

• (PNC)/2.30

• (PGR)/1.46

• (USB)/.82

• (UNH)/3.67

After the Close:

• (ADTN)/-0.08

• (BBBY)/.21

• (LVS)/-.08

• (SLM)/.90

Economic Releases
8:30 am EST

• Retail Sales Advance MoM for March is estimated to fall -8.0% versus a -.5% decline in Feb.

• Retail Sales Ex Autos MoM for March is estimated to fall -5.0% versus a -.4% decline in Feb.

• Empire Manufacturing for April is estimated to fall to -35.0 versus -21.5 in March.
  

9:15 am EST

• Industrial Production MoM for March is estimated to fall -4.0% versus a +.6% gain in Feb.

• Capacity Utilization for March is estimated to fall to 74.0% versus 77.0% in Feb.

• Manufacturing Production for March is estimated to fall -4.2% versus a +.1% gain in Feb.
  

10:00 am EST

• Business Inventories for Feb. is estimated to fall -.4% versus a -.1% decline in Jan.

• The NAHB Housing Market Index for April is estimated to fall to 55.0 versus 72.0 in March.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +12,024,090 barrels versus a +15,177,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +7,298,910 barrels versus a +10,497,000 barrel gain the prior week. Distillate inventories are estimated to rise by +2,034,550 barrels versus a +476,000 barrel gain prior. Finally, Refinery Utilization is estimated to fall by -1.85% versus a -6.7% decline prior. 
  

2:00 pm EST

• US Fed Beige Book release

4:00 pm EST

• Net Long-Term TIC Flows for Feb.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Australia Unemployment Rate, weekly MBA Mortgage Applications report and the (IR) business update could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and consumer discretionary shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Surging into Final Hour on Diminishing Coronavirus Fears, Short-Covering, Technical Buying, Tech/Biotech Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 37.8 -8.3%

• Euro/Yen Carry Return Index 121.98 +.03%

• Emerging Markets Currency Volatility(VXY) 11.15 -1.85%

• S&P 500 Implied Correlation 71.66 -7.5%

• ISE Sentiment Index 46.0 -127.0 points
  

• Total Put/Call 1.0 +9.89%

• NYSE Arms 2.0 +96.1%

Credit Investor Angst:

• North American Investment Grade CDS Index 80.73 -3.16%
  

• America Energy Sector High-Yield CDS Index 1,110.0 -3.24%

• European Financial Sector CDS Index 93.94 +.67%

• Italian/German 10Y Yld Spread 216.25 +24.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 116.69 -5.18%
  

• Emerging Market CDS Index 313.20 +1.94%
  

• iBoxx Offshore RMB China Corporate High Yield Index 158.26 +.49%

• 2-Year Swap Spread 21.0 -1.0 basis points

• TED Spread 105.0 +2.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap 46.75 +9.5 basis points
• MBS  5/10 Treasury Spread  124.0 +3.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 59.04 +.11%
• 3-Month T-Bill Yield .16% -4.0 basis points

• Yield Curve 51.25 +2.25 basis points

• China Iron Ore Spot 83.95 USD/Metric Tonne +.45%

• Citi US Economic Surprise Index -84.1 -2.3 points

• Citi Eurozone Economic Surprise Index -61.60 -.2 point

• Citi Emerging Markets Economic Surprise Index 12.0 +2.4 points

• 10-Year TIPS Spread 1.29 +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 -44 open in Japan 
• China A50 Futures: Indicating -119 open in China

• DAX Futures: Indicating +2 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 75% Net Long