It’s been a tough year, and now the first rebound of the 2020 bear market is running out of steam. While there was no rationale for equities to rise higher yesterday, we saw accumulation at key moments on the downside. If the goal was to seduce more fence-sitters off the sidelines, it was abandoned in the final hour of trading.
The only sector to finish higher was Energy, which has been by far the hardest hit in a river of red.
Last night, President Trump warned of a “very, very painful next two weeks,” as the onslaught of deaths from the coronavirus ramps higher, citing a worst-case figure of 220,000. We pray it’s a lot less.
2020 River of Red S&P 500 (SPX) | Day | Week | Month | 3 Months |
-1.60 | +5.61 | -16.36 | -20.00 | |
Communication Services (XLC) | -0.23 | +3.32 | -15.80 | -17.55 |
Consumer Discretionary (XLY) | -1.97 | +2.50 | -18.10 | -21.76 |
Consumer Staples (XLP) | -1.98 | +6.63 | -10.79 | -13.46 |
Energy (XLE) | +1.57 | +6.29 | -38.28 | -51.58 |
Financials (XLF) | -2.85 | +4.79 | +25.58 | -32.42 |
Health Care (XLV) | -0.61 | +10.03 | -8.79 | -13.18 |
Industrials (XLI) | -1.59 | +7.03 | -22.27 | -27.83 |
Materials (XLB) | -1.42 | +5.04 | -18.12 | -26.70 |
Real Estate (XLRE) | -3.19 | +11.99 | -19.73 | -19.83 |
Technology (XLK) | -2.58 | +2.81 | -14.64 | -12.96 |
Utilities (XLU) | -3.98 | +11.41 | -15.80 | -14.21 |
Mark to Make-Believe?
Remember the term “mark to make-believe” during the last financial crisis? It referred to Wall Street banks marking any price they wanted in measuring the value of certain assets on the books. It led to boom times for Wall Street until there was a sonic boom that wiped out Main Street.
Last night, China posted its latest manufacturing numbers that were nothing sure of wonderment.
Apparently, China’s manufacturing has roared back in expansion with a reading of 50.10 in March after plunging to 40.30 in February. Golly, remember when our market was moving lower due to the impact of the coronavirus on China’s manufacturing sector, and the notion it would take months to come back online? Even if you don’t believe these numbers, it would have moved our markets big time in another time and place, and that wasn’t this nightmare.
To see China's february manufacturing PMI, click here.
Next Wave of Unemployment Claims
Tomorrow, we get the next wave of the Initial Jobless Claims, and this time, everyone agrees the number will shatter the record established last week:
- 6,500,000: Banque Pictet & Cie SA
- 5,298,000: SouthBay Research
- 5,250,000: Goldman Sachs
- 5,000,000: Capital Economics
- 5,000,000: NatWest Markets
- 5,000,000: Wrightson ICAP
- 4,500,000: Fact And Opinion Economics
- 4,500,000: Moody’s Analytics
- 3,500,000: Consensus
Portfolio Approach
We kept our powder dry yesterday, and there is a chance we might raise funds in the Hotline model portfolio, as a couple of recent ideas have made substantial moves.
The goal of the service is typically to buy and hold for three to six months, making adjustments based on underlying fundamentals. I can’t let strong double-digit gains evaporate during this period, where cash is king.
Today’s Session
The ADP Employment Report showed a net loss of -27,000 jobs in March. It was a massive blow to small business, and it probably understates how dire conditions are.
- Large (500+ employees) +56,000
- Midsize (50 to 499 employees) +7,000
- Small (1 to 49 employees) -90,000
To see the chart, click here.