To put things into perspective. The most horrible week for the Dow since the GFC in 2008 is hardly visible on the long-term chart.
Archives of “February 2020” month
rssThis is what a sudden stop in China looks like
US stocks catch a big bid in the final 15-minutes of trading to limit the damage
Dramatic move late
The S&P 500 finished the day down just 24 points at 2954 in a big win for the bulls late in the day.
The index gained more than 70 points in the final 15 minutes of trading in a huge bid, that was likely helped by month-end rebalancing. The huge rallies in bond and selling in stocks this month left pensions and other balanced funds heavily overweight bonds, so they’re forced to buy to get back on target.
There may also be hopes for an emergency Fed cut on the weekend or some good coronavirus news. There’s no doubt the market could have overshot this week, with the S&P 500 posting its worst weekly performance since October 2008 — when Lehman Brothers collapsed.
The intraday chart shows the huge reversal that kicked off a test of the earlier low of 2880.
On the day:
- S&P 500 -25 points to 2954 (-0.8%)
- Nasdaq – flat
- DJIA -1.4%
On the week:
- S&P 500 -11.5%
- DJIA -12.4%
- Nasdaq -10.5%
The weekly chart is still ugly but at least the bulls have some lift as we closed off the weekly lows:
We will have to get back above the 200-dma at 3046 to generate any real optimism.
Thought For A Day
It was an awful week for European stocks. Here’s a look at the damage
Closing changes for the main European bourses:
- UK FTSE 100 -3.2%
- German DAX -3.9%
- French CAC -3.4%
- Italy MIB -3.6%
- Spain IBEX -2.9%
On the week:
- UK FTSE 100 -11.1%
- German DAX -12.4%
- French CAC -11.9%
- Italy MIB -11.3%
- Spain IBEX -11.8%
- Stoxx 600 -12.2%
It was the worst week for most indexes since 2011 or since 2008. It’s interesting to note that despite being the centre of the storm in Europe, Italy’s market outperformed. In FX, the temptation is going to be to sell the currency of wherever the next outbreak is, but the market is increasingly looking at it as a global event, rather than a localized one.
The current week is the worst for the stock market since October 2008.
OPEC reportedly discussing additional output cut of up to 1 mil bpd now
Reuters reports, citing OPEC sources on the matter
This is similar to the story reported by the FT earlier today here. It is said that several OPEC members, including Saudi Arabia, are leaning towards a deeper oil output cut because of the coronavirus outbreak.
Yeah, I’m not sure if Russia is going to get on board with that. In any case, Saudi Arabia is likely going to have to do the bulk of the heavy lifting here to push this through.
Even then, I’m not sure if it would be enough to turn sentiment around in the oil market as the virus outbreak continues to be more widespread across the globe.
The market now expects the Fed to cut rates next month
Three rate cuts are priced in by the September meeting now
The moves in the rates market over the past two weeks have been something else. On 14 February, odds of a 25 bps rate cut by the Fed for the March meeting were only at 10%. Now, the market has fully priced that in and then some.
Meanwhile, over three rate cuts are fully priced in for the remaining ten months of the year with the next cut seen in June and the third in September.
I think the big question now is, will the Fed be bullied by the market into yet another rate cut this time around? So far, they haven’t dropped any hints about a move next month but there’s still two-and-a-half weeks to go.
Chinese naval ship lases a US Navy plane near Guam
A US maritime patrol aircraft ‘lased’ by a Chinese destroyer
- about 380 miles west of Guam
- on February 17
Statement from the US Pacific Fleet just released – said the incident occurred over international waters.
FT: Saudi Arabia is pushing to make a substantial cut in oil production when Opec meet
OPEC meet 5 and 6 March in Vienna, the Financial Times says Saudi Arabia is asking producers including Russia for a production cut of an additional 1m barrels a day
FT citing five people familiar with the talks,
Under the proposal, Saudi Arabia would account for the bulk of the new 1m b/d cut
- Kuwait, the United Arab Emirates and Russia would split the rest
- Deal not yet been agreed
- Moscow still hesitant
This proposal is up from the 600k bpd proposal previously floated.
