Don’t blame “the market”, it is always right!
Archives of “April 2020” month
rssHow do you find the stock #leaders? Leaders lead, simple as that!
S&P affirms Italy rating with outlook negative
There was some speculation that they would cut the rating
S&P has affirmed Italy’s rating at BBB. They continue to keep the outlook negative.
They said:
- could lower ratings if government debt to GDP fails to shift onto clearly discernible downward path over the next 3 years
- could lower ratings if there is market deterioration in borrowing conditions that jeopardizes public finance sustainability
- projected that Italian gross general government debt will increase to 153% of GDP by end of 2020
- forecasts Italy average unemployment rate will rise to 11.2% this year
They also kept Greece at BB- but moved outlook to stable from positive.
Report that China has sent a medical team to North Korea to attend to Kim Jong Un
Reuters with the report citing “three people familiar with the situation.”
- The sources declined to be identified given the sensitivity of the matter.
Chinese doctors along with officials are part of the team sent to NK
- delegation led by a senior member of the Chinese Communist Party’s International Liaison Department left Beijing for North Korea on Thursday
Link to the Reuters piece for (a little) more.
—
Rumours circulated last concerning the health of Kim, everything from he was recuperating following cardiovascular surgery, to he was brain deed, to he was dead.
- Kim was last seen in public April 11.
Nasdaq leads the way to the upside today. All major indices fall for the week.
Dow posts a 3 day win streak. All 11 S&P sectors close higher
the major indices all closing higher for the day with the NASDAQ index leading the way to the upside. The Dow industrial average posted a gain for the 3rd day in a row. All 11 sectors of the S&P closed higher.
The final numbers are showing:
- Dow, +260 points or 1.11% at 23775.27
- S&P index +38.94 points or 1.39% at 2836.74
- Nasdaq index +139.77 points or 1.65% at 8634.52
For the week, all 3 major indices closed lower with the NASDAQ outperforming relatively. The numbers for the week show:
- Dow, -1.93%
- S&P, -1.32%
- Nasdaq close modestly lower at -0.18%.
For the week, some oversized winners included:
- Beyond Meat +41.44% as meet distributors close operations due to coronavirus
- Rite Aid +22.75%
- Papa John’s, +10.52%
- Lyft, +9.74%
- DuPont, +9.23%
- Chipotle, +8.23%
- Twitter, +7.64%
- Facebook, +6.05%
- Schlumberger J, +5.3%
- IBM +3.83%
- Bristol-Myers Squibb, +2.71%
- Box, +2.45%
- Johnson & Johnson +1.81%
- Home Depot, +1.35%
- Pfizer, +1.33%
Big decliners for the week included:
- Boeing, -16.24%
- United Airlines -12.07%
- Deutsche Bank, -9.02%
- Delta Air Lines, -7.66%
- Slack, -7.26%
- General Dynamics, -6.5%
- Southwest Airlines, -5.93%
- Coca-Cola, -5.47%
- Walt Disney, -5.16%
- Gilead -5.16%
- Citigroup, -5.15%
- Wells Fargo, -5.11%
- Lockheed Martin, -4.93%
- American Express, -4.87%
- Procter & Gamble, -4.8%
- Bank of America, -4.73%
- J.P. Morgan, -4.71%
- Raytheon technologies, -4.06%
- travelers, -4.05%
Thought For A Day
European equity close: More losses in a tough week
Closing changes for the main European bourses:
- UK FTSE 100 -1.3%
- German DAX -1.6%
- French CAC -1.3%
- Spain IBEX -1.3%
- Italy MIB -0.7%
On the week:
- UK FTSE 100 -0.4%
- German DAX -2.7%
- French CAC -2.2%
- Spain IBEX -3.6%
- Italy MIB -1.0%
There is a similar picture in many equity markets of consolidation and uncertainty. The lack of urgency for more stimulus on the fiscal side in Europe is going to be a drag. Next week the ECB will roll out something new but I fear it will underwhelm because the toolbox is limited.
No one knows what’s going to happen to all the debt
Trillions upon trillions in debt is the economic legacy of the virus
I’m going to write about this all day today because it appears to be relatively quiet.
Here is the basic playbook right now.
- The government issues debt
- The central bank buys it to keep yields low
It’s an incredible shell game and it will work to a point. Effectively, I think governments are going all-in on this strategy. Politely, it’s not nice to talk about it and to pretend that at some point the debt will be paid down. The reality is that Japan is 20 years ahead of the rest of the world with the west rapidly catching up.
Greg Ip in the WSJ today writes about the growing US deficit. He notes that the Committee for a Responsible Federal Budget pegs the deficit at $3.8 trillion this year. I expect more stimulus, weaker growth and at least $5 trillion.
The added debt could “threaten the future of the country,” Senate Majority Leader Mitch McConnell said Wednesday.
The problem is that fiscal conservatives have been sounding the alarm for 25 years and it was a boy-who-cried-wolf situation, nevermind the hypocrisy of a $1 trillion corporate tax cut.
The old-fashioned fear is that interest rates will rise but the Fed can repress that. What the real fear should be is that it falls on the dollar as global central banks shift reserves.
Here’s a tweet from the former Goldman Sachs CEO that was mocked but it touches on something real:
More on this laterFDA cautions against using hydrochloroquine for COVID-19, says it’s not proven effective
US Food and Drug Administration issues warning
- FDA warns of heart risks
- Cautions against use outside of hospital setting or in a trial
- Drug has not been effective against COVID-19
This isn’t the final say and there appears to be some kind of war within the US administration about the guidance here. I think it’s safe to say that it’s not a miracle drug but it might be useful in the right circumstances. In the next few weeks there are going to be a bunch of proper studies on this and remdisivir published.
Why Crude oil traded -$38?
