Morning Report: Stocks down on travel ban

Vital Statistics:

 

Last Change
S&P futures 2601 -139.25
Oil (WTI) 31.12 -1.89
10 year government bond yield 0.70%
30 year fixed rate mortgage 3.5%

 

Stocks are lower after Trump announced a 30 day travel ban from Europe. Bonds and MBS are up.

 

Initial Jobless Claims came in at 211,000 last week, below expectations. If Coronavirus is going to cause a recession, this will be the first place you see it. So far, it looks like companies are hanging on to their workers. This is key to preventing a recession.

 

Credit spreads are beginning to widen, however. The banks have been crushed YTD, with Wells down something like 40%, JPM down 30%. We are nowhere near 2008 levels (and probably aren’t heading there), but widening credit spreads are the canary in the coal mine.

 

Speaking of widening spreads, mortgage backed security spreads are widening. The difference between the implied yield of mortgage backed securities and treasuries is about 150 basis points right now. It was about 110 at the end of February. In a nutshell, this means that mortgage rates right now are about the same as they were when the 10 year was yielding 1%.  If all you watch is the 10 year bond yield indicator on CNBC. It isn’t telling the whole story.

 

We are entering “oh crap” season, where companies that are going to miss their first quarter earnings expectations disclose it to the market. This could be an opportunity for companies to “kitchen sink” a lot of things as Coronavirus provides an opportunity for them to build in cushion for future earnings releases. In other words, if the Street expects you to make $1.16 in your first quarter earnings, and you are going to come in around $1.12 – $1.13, you might disclose that you will make only $1.10 and take the opportunity to write down a whole bunch of assets and doubtful accounts to create some cushion to make sure they make their numbers going forward. Companies aren’t supposed to do this, but they do. Certainly look for airlines, hotels, banks, consumer discretionaries, and energy to warn on Q1.

 

Inflation at the wholesale level fell 0.6% MOM in February, and is up 1.3% on a YOY basis. Ex-food and energy it is down 0.3% MOM and up 1.4% YOY. Again, inflation no longer matters to the Fed.

 

The Fed Funds futures are now predicting a 60% chance cut of 75 bps next week and a 40% chance of a 100 bp cut. Note that the CME indicates that the inter-meeting cut has screwed up the probability graphs, but they don’t quantify it. Oh, by the way, the CME is suspending all open-outcry trading until further notice starting Friday.

 

Fed funds futures Mar 20

 

 

76 Responses

    • Yes, because banning white people from Europe from coming over is racist.

      It is a foreign virus. Accuracy is xenophobic, however. Facts are racist!

      This virus didn’t start off in Virginia.

      Eh, I’m checking out of the propaganda piece. I’ve read enough Orange Man Bad pieces. Legit criticism based on facts, all for it. Plenty of things to criticize.

      ORANGE MAN BAD!!1!!1! I’ve had enough of, I think.

      Expander diversity and focusing on intersectionality is not the proper response to the Corona virus–even if we’re getting hysterical about it.

      Like

    • Thanks JNC, I’m not sure what to do with that information. So many things seem to be uncertain right now that I can’t wrap my head around it. I just hope my daughter will be ok.

      Like

    • If I had money I would be buying. I’d be dollar-cost averaging, buying a block of index funds or stocks that have dropped a ton and have no real reason to, but keeping some cash in case it drops some more. Alas, I have no liquid capital for playing the stock market these days!

      Like

      • Kevin, hubby and I checked out of the stock market in late 2007, prescient on my part right? Unfortunately we missed the buy in after the fact and now just aren’t interested anymore. We invested in our business and property instead and will weather the property storm this time if there is one. Hoping it will be short lived at least………:-)

        Like

  1. The presumptive D nominee, y’all.

    How he handled the Swine flu in ’09 and almost caused a panic:

    https://www.politico.com/story/2009/04/biden-says-avoid-planes-subways-puts-out-clarifying-statement-021925

    How the initial Chinese travel ban was XENOPHOBIC!!!1!!11!!!!!

    https://nypost.com/2020/03/01/criticisms-of-trumps-coronavirus-response-are-sickening-devine/

    Course, he was probably thinking about Hunter’s Chinese business interests.

    And today?

    Liked by 1 person

    • While I think some of the responses are hysterical, I don’t understand the cognitive dissonance of “this awful plague is Trump’s fault” and “oh no he doesn’t want people who might have coronavirus to travel back and forth to our country”. Is it a helpful restriction? Dunno, I don’t think anybody does.

      Is it outrageous xenophobia? I’m not seeing it.

      Like

      • Is it outrageous xenophobia? I’m not seeing it.

        xenophobia, like racism, is a fluid concept based on the rhetorical needs of the user

        Liked by 1 person

    • Hmmmmm, I’ve decided if I’m going to stay here through the election, I’m not going to slam Trump and won’t listen to or comment on any of your slams to Biden (who will presumably be the Dem candidate). Scott schooled me in the Trump thing and now I’m schooling you guys in the Biden thing. Neither one of them are awesome and barely vote worthy.

      Wish we had better choices but in the interest of super partisanship, the intelligent and tempered in the way of government have left the room!

      Like

      • lms:

        Scott schooled me in the Trump thing

        I just speak for myself, not this site in general, and I was not trying to school you in anything nor suggesting that you not slam Trump. Slam away, if you want. And if I have an objection to any particular slam, I will say so. Free speech for all is best, I think.

        Like

        • I’m certainly not trying to limit anyone’s freedom of speech. Just saying I’m not going to fall into the trap of comparing Trump to Biden. I’m not that interested enough in either of them to begin doing a tit for tat thing. Sorry if I wasn’t being clear, yesterday was a long day for me.

          Like

        • lms:

          Sorry if I wasn’t being clear, yesterday was a long day for me.

          No worries! I am familiar with long days. I seriously can’t wait for the markets to close tonight, just so I can relax for a couple of days without worrying about where it is going and whether I should be doing something. Even if the apocalypse comes over the weekend, there is nothing to do when the markets are closed.

          Like

        • there is nothing to do when the markets are closed.

          What, free internet porn is now “nothing”?

          Like

        • hahahaha

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        • So you have a link for that? Just asking for a friend!

          Like

        • lms!

          Like

  2. “CDC Recommends Full-Body GWAR Costume to Protect Against Coronavirus”

    https://thehardtimes.net/music/cdc-recommends-full-body-gwar-costume-to-protect-against-coronavirus/

    Presumably this helps to enforce social distancing.

    Liked by 1 person

  3. I laughed.

    It would be par for the course.

    Liked by 1 person

  4. Socialists for Trump?

    https://www.washingtonpost.com/politics/paloma/the-trailer/2020/03/12/the-trailer-what-the-election-looks-like-to-the-media-that-love-sanders/5e6a3a23602ff10d49ac9f8d/

    I read that one of the “if not Bernie, then Trump” so-called journalists is sponsored by Russia Today.

    Liked by 1 person

  5. So our school district is closing (that is, the big one–Shelby County Schools–where I work) until March 30th. That is, the schools are–so teachers and students stay home but everybody else shows up to work. And we’re still having face-to-fact meetings, more than ever. Which I find crazy. I don’t think the Corona virus is the end of us but still–why not just Zoom or WebEx instead of getting everybody in the same small room breathing on one another?

    Gonna be working late. Gotta clear stuff off because we’ve got a lot of projects related to closing the schools and Corona virus that must be dealt with now! 😉

    Sheesh.

    Like

  6. Here’s my report, on the ground in CA, re COVID-19. Luckily CA is very spread out, with so far only concentrated populations where the virus is spreading. It’s kind of tough to know really because the testing has been so constrained. San Francisco and Los Angeles are the major metropolitan areas and so far SF is faring worse than LA.

    Our daughter who lives in SF with her legally blind lawyer husband is under self isolation. She has a fever and a cough but hasn’t been tested yet. She’s strong other than her lungs (severe asthma since a baby) so we’re hoping she will beat it obviously. She normally does the driving and shopping because her husband really can’t, but now they are buying groceries online. She can’t find a few things locally even online so we’re sending supplies for them from here. They are both working from home at the moment from one job and her husband is still going into his 2nd job which is as an advocate for homeless. Pretty sure that’s where they picked it up.

    I can’t go up there to help out since I’m in the age category that the kids all want to protect and they don’t want me to leave Walter alone down here.

    My other daughter, the geologist working for OXY is expecting to be working from home by Monday and has no idea if her son (my 2.5 year old grandson) who is in day care will be home with her or not. They’re having a major remodel done on their home in Golden so she might have to go to Starbuck’s to work if they’re open. Also, since she works now for OXY, who knows where that will end up. She has a Change of Control option worth about $600K until the end of August……..but is kind of freaking out.

    Our son, who is also in CO, the retired firefighter (due to an on the job injury) who lost everything in 2009 has found a great job that he’s really great at but as it’s a kind of luxury product he’s selling…………he’s worried too.

    I don’t know what’s going to happen to my family, but we all survived the recession so hopefully we’ll survive this bullshit!

    Like

    • lms:

      Here’s my report..

      Sorry to hear that your SF daughter isn’t feeling well. Hopefully it is mild or something else entirely.

      Here’s my report. My Georgetown daughter was out visiting her sister in LA for spring break when G’town told students not to return from spring break, and that classes would be done online. USC has more or less announced the same thing, so the two of them are setting out on a road trip today headed to North Carolina where, luckily, I recently bought a house, so they at least have a place to go.

      My wife flies out in a few hours to go back to the US to join them (while flying from the U.K. is still possible!) I’m staying here to work. We’re preparing for a significant time apart. My Boston daughter will stay in Boston for the time being with her girlfriend.

      At work we will be splitting the team into two groups and isolating them apart from each other, one team in the office and one team at our disaster recovery site, indefinitely. Everyone also has tested out their home setup in case we all end up having to work from home.

      Crazy times. Something to tell the grandkids years from now.

      Liked by 1 person

      • Scott

        Crazy times. Something to tell the grandkids years from now.

        Indeed and my 3 grandchildren are living it so there’s that. 🙂

        Hope all of your family stays well and the girls’ education isn’t impacted too much. It’s very difficult for students across the country right now. I’m sure your wife is anxious to be with the two in SC although being separated from you will be tough.

        Thanks for the well wishes re my daughter. I haven’t spoken to her yet this morning but she said last night that so far it feels like the normal flu to her but she doesn’t know exactly what it’s supposed to feel like. Hopefully, she’ll be tested soon.

        I’m trying not to worry and have a little faith in her own ability to take care of herself……………once a mother always a mother.

        Like

        • lms:

          I’m trying not to worry and have a little faith in her own ability to take care of herself……………once a mother always a mother.

          I know what you mean. I have had to repeatedly remind myself recently that they are old enough to make their own decisions.

          BTW, this from my cousin who is a doctor, as is his wife, last night: “Wife and I get that one would take measures like this for Ebola or something really dangerous, but having a hard time medically with a common cold virus. Especially when the annual flu has killed more than 20,00 people in US alone this season already. Strange times.”

          Like

        • Scott

          From your cousin Especially when the annual flu has killed more than 20,00 people in US alone this season already. Strange times.”

          We don’t have any medical professionals in our family. I remember when we first brought it up here at MFP that many of us had the same opinion. Seasonal flu sickens and kills many more here annually.

          I’ve tried to read a lot of the science, rather than politics surrounding the current wisdom in the research medical community. The general consensus is that this novel virus is anywhere between 10 and 30 times more deadly than the seasonal A/B flu strains mainly because there is no immunity built up in the population to it and no vaccine or treatment really……………the potential for illness and loss of life in any population where it spreads unchecked is very large. It also seems to be more deadly to our older population or those with compromised health than the seasonal flu. Thank goodness children don’t seem to be affected in any significant numbers.

          I’ve heard estimations of anywhere between 60 and 90% of us may eventually get it. If we do our best to contain the spread we can contain the possible over burden on the health care system, as well as give the scientists more time to come up with a vaccine. I’ve read that in Italy they are prioritizing treatment now based on age. That’s not something anyone here wants to do I don’t think.

          I remember being somewhat skeptical about the whole thing myself just a couple of weeks ago. I hate all the things we’re doing here now but if it’s only a temporary halt to normal life and does the job everyone seems to hope it will do I think we’ll all be glad for it eventually.

          Like

    • I found out this morning that the Kaiser Permanente in SF (where my daughter goes) is opening, or has opened, a drive-thru testing area. My daughter may be able to be tested there, possibly today, it’s still a little uncertain. She will need a referral from her doctor, she’ll get that easily enough, and may or may not need an appointment.

      Like

  7. Fascinating, last night my company told the entire sales force to work from home. These responses are just wild.

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    • It’s really disruptive……………all the event cancellations, school closures and business decisions surrounding this social distancing. I hope it isn’t actually necessary but maybe we’ll look back at it and realize that it was a good thing we did it. I wish I knew.

      Like

  8. Last week, or over the weekend, Mark posted a cute little story about making hand sanitizer with his twin granddaughters. I’m glad I read that. Today I’m sending our two bottles we bought to my daughter in SF……..she can’t buy it online or anywhere in SF. I have alcohol and aloe here so we can make our own. 😉

    Also, in the OXY building in downtown Denver someone stole all the hand sanitizer from the storeroom that the company uses in its dispensers around the building the gym and in the restrooms. Sheesh, people are bizarre sometimes. They’ve actually launched an investigation so they can fire said person or persons.

    Like

    • The local supermarket was bedlam. They are running out of stuff (TP is long gone).

      Madness of crowds, i guess.

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      • We’re sending 12 rolls of TP to our daughter from our own large pack that we bought before the panic set in. My hand sanitizer turned out fine but smells like alcohol…..LOL

        Like

  9. Can I now engage in cannibalism?

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  10. People at Costco are buying 3 chickens!

    C’mon Man!

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  11. Our daughter was tested at a drive-thru testing facility at Kaiser Permanente in SF. Her doctor will give her presumptive results tomorrow but we’re still not sure how long the final result will take. Apparently they may be able to get that without going through CDC now.

    She’s still running a fever, aches and pains but only a shallow cough. She slept most of the day even though she’s supposed to be working from home! Slacker!

    Have a great weekend everyone. We’re going to see a movie tomorrow and grab a meal out. I haven’t left the house since last Saturday so I definitely need to get out. Apparently the theaters here are limiting the number of seats sold so it should be deserted.

    Like

  12. In the news of the bizarre. We haven’t really been raiding the stores or stocking up mostly because we generally have enough food, fresh or frozen for a couple of weeks. Walter did go out a few days ago and bought hand sanitizer and hand soap, which we ended up sending all to SF for our daughter, she needs it more than we do.

    He likes going to the grocery store early in the morning and picking up the few things we might need. We have 2 stores here that open at 7 and another that is open 24 hours (Winco)..He left here to go to Winco for Coffee Mate and a loaf of bread. Keep in mind this is the store that never closes. There was a line to get in a block long, they were limiting the number of folks who could be in the store at one time he thinks. Well, he’s not going to wait in line for coffee cream and bread so he drove by the other two stores that would be opening soon and they had very long lines as well.

    Amazing! I can drink tea and skip the bread very easily but now I’m wondering what else we might do without over the next few weeks.

    Panic has definitely set in.

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  13. My daughter got the results from her test back and she is negative for COVID-19, thank goodness. Her doctor told her to stay home and limit outside contact for at least a week so she doesn’t get exposed to anything else. They brought her a laptop from work yesterday so she’s set to work at home for now when she feels better.

    Like

    • Good news!

      Like

      • I’ve learned to live with the fear of her being sick since she was little so I try not to panic but I admit I was worried about this.

        Everyone in my family has gone into hibernation mode for now and we’re doing puzzles, playing games and facetiming each other. The kids are all worried about Walter and I because we’re in that age group but I’m not worried about it. I’m not going to watch the news this weekend……………I need a break!

        I think Trump finally got the messaging right yesterday and his tone was much less partisan and serious. He still leaves a lot to be desired but I think he appeared Presidential. Not sure where all the panicked buying came from but I’m pretty sure the stores will be able to re-stock soon.

        Like

    • Great! So glad to hear it!

      Liked by 1 person

  14. I find it amusing how many of my leftist friends think that the Fed spent $1.5 trillion on stocks last Thursday.

    Like

    • I find it amusing how many of my leftist friends think that the Fed spent $1.5 trillion on stocks last Thursday.

      hahahahahaah

      Like

      • There has been this talking point going around that on Thursday when the market was getting whacked, the Fed announced their liquidity injection. People then show the intraday chart of the S&P and note that the stock market picked up about 20 S&P points before selling off again. They then conclude the Fed wasted $1.5 trillion stupidly supporting the stock market and then claim we could have given everyone free college for that. And of course the hurr duurrrp durrrp! laughing at the idiocy of the Fed.

        It reminds me of the NYT editorial chick who thought the money spent on Bloomberg’s campaign could have given everyone a million dollars. It isn’t that they just suck at math. It isn’t even that they lack common sense. It speaks to their worldview that all of our problems could be solved if we just made billionaires pay a couple pennies.

        But yes, my progressive friends on Facebook are generally dumb and gullible to swallow shit like that. And what is worse is they think they are the smart ones! Ignorance and arrogance are a toxic cocktail.

        Like

    • You know why they think that right?

      &

      “Senator Bernie Sanders said, “When we say it’s time to provide health care to all our people, we’re told we can’t afford it. But if the stock market is in trouble, no problem! The government can just hand out $1.5 trillion to calm bankers.””

      Even their fellow travelers are trying to correct them.

      https://www.theatlantic.com/ideas/archive/2020/03/federal-reserve-trying-stop-financial-crisis/607987/

      Like

  15. Worth a read:

    “Newt Gingrich: I Am in Italy Amid the Coronavirus Crisis. America Must Act Now—And Act Big

    Newt Gingrich
    On 3/13/20 at 4:51 PM EDT”

    https://www.newsweek.com/newt-gingrich-i-am-italy-amid-coronavirus-crisis-america-must-act-now-act-big-opinion-1492270

    Like

  16. I wonder if anyone will do a study as to whether or not HIPAA contributed to delayed detection of COVID-19.

    “Federal and state officials said the flu study could not be repurposed because it did not have explicit permission from research subjects; the labs were also not certified for clinical work. While acknowledging the ethical questions, Dr. Chu and others argued there should be more flexibility in an emergency during which so many lives could be lost. On Monday night, state regulators told them to stop testing altogether.”

    Like

    • I think it’s been a bit of a comedy of errors, not just from our President, but the regulatory issues (FDA and CDC as well as our federal pandemic team which was dismantled) and our own attitudes as Americans that we’re better than the rest of the world. We haven’t paid attention to the potential severity of this virus……………sure it’s not crazy deadly, but it will overwhelm our ability to provide care for the people who need attention from our healthcare system……….such as it is.

      Walter said tonight they’re trying to get rid of the homeless and the old folks. I don’t agree but he may share that sentiment with others.

      We’re trying to do our part here, as is the rest of my family. I’m in contact with our Neighborhood group and we’re doing what we can locally. Bars are closing now so I guess we’ll have to hit the liquor store to keep our glasses half full.

      I’m frustrated, in case you couldn’t tell! 🙂

      Like

      • lms:

        …and our own attitudes as Americans that we’re better than the rest of the world.

        I don’t understand this. How has this attitude been manifested?

        Walter said tonight they’re trying to get rid of the homeless and the old folks.

        Who is he referring to when he says “they”?

        Like

        • Scott, I think some Americans, not all, have been ignoring the potential severity of this because they think we’re somehow invincible from the kinds of things that are happening in Italy. I belong to another very large internet group focused on fitness and there are people from all over the world commenting. It’s amazing the sheer numbers of Americans whose attitude is that COVID-19 will not affect them and they’re going about their daily lives as if nothing could happen. It’s astonishing I think.

          Walter was primarily kidding so I don’t know who he was talking about, presumably our government.

          He has little faith in the government.

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        • He has little faith in the government

          The proper position to have at all times. I salute him!

          Like

        • lms:

          I think some Americans, not all, have been ignoring the potential severity of this because they think we’re somehow invincible from the kinds of things that are happening in Italy.

          All of the people that I know that have downplayed the risks have done so because they thought the media was over-hyping things, as the media is wont to do, not because they view Americans as somehow “invincible” or “better” than other nationalities. I haven’t seen any evidence of the latter, which is why I asked.

          He has little faith in the government.

          McWing corked me on this one!

          Like

  17. George, I think I was wrong when I thought Russia would fold to Saudi pressure. Putin says he can stand the pressure for years [but Texas cannot], and Trump asked MBS to quit screwing around, but MBS doubled down.

    I consider Trump’s fascination with dictators like MBS a brutal shortcoming in a POTUS. Another trait he shares with Sanders, btw.

    Like

  18. So,Open Borders is the moderate position?

    Like

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