Stock are Confused

The coronavirus continues to affect more people. The death toll is now 177 people and the number of infected people now stands at better than 7000! The FED leaves rates unchanged (expected), but warns of a global slowdown due to “the virus.” TSLA kills it, and the junkies can’t get enough, sending the stock up 11% in afterhours trading causing the shorts to run for the hills as they continue to get slaughtered. The stock is quoted up more than $50. FB gets smashed, falling 7% after they reported “better earnings and better revenues,” yet missed on ARPU (Avg Revenue Per User) as their expenses rose more than expected. Street analysts are cutting their recommendations, stock quoted down $16. MSFT rises on better numbers, and Treasuries once again in favor (think safety) with investors as the angst builds, sending prices up and 10 year yields down to 1.563%, the lowest levels since October.

Steve Bannon, former WH “aide” is making a documentary that is set to “take down” China’s Xi Xi just as the US and China embark on Phase Two trade negotiations. (That’s brilliant) And then we find out that Lizzy Warren (Democratic Presidential Candidate) wants to impose criminal penalties for any one of the FANG stocks that publishes and spreads voting “disinformation” online ahead of the 2020 Presidential Election (think FB), saying “I’ve got a plan for that!” In fact, she wants to hold them all responsible for the 2016 election results, as she tries to nullify the voice of the American electorate.

And finally, the government is set to report fourth quarter GDP today. And while everyone expects it to be 2.1%, the message now is that some economists are expecting GDP to slow into the new year as estimates for the first quarter now run the gamut from 1.4% – 2.6%.

And so stocks became confused, not sure what to do. Should we just go higher and ignore the data? Or should we reconsider all of the information and give it all up? By the end of the day, the Dow was +11 pts, well off its highs of +222 pts, the S&P closed lower by 3 pts, well off its highs of +17 in the early morning only to plunge, rally again and then plunge into the bell. The Nasdaq closed +5 pts while the Russell lost 9 pts. By far, the biggest loser.

The focus for the day was earnings until it wasn’t. As the day wore one, the markets and investors/traders/algos started to become a bit more concerned (again) about all of the other noise, suggesting that Tuesday’s surge was in fact that “dead cat bounce” that we discussed.

Overnight, stocks in Asia continue to get hit. Japan down 1.7%, Hong Kong losing another 2.6% with airliners and casino’s getting smashed. The Taiex (Taiwan) plunged by 5.75%, as Apple supplier Foxconn loses some 10% as the coronavirus once again moves to the front burner. South Korean Kospi lost 1.7% and China remains closed for the lunar holiday. They are due to open on Monday, and if this continues to spin out of control, then we can expect that trading in China will be ugly. As the virus is now present throughout that whole country, never mind everywhere else around the world. And again, while this will not price stocks in the long term. No one really wants to jump in front of a freight train, so while buyers exist. They are choosing to be at lower prices, forcing sellers to make a choice. Do I sell it down or do I walk away? Right now, it appears as if sellers are choosing to sell, and that just might be the silver lining the long term investor loves.

Markets in Europe are beginning the day under pressure. As a new day dawns over the continent, we see investors/traders and algos continue to risk off mentality. All market centers pushing losses of 1% across the Eurozone. The BoE is due to announce their interest rate policy decision this morning. While no change is expected, there is rumor that we could see a cut in rates. Next, BREXIT is finally here. Three years after the Brits voted to leave the EU (European Union). As of Friday at 11 pm, the UK will no longer be part of the EU. It will be their modern “independence day.”

FTSE -0.73%, CAC 40 -1.25%, DAX -1%, EUROSTOXX -0.98%, SPAIN -0.50% and ITALY -0.97%.

US Futures are all lower as global concern rises over the coronavirus as well as the FED commentary. Now it was all fine as the FED left rates unchanged, but then he suggested that while it is too early to tell, the coronavirus could disrupt the Chinese economy as well as the global economy. So it’s Risk Off (again). Dow futures are -175 pts, S&P’s are -22 pts, the Nasdaq is +55 pts and the Russell is down 11 pts. Earnings due out today from Altria, UPS, VZ, KO, AMZN, V, and X.

Economic data includes the first go around for fourth quarter GDP – exp of +2%. But like I said, some on the street are suggesting that 2020 GDP is due to slow. So, just like Monday, when the tone is negative, then any story out there that has a negative hint will only add to the downside pressure as the markets will Accentuate the Negative and Eliminate any Positives (at least for today).

The S&P closed at 3273, after attempting to pierce 3300. Yesterday’s high was 3293. Today’s weakness suggests that the markets may want to test Monday’s lows of 3236 at some point. If not today, then maybe tomorrow as we head into the weekend as investors await more news on the virus. With China due to open on Monday, we can expect that market center to fall out of bed if we don’t get some good news over the weekend.

Oil, under pressure again. But this time it is more than just the virus. The US reports a bigger than expected INCREASE in crude supply, and that only added to the Risk Off tone. As I have been saying all along, we are awash in oil. The world has more supply, demand is waning because we are becoming much more efficient not because we don’t need oil any longer, we just need less of it as alternative sources of energy become more popular.

Gold, you got it. After backing off a bit as the angst subsided, it is back in vogue as the angst heats up again. The uncertainty around the virus and global growth continue to be of real concern. This will continue to support gold right here. Do not be surprised to see it pierce $1600/oz. before it pierces $1550/oz.

Take good care.

Kp


Perciatelli in sauce

Perciatelli in Red Pepper Sauce

The Red Pepper Sauce comes from the Lombardy region and is one of the 20 regions of Italy. Its capital is Milan, Fashion and Business capital of the country… 1/6 of the population lives here and about 20% of the country’s GDP is produced here, making this one of the richest regions in the country as well as in Europe. It is home to Lake Como, Lake Garda and Lake Maggiore. spectacular locations, and ones that should be on everyone’s bucket list.

1 lb. of Perciatelli, Red bell peppers – washed and sliced thin, diced onion, garlic, olive oil, s&p, fresh basil, hot red pepper (opt) and plenty of Pecorino Romano Cheese.

This is simple

Bring a pot of salted water to a rolling boil.

In a large sauté pan – heat up the olive oil, sauté the sliced garlic, now add in the diced onions and sauté until translucent. Now add in the thinly sliced red peppers and sauté until soft. Season with s&p. When done – run 3/4 of it thru the food processor to blend. Return to sauté pan and set aside.

Cook the pasta al dente – maybe 8 mins… strain and reserve a mugful of water. Toss the pasta into the sauté pan and turn heat to med – mix well – adding in half of the reserved mug of water.

Now add the fresh basil – some hot red pepper (opt) and plenty of cheese. Toss and serve.

Buon Appetito.

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Kenny Polcari

Kenny is the editor of Morning Thoughts and has been with Seven Figure Publishing since 2019.

Kenny is a CNBC exclusive contributor appearing on shows like The Halftime Report, Power Lunch, and Closing Bell. His market commentary has reached audiences across the nation on media outlets such as Bloomberg, Fox, ABC, and more.

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