New Lockdown Concerns?

Stocks rallied then failed as Apple set off another round of ‘lockdown’ concerns when they announced that they will be shutting stores in 4 states that have seen a Recent jump in cases… once that news hit the tape, the algo’s went into overdrive –  going from buy to sell in short order sending the market tumbling by 63 pts on the S&P or 2%.  The issue is not so much Apple per se, it is the image that it conjures up of store closings, more lockdowns, more quarantining, more social distancing. Now at the moment this story is only relevant to Apple, but what will others do?  Will they follow in Apple’s footsteps?  Will they too, shut down stores and furlough workers? Will we see another round of empty streets, empty tables and empty chairs? While the gov’t will not shut down the US economy again – what will individuals do, what will companies do?

Look –Apple is Apple – it continues to change the world and will continue to change the world – are you really selling your position in Apple because they are closing stores in 4 states? Is that a reason to sell a core holding? Absolutely not. But what it means for large asset managers is different… Look – first – Apple is trading at all-time highs (that’s important to this conversation) – for example – State Street Corp owns some 180 million shares, Blackrock owns some 275 mil shares, FMR owns 95 mil shares – million shares – so it makes sense that as asset managers they remain proactive and news like this may cause them to peel off some of their holdings – taking advantage of the new highs it is making, book some profits, raise some cash to invest either in other names that are due to rally as the world awakes (think energy, financials, consumer discretionary, real estate) or just keep it aside to re-invest back into Apple if we see a significant selloff. Great! While other asset managers like Vanguard that already owns 336 mil shares or Berkshire Hathaway that owns 274 mil shares or  TRowe Price that owns 60 mil shares may be adding to their position because they think it has room to go and news like this creates an opportunity… Either way – everyone sees an opportunity… which will cause some to sell stock while others are buying stock. And the buyers and sellers will wait and see how that reaction happens… Is it being perceived as more negative or more positive? Today is the Apple ‘TECH Developers Conference’! (It will be virtual, but it will happen). And do you think it’s going to be negative? Hint: the stock is up $2 in pre-market trading – taking back the $2 losses suffered on Friday. Now INTC may not be happy – but that’s another story.

By the end of the day on Friday –  the Dow was down 208 pts or 0.8%, the S&P was lower by 17 pts or 0.56%, the Nasdaq gained 3 pts or 0.03% and the Russell 8 pts or 0.6%.

Now the issue with the ongoing first wave –  (or possible second wave) – is what is keeping investors/traders on the edge and until we get more clarity on what the uptick in cases really means markets will remain on the edge. Now look – we’ve talked about this- newly diagnosed infections are a direct result of more testing – we knew that would be the case -this should not be a surprise, what we are also seeing is that early re-openings in some states do appear to
contribute to the uptick in cases – which really means diagnosed infections. Some are asking – Is the rate going up because of spread or because of additional tests?  Most likely it is a combination of both. But what we do know is that deaths from the virus are in decline (for the most part), people with compromised immune systems, people that are older, people in nursing homes and people with  other ailments are still at risk and will continue to be at risk – the way they are to any virus –  while healthy people  who may get sick, are not dying in droves. In fact, the percentage of deaths vs. infections continues to fall – and that is a positive.  And what we are beginning to hear is expect millions of more people around the world to get infected and that is exactly what may need to happen to bring global immunity to this virus.

Now that being said – overnight in Asia – markets ended mixed. Investors there watching rising cases around the world – but not spooked.  PBoC – kept its benchmark lending rate unchanged – as expected. And officials in Beijing tell us that they can test 1 million people per day – so get ready – because there will surely be a spike in diagnosed cases…and if there isn’t then that’s another issue, because if the math is right – then it should produce at least 60,000 new cases per every 1 million tested.  (and that should be true anywhere in the world – including the US).  So again – as the testing rises – cases rise, but deaths are not- period. By the end of the day – Japan lost 0.18%, Hong Kong lost 0.54%, China rose 0.08% and the ASX rose 0.03%.

Stocks in Europe were lower – then went higher and are now lower again… as the market looks for direction.  Investors trying to reconcile the increase in cases vs. the potential increase in deaths… which is in decline… yet – the angst hangs over the markets. In Germany – the Koch Institute for public health has a new indicator – called the ‘reproduction rate’ or RR  – it tries to
estimate how many people will get infected by one person –  and over the weekend this new indicator jumped from 1.79 to 2.88 – so that is considered a negative.  As of 6:30 am – the FTSE is flat, CAC 40 -0.05%, DAX – 0.06%, EUROSTOXX -0.29%, SPAIN -0.75% and ITALY -0.30%.

US futures are all over the place – currently they are up….  Dow futures are up 195 pts, S&P’s are up 24 pts, the Nasdaq is up 87 pts and the Russell is up 11 pts.  Eco data today includes – Existing Home Sales – exp of -5.6%.  This data point is not expected to be a market mover at all. Look – there is a war going on right now… everyone searching for a data point that tells their story… either bullish or bearish – so the markets will continue to be volatile.  In the end – the FED has made it clear that they stand ready to support the capital markets – and with stocks trading at 21X earnings – you can make the argument that the market is expensive by historical standards but with rates at zero – can the market go higher?  Of course – but that doesn’t mean it is not stretched and it doesn’t mean it can’t go lower – it is and it can… which is why I think a well-designed portfolio will stand the test of time. Period.

Take good care –

Kp


Linguine w/Artichokes

Linguine w/Artichokes and Pancetta

For this you need: 8 Small Artichokes (use frozen but thaw first) cut Into Pieces, Olive Oil,  1 diced yellow Onion, 2 Cloves Garlic – minced, Pancetta Diced, Dry White Wine, s&p, Chopped Fresh Parsley, 1 Pound of Linguine, splash of lemon juice and fresh grated Parmegiana.

Bring a pot of salted water to a rolling boil.

In a sauté pan, heat the oil and add the onion and pancetta. Cook over medium heat until the onion is soft and the pancetta is cooked maybe 10 minutes. Now add the garlic and cook another minute or two.

Next add the artichokes, some white wine and a squeeze of fresh lemon juice – bring to a boil.
Reduce the heat to low and cook until the artichokes are tender – maybe 10 minutes. Season with s&p. Toss in the chopped parsley and mix.

Now cook the linguine until al dente – like 8 mins or so… drain – always reserving a mugful of the pasta water.  Toss the linguine into the lg sauté pan and mix well. Keeping the heat on low.  If the pasta absorbs all of the liquid – add in some of the reserved water to remoisten. Toss – add in a handful of cheese – toss again and serve immediately in warmed bowls.  Have extra cheese on the table for your guests. Serve with your favorite chilled white wine

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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