Things you need to know:
- Joey’s wins cause a visceral reaction in the markets.
- Bloomberg bows out and pledges millions to help the democrats
- Dow surges by 1200 pts – Algos do it again, but yesterday felt good!
- Try the Pacific Halibut
KENNY POLCARI, Editor, Chief Market Strategist and Consultant
Does it get any better than this? Joe Biden takes the lead and is now the presumptive Democratic candi- date – as the road to delegates just got a whole lot harder for Bernie. Mike Bloomberg, doing the right thing, formally dropped out of the race after his poor showing, throwing all of his support and money be- hind Joey. Lizzy (Warren) vows to fight on – further (never mind frustrating) the far left progressive wing of the party. And while investors and traders were excited, it was the algos that loved it! In early trading, fu- tures were pointing higher, then the market opened and stocks traded higher and surged higher all day as the news kept getting better and better. Economic data, only added to the feel good mood – because it was good. ADP reported a surge in new jobs (bullish) and ISM Services PMI exploded higher, coming in at 57.9 (vs. the 54.5 expectation). That is really bullish – and since the mood of the day was so positive – the positive economic data only added to the momentum. Once the algos got a hold of it – it was all over. By the end of the day – the Dow added 1173 pts (4.5%), the S&P surged by 126 pts (4.22%), the Nasdaq ral- lied by 334 pts (3.84%) and the Russell raced ahead by 45 pts (or 3.04%)…
Now – let’s be honest – when the market collapses (almost uncontrolled) – everyone blames the technolo- gy and the speed at which the algos destroy the market – and guess what? When the market surges (almost uncontrolled) you have to also “blame the algos” because just like on the way down – when the buyside interest disappears causing a void in prices, the exact same thing happens on the way up. As evi- denced yesterday – sellside offers disappear leaving a void in prices – forcing buyers to pay up BIG – thus the 4% move higher. Yes – was there good news – of course – (the same way there is bad news on the way down) – but it is the technology that has created all this efficiency that allows for such action from day to day…
Now what had really changed? The coronavirus continues to spread, and continues to raise alarm bells so it wasn’t that, the economic data – as evidenced – continues to be robust – further supporting the idea that the US economy is also alive and well.
The FED and every other central bank around the world promises to pump money and or cut rates to help stabilize any ill effects of the virus – so what was different? Super Tuesday! This was the day most Ameri- cans have been waiting for – so that we could finally “cull the field” of democratic candidates to see who was going to rise to the top. Because up until now, it appeared as if the democrats were taking a hard left turn – talking about cutting off the head of capitalism and replacing it with socialism. That all changed as of Tuesday evening, and that is what caused the change in sentiment…
Every sector enjoyed the day. Sectors that had been under pressure – for weeks as investors considered what a Sanders presidency would mean suddenly broke out. Investors celebrating the idea that America is NOT a socialist country and that Capitalism is what built this country, allowing for anyone with ambition and drive to succeed – It is the American dream and will remain so.
Healthcare – was by far the best performer – the XLV (Healtchare ETF) surged by 5.7%! (Up until yester- day the sector was down 11% since January as the prospects of a Socialist president took its toll…) Con- sumer Staples – XLP – added 4.9%, Industrials (XLI) surged by 4.1%, Utilities – XLU surged by 5.6%, as investors went all in scooping up these shares for the stability they provide as well as for the income they provide. A 2.78% yield plus safe equity exposure is always a winner when bond yields plummet as a result of recent central bank policy.
Energy while higher – was the “worst performer” only up 2.8% on the day. When other sectors were up in the high 3s. But that’s ok – there is a lot going on in that space – and the virus is still causing massive changes in global demand (for now). Airlines feeling the brunt of the effects, as business travel and per- sonal travel all get re-assessed… Skype meetings, ZOOM meetings, working from home remotely – are all the results of trying to control the spread of this virus. But remember – this is temporary (we hope) – once this comes under control – demand for life as we knew it – will return and demand for energy will surge.
Overnight – Asian markets rallied on the back of the US surge. The IMF (Int’l Monetary Fund) an- nounces that they will support the fight against the virus by launching a $50 billion aid package aimed at blunting the economic impact for low income and emerging market countries to assist in bolstering their healthcare systems. Australia trade data came in above expectations but the country still warned that the virus crisis will hit GDP this current quarter. Yeah – we get it. Guess what – that is going to be the story around the world – this is NOT unique to you.
By the end of the day – Japan +1.09%, Hong Kong + 2.08%, China +2.23% and ASX +1.11%
European stocks are not joining in the fun. While the IMF news is good, investors there remain focused on what the ECB will do next week and how fast the virus continues to spread across the region. Italy an- nounces that they have closed all schools and universities for the next two weeks as they attempt to stall the spread. In early trading European markets are all lower by about 0.50% – 0.75%.
US futures are also suggesting a weaker opening. THAT should be no surprise at all considering the move yesterday. At 4:30 am – Dow futures were down by 360 pts, S&Ps lower by 46 pts, the Nasdaq los- ing 128 pts and the Russell is off by 21 pts. Now after the explosive move higher yesterday – on the Biden win – investors today recognize that the balance of the story remains the same. Look – you have to expect more volatility in the weeks ahead – the last two weeks have created a lot of internal damage to the index- es and to stocks. Broken trend lines – and I mean all of the long term trend lines will cause the markets to thrash around as they attempt to find a bottom. The Dow is still attempting to take back its broken 200 DMA trendline, the S&P has taken it back and is now attempting to stabilize between 3050 (200 DMA) and 3171 (100 DMA). Nasdaq while it never broke its long-term trend is attempting to hold steady between its 100 DMA and its 50 DMA at 8848/9245. I realize these are all WIDE targets – but when the market suffers such short term damage – we will see dramatic moves in either direction until it settles down. Stay the course – yes – the virus is concerning – but it is not the end of the world.
If you are taking the long term approach, take a look at your portfolio – take a look at the names you like – and take advantage of the price dislocations that have resulted due to the volatility created by the virus and by the other geo-political events. Do not get caught up in the chaos. The fundamentals have not changed for the broader US economy. And while the virus will certainly affect short term results – a long term investor only cares about short term results when it creates great long term opportunities. This is one of those events.
Take good care.
Kenneth Polcari
Chief Market Strategist, Consultant
kpolcari@slatestone.com
Halibut w/Mushrooms, Leeks and Clams
This is easy and delicious. It makes you feel like you are on the beach with the sand between your toes… Enjoy
You need if you can get it Pacific Halibut – because the Pacific Ocean is colder year round vs. the Atlantic and the fish does not fall prey to some of the parasites that exist in warmer waters. Atlantic Halibut is best eaten in the colder months when the water is at its coldest…
Ingredients: Halibut, mushrooms (preferable oyster mushrooms), butter, 3 large leeks, s&p, chicken broth, 2 doz. littleneck clams and chopped Italian parsley.
Season the Halibut with s&p. Set aside.
Start by melting the butter in a sauté pan over med heat – do not burn the butter – add sliced mushrooms – like 2 cups and the sliced leeks. Trim the leeks and use only the white and light green part of the stalk – discard the rest. Season with s&p and reduce heat to med low and cook for about 10 mins or until the leeks are soft. Now add about 3 cups of the chicken broth and raise the heat to med hi – let it come to a boil.
Now add the fish and clams to the sauté pan – wait for it to re-boil and then reduce heat to low and cover. Cook for about 6 or 7 mins…make sure all of the clams have opened. If you still have some unopened clams – remove the fish and the opened clams and continue to cook for another 3 mins or so to give the stubborn ones a bit more time. At this point throw out any unopened clams.
Serve this dish in a full size bowl (shallow is best) bathing in the clams and broth topped with the mush- room and leeks. Sprinkle with the chopped Italian parsley at the end. Enjoy this with a crisp, chilled white wine.
Buon Appetito.
