US markets started climbing today after nearly two weeks with a 4% plus move in either direction during every trading session. Yesterday, the S&P 500 closed 0.5% higher, the Dow Jones Industrial Average was up 1%, and the Nasdaq Composite gained 2.3%. There was still a huge amount of news flow, including some after-hours announcements that will be certain to generate reaction on Friday.
Tesla, which had posted a double-digit rebound on Thursday, sank heavily in after-hours trading following the announcement that it is suspending US car production due to the pandemic. There was some respite for oil producers as US crude oil prices jumped back past $25 a barrel after the US Energy Department announced it is buying up to 30 million barrels for the strategic petroleum reserve to help dampen the impact of the price war. Chevron and Exxon Mobil both closed around 4% higher following the news. President Trump’s government is also reportedly considering intervening in the price war between Russia and Saudia Arabia, through a diplomatic push to encourage production cuts.
In economic news, US initial weekly jobless claims came in at 281,000, up from 220,000 the week before, as the disruption began to force businesses into layoffs. Boeing is now reportedly considering letting staff go, according to The Wall Street Journal.
Late on Thursday evening, California – which would be the world’s fifth largest economy if it were a separate country – ordered all 40 million residents into lockdown (essential activities exempt) due to the continued spread of the coronavirus. US cases have now passed 10,000 and New York City mayor Bill de Blasio has made a plea for military support to help combat the virus.
Oil bump helps energy names, T-Mobile still planning to finish merger
The best performing of the three major indices on Thursday, and year-to-date, was the Nasdaq Composite. Friday’s open looks likely to be in the red, however, based on futures. In the S&P 500, oil names Noble Energy, Welltower and National-Oilwell Varco rode the oil price bump to 20% plus share price gains, although several consumer energy companies posted heavy losses.
Airlines had a mixed day, with United close to flat but American Airlines down more than 11%. An anticipated government bailout for the airline industry is drawing significant scrutiny, as US airlines reportedly spent 96% of their free cash flow over the past decade on stock buybacks. On Thursday, budget carrier JetBlue told its 23,000 staff that, on a typical day in March last year it took in $22m in bookings and fees, but recently that figure has fallen below $4m. On top of that, the company is now issuing more than $20m in daily credits for canceled bookings.
Despite fears that M&A will be held up by the market chaos, T-Mobile put out a public statement saying that it is financially prepared to close its merger with Sprint, noting that none of the 16 banks it has spoken to have withdrawn their funding commitments to support the closing of the deal.
In other corporate news, Walmart announced it would be paying $550m in cash bonuses to hourly staff and hiring 150,000 temporary workers to deal with demand from shoppers. Occidental Petroleum, one of the oil names with the hardest hit share price, announced it is bringing back former CEO Stephen Chazen as its chairman as it faces down activist investor Carl Icahn, who has taken advantage of the low share price to up his stake.
S&P 500: +0.5% Thursday, -25.4% YTD
Dow Jones Industrial Average: +1% Thursday, +29.6% YTD
Nasdaq Composite: +2.3% Thursday, +20.3% YTD only down 0.7% over past 5 trading days
Bank of England cuts rates again in new Governor’s first week
The big news in the UK was the Bank of England’s decision to cut interest rates to a record low 0.1% and print £200bn of new money, ahead of a stimulus package for households expected to be announced by Chancellor Rishi Sunak. Having sunk in the run up to the interest rate decision, the FTSE 100 rallied after the news was announced, closing out the day with a 1.4% gain, while once again the FTSE 250 lagged behind with a 1.4% loss. Investment firm M&G, cruise line Carnival and airline Tui were the biggest winners in the FTSE 100, gaining 34.4%, 18.9% and 18.8% respectively, although all are still sitting on huge monthly losses. At the bottom end, International Consolidated Airlines Group, Glencore and Intercontinental Hotels Group were among the names holding the index back.
In the FTSE 250, housebuilder Crest Nicholson closed 22.8% lower after cancelling payment of its final dividend, pulling its full-year financial guidance and drawing down the entirety of a £250m credit line to help it cope with the virus disruption.
FTSE 100: +1.4% Thursday, -31.7% YTD
FTSE 250: -1.4% Thursday, -41.4% YTD
What to watch
There are no major companies reporting earnings on Friday, but there is still plenty to watch, most notably the ‘quadruple witching’, when stock options, single stock futures, stock index futures and stock index options expire at once.
Massive volatility: Today is set to be a hugely volatile day in markets as a swathe of options, futures and other derivative contracts are set to expire. Some market watchers are hoping that the so-called ‘quadruple witching’ which happens on the third Friday of the last day of every quarter, might provide some relief to stock markets. With options and futures contracts expiring, traders will be scrambling to roll out of old positions and into new. Some traders are reportedly expecting that the unwinding of large numbers of short positions might ease selling pressure, and reduce some of the focus on movements in futures contracts on major indices such as the S&P 500.
Stimulus package progress: On Thursday, Republican Senators rolled out a trillion dollar economic stimulus plan that includes $200bn in loans to airlines and $300bn in forgivable bridging loans for small businesses. It also includes payments of up to $1,200 per American below an income threshold. Progress of the package will be closely watched, but there are likely to be sticking points. There are still Republicans in disagreement over what exactly should be included, such as the individual payments, and they still need to secure support from the Democrats. Senate minority leader Chuck Schumer, a New York Democrat, said that he was concerned the fact Republicans had not involved Democrats from the start might prove a time-scale hinderance, and added the Senate Democrats “look forward to working with [Republicans] to come up with a bipartisan product as soon as we can.”
The world’s three major cryptoassets rallied on Thursday, with all three ending well up on their starting positions.
Bitcoin surged from early on, peaking at $6397 late in the evening, and is now trading around $6254 early on Friday. Ethereum also rallied, albeit with more volatility, starting the day at lows of $115.00 before climbing to $141.89 late on. It is now hovering around $137.40 this morning. Finally, XRP reached a high of $0.1705 late last night and is now trading around $0.1614 early doors.
All data, figures & charts are valid as of 20/03/2020. All trading carries risk. Only risk capital you can afford to lose.