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End of Day Briefing - Tuesday March 10, 2020

Stocks stutter-step, then rebound from yesterday's sharp losses

Dow +1167.14 at 25018.22, Nasdaq +393.58 at 8344.26, S&P +135.67 at 2882.23

Following yesterday's limit down trading action, futures hit the limit up prior to the open as investors appeared to be buying the dip following stocks' worst one-day loss since the 2008 financial crisis. The averages gave up their gains near midday as questions swirled about what type of economic stimulus might be coming, and might be able to pass both Republican and Democrat scrutiny, but stocks soon resumed their recovery from yesterday's steep selloff. On the coronavirus front, cases in Italy eclipsed 10,000 and the country enacted an extreme lock-down to try to slow the further spread of the disease as cases in France, Spain and Germany are all edging toward 2,000 as well. The confirmed case count in the U.S. still accounts for less than 1,000 of the worldwide total of 118,000, according to the latest data from Johns Hopkins University, but that figure is certain to continue to grow.

ECONOMIC EVENTS: In the U.S., little economic data of note was reported.

In White House news, The Washington Post reported that U.S. President Donald Trump's meeting with Senate Republicans ended with no resolution on a coronavirus economic plan. The news comes after Bloomberg reported that Trump told GOP Senators Tuesday that he wants to enact a payroll tax holiday through this year's November election as part of an economic response plan to the virus outbreak.

In Europe, the Italian government extended its quarantine measures to the entire country, meaning no travel is permitted other than for work or medical emergencies across the nation as of today. Meanwhile, the number of euro area cases outside Italy has also risen sharply.

TOP NEWS: Amid the ongoing fallout from the coronavirus outbreak, airlines and cruiselines continue to be under significant pressure. On that front this morning, Royal Caribbean ($RCL) announced that the company has increased its revolving credit capacity by $550M and is pursuing additional actions to improve its liquidity. Royal is also withdrawing its first quarter and full-year 2020 guidance, citing "the recent government actions and the heightened impact and uncertainty of changes in the magnitude, duration and geographic reach of COVID-19." Delta Air Lines ($DAL) is also withdrawing its March quarter and fiscal year financial guidance, stating that it currently expects March quarter unit revenue to be down mid- to high-single digits. Delta has also decided to defer $500M in capital expenditures, delay $500M of voluntary pension funding, suspend share repurchases and is undertaking cost reduction initiatives, the airline announced this morning. Meanwhile, United Airlines ($UAL) also withdrew its Q1 guidance, stating that it now expects to incur a loss in the quarter. United also said it has pulled down 10% of domestic schedules in April, has suspended share buybacks under its existing repurchase program and has raised an incremental $2B in new liquidity. Spirit Airlines (SAVE) also said its previous FY20 guidance "should not be relied upon" given the uncertainty surrounding the impact of COVID-19.

In a situation with echoes of the scandal that heavily impacted Wells Fargo ($WFC), the Consumer Financial Protection Bureau alleged in a complaint that Fifth Third Bank ($FITB) ignored signs that employees were opening unauthorized accounts to meet aggressive sales goals. Fifth Third issued a response, rejecting the allegations and stating that it will defend itself "vigorously and is confident in the outcome" in the civil suit it contends is "unnecessary and unwarranted."

Occidental Petroleum ($OXY) shares were halted before the oil and gas explorer announced that its board approved a reduction in the company's quarterly dividend to 11c per share from 79c per share, effective July 2020. The company also announced it will reduce 2020 capital spending to between $3.5B and $3.7B from $5.2B to $5.4B and will implement additional operating and corporate cost reductions "due to the sharp decline in global commodity prices."

Meanwhile, Disney ($DIS) shares rose 6.8% after the company reopened certain features of its mega-resort in Shanghai more than a month after it was forced to close because of the coronavirus outbreak.

MAJOR MOVERS: Among the noteworthy gainers was Cypress Semiconductor ($CY), which surged almost 49% after it announced CFIUS approval of its merger with Infineon ($IFNNY). Also higher was Dick's Sporting Goods ($DKS), which gained 4% after reporting quarterly results.

Among the notable losers was Cerner ($CERN), which slid 1.6% as the company hosted its investment community meeting. Also lower were shares of Ventas ($VTR), which fell 2.2% after Jefferies analyst Jonathan Petersen double downgraded the stock to Underperform from Buy on the belief that the increasing spread of COVID-19 presents a particular threat to the Senior Housing business. Shares of Welltower ($WELL), which were also downgraded to Underperform from Hold by Petersen, dipped fractionally.

[BRIEFING.COM] The stock market rebounded about 5%, while Treasuries sold off, in Tuesday's volatile session as investors weighed the possibility of a fiscal stimulus package. The major indices started the session up nearly 4%, then briefly dipped negative as investors sold into strength, and later staged a strong rally into the close.

The S&P 500 rose 4.9%, the Dow Jones Industrial Average rose 4.9%, and the Nasdaq Composite rose 5.0%. The small-cap Russell 2000 increased just 2.9%. Sector gains ranged from 1.0% (utilities) to 6.6% (information technology).

President Trump said last night he wanted payroll tax cuts and support for hourly workers to help mitigate the impact and spread of the coronavirus. Mr. Trump added today that he also wants to protect airlines, cruise ships, and shipping industries. On top of that, CNBC reported he pitched the idea of a 0% payroll tax rate for the rest of the year.

Republican Senate Leader McConnell (R-KY) reportedly said he didn't like the idea of a payroll tax cut, but Treasury Secretary Mnuchin said he thinks there's bipartisan interest in getting something done. The market appeared to side with Mr. Mnuchin's optimism, and Mr. Trump's urgency, although there was some skepticism about the efficacy of tax relief in improving consumer confidence.

The big moves in the Treasury market, meanwhile, appeared to dictate investor sentiment. Stocks gave up gains as renewed buying interest in bonds pulled yields from prior highs, but a resurgence in selling interest coincided with the late rally in equities.

The 2-yr yield finished 15 basis points higher at 0.47%, and the 10-yr yield finished 25 basis points higher at 0.75%. The U.S. Dollar Index rose 1.6% to 96.45.

Separately, oil rebounded from its worst day since 1991 after reports indicated that Russia could be interested in discussions to stabilize oil markets. The price of WTI crude rose by 10.2%, or $3.16, to $34.25/BBL. The energy sector (+4.7%) increased slightly less than the broader market.

Airline stocks were among the biggest beneficiaries from President Trump's comments. Delta Air Lines ($DAL 45.47, +1.95, +4.5%), American Airlines ($AAL 17.00, +2.25, +15.3%), and United Airlines ($UAL 52.56, +5.78, +12.4%) announced capacity cuts due to weakened travel demand, but shares rallied on the potential for government aid.

Tuesday's lone economic report was the NFIB Small Business Optimism Index for February, which increased to 104.5 from 104.3 in January.

Looking ahead, investors will receive the Consumer Price Index for February, the Treasury Budget for February, and the weekly MBA Mortgage Applications Index on Wednesday.

  • Nasdaq Composite -7.0% YTD
  • S&P 500 -10.8% YTD
  • Dow Jones Industrial Average -12.3% YTD
  • Russell 2000 -19.0% YTD
Market Snapshot
SP 5002882.23+135.67(4.94%)
10-yr Note -23/320.796
NYSEAdv 2167 Dec 668 Vol 1.8 bln
NasdaqAdv 2186 Dec 1085 Vol 4.3 bln

Industry Watch
Strong: Information Technology, Financials, Consumer Discretionary
Weak: Utilities

Moving the Market

-- Stock market rebounds 5% from Monday's massive losses amid hope for fiscal stimulus package

-- Oil prices rebound 10%, Treasuries sell off

-- Volatile session

Source: (

Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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