The Fed Fails to Stabilize Stocks

Tale of the Tape

The worst sector year to date, aside from energy, which is off an epic 23%, is the financials. The financials are 12% lower so far in 2020. The regional bank index is 15% lower. This is, in part, a consequence of lower rates. Banks make less money on net interest spread as rates decline.

If today’s 50 basis point cut can’t cure coronavirus, it is definitely not going to cure this flu in the financials.

Speaking of unnaturally low rates, the 10-Year Treasury yield made another record low today closing at 1.01%. This is unprecedented (more below).

Oh yeah, stocks got crushed today. The S&P 500 was off almost 3% and is now down 7% year to date. This is simply a volatile environment and it’s going to be volatile until it’s not.

S&P 5003,003-2.81%
Russell 20001,486-2.13%
Dow Jones25,917-2.94%

Below is a 5-minute chart of today’s action in the S&P 500. You can see the huge spike early in the day on the surprise rate cut announcement and then the fade over the course of the afternoon. First blush, the Fed failed to stabilize stocks.

(The red line is yesterday’s close)

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ThIs iS noT a DrilL

The Fed issued an emergency cut today, dropping interest rates by 50 basis points. The cut was in efforts to combat the effects of the coronavirus. This was the first unexpected cut since 2008 – the year of the global financial crisis.

Here’s what Fed Chair, Jerome Powell had to say:

“The committee judged that the risks to the U.S. outlook have changed materially. In response, we have eased the stance of monetary policy to provide some more support to the economy.”

Down Under 1%

The 10-Year Treasury yield dropped below 1% intraday today for the first time ever. Uncharted waters. What this means for the economy moving forward… nobody knows. Anyone who tells you different is smoking the crystal meth. 

Here’s the updated $TNX chart: 

Here’s Wile E. Coyote…

Markets Around the World 🟥

Every world index is negative on the year. Interestingly enough, the Shanghai Shenzhen index is down the least… 🤨

BMW’s i4 Concept

We thought this was a great ad. The company played the nostalgia card to the fullest, tugging at the heartstrings of the older crowd. That said, concepts are all fun and games, we want mass production.  

In Other News

Saudi Fund Hires Former McKinsey Consultant to Help Run Strategy

SoftBank Moves Into Chinese Real Estate

Google Cancels its Annual Conference Due to Coronavirus

Nordstrom Reports Fourth Quarter and Fiscal 2019 Earnings

Earnings Tomorrow:

Be sure to know when your stocks are reporting. Here’s the full earnings calendar.

Links that Don’t Suck

5 Things to Learn About Martin Zweig

David Tait: Fearless Ex-Head of FX Trading at Goldman Sachs – Life and Trading Cannot Be Separated.

The Future of Work is Automated

Volatility Will Continue