Mid-Morning Look: March 16, 2020

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Mid-Morning Look

Monday, March 16, 2020






DJ Industrials




S&P 500








Russell 2000






U.S. equities undergo their third circuit breaker market halt in the last 2-weeks (falling over 7%, prompting a 15-minute trading halt) as a 100 bps cut to 0%-0.25% from the Federal Reserve and promises over the next few months to lift its holdings of Treasury paper by $500B and holdings of MBS by $200B along with coordinated central bank action to help stimulate liquidity, and the IMF saying its ready to mobilize $1 trillion loan capacity to fight virus – all failed to bounce stocks as the global pandemic/market scare from the coronavirus and its impact on global business and economies creates further market selling panic. With today’s decline, the Dow Jones Industrial Average falls 30% from its record highs of 29,568.57 on February 12th of this year. Drastic measures being taken by countries, states and governments to prevent the risk of spreading the coronavirus outbreak – as schools were closed in New York city through April 20th and New Jersey schools remain closed as well and NY, NJ, CT to ban gatherings of more than 50 people. Coronavirus cases topped 166,000 worldwide as deaths topped 6,400 as headlines pertaining to the virus dominate markets once again. At its peak low, the Dow Jones Average fell over 12%, while all eleven S&P sectors are markedly lower again, and the Nasdaq Composite touched an intraday low of 6,951.27.


Treasuries, Currencies and Commodities

·     In currency markets, the U.S. dollar falls about -0.7%, down against safe haven currencies (Japanese yen), with the dollar index slipping to around the 98 level following the Fed’s move to lower interest rates and announce another QE stimulus measure. Commodity prices absolutely pummeled given the plunging global growth fears with reduced traffic, production, demand due to the coronavirus sending oil prices to their lowest levels since 2016 (WTI crude and Brent both drop below $30 per barrel). Even safe have related assets such as gold, silver are falling sharply. Treasury market’s rally as yields tumble (10-year yield hit low 0.62% before paring losses to around 0.8%, but still down about 17bps).


Economic Data

·     The Empire State Manufacturing Index dropped last month to negative -21.5, the lowest since March 2009, from positive 12.9 in February and optimism about the future was the lowest since the financial crisis more than a decade ago, the Federal Reserve Bank of New York said to reflect the impact from the coronavirus outbreak. The 34 point drop was the largest in the survey’s history dating to 2001.







WTI Crude















10-Year Note





Sector Movers Today

·     Casino & Leisure movers; another day of absolute destruction for casino, cruise lines (CCL, RCL, NCLH), theme park (SIX, FUN, SEAS, DIS), movie theatre (AMC, CNK, IMAX) related names on closures, hits to revenue and lost traffic; casino stocks plummet amid widespread closings; casino stocks drop after a large number of companies closed resorts (PENN, MGM, BYD, WYNN) due to the coronavirus outbreak and directives from state authorities; MTN said it will suspend the operations of all its North American mountain resorts and retail stores March 15-22 and will use that time to reassess approach for the rest of the season

·     Auto industry; FCAU shares fell after saying it will temporarily suspend production across the majority of their European manufacturing plants until March 27; AZO was upgraded at Wedbush and Morgan Stanley as believe aftermarket parts/retailers will provide investors with further downside protection; RBC Capital downgraded shares of AXL, DAN, BC, HOG in auto and leisure space saying in terms of absolute units, they don’t have the industry getting back to 2019 levels until 2022, and even by 2023, still ~3% below 2017 peak/February 2020 retail sales were down -80% y/y and checks indicate that March-to-date is probably down about -50% YoY; the UAW, GM, Ford (F) and FCAU will form a coronavirus task force to implement enhanced protections for manufacturing and warehouse employees at all three companies

·     Energy stocks bludgeoned on reduced production, plunging oil prices (Saudi Arabia/Russia price war certainly not helping), and declining demand (from travel) given the coronavirus impact; in the E&P sector, several more companies reacting as EQT cut its capital expenditure forecast for the full year as sees FY capital expenditure $1.08B-$1.18B from prior view $1.15B-$1.25B while VET cuts 2020 capital budget by c$80m-c$100m, revised capital budget C$350m to C$370m and cuts its monthly dividend to C2c from C11.5c; EOG updated its full-year 2020 capital plan as a result of the significant decline and increased volatility of commodity prices; WLL reduces its full-year capital budget plan to $400M-$435M, a $185M or 30% decrease at the midpoint from 2020 levels, due to the volatility in commodity prices and said it expects to drop one rig and one completion crew within the next month

·     Bank movers; obliteration for the banks on several factors outside of the virus concern, as eight of the biggest U.S. banks (JPM, BAC, C, GS, MS, BK, STT, WFC) will stop buying back their own shares, and will instead use that capital to lend to individuals and businesses; also weighing was rate cuts as the Fed slashed its benchmark rate near zero over the weekend, its second emergency interest-rate this month. Banks are under stress as interest rates fall, crimping profits, and as concern rises that borrowers won’t be able to pay back loans

·     Hardware & Component news; AAPL said Saturday it’s closing its hundreds of retail stores outside of Greater China until March 27 and is moving to remote work in order to help reduce the spread of coronavirus; in communication equipment, Citigroup downgraded HPE, GPRO and INFN to sell from neutral and downgrade COMM to neutral from buy as the firm again reducing sales & EPS estimates but this time for actual demand declines whereas our prior reductions were more of a push out of demand and potential recouping of that demand later in 2020/cutting all our estimates below company guidance metrics given the elongated resolution of the Coronavirus and the ripple economic effect associated with the global nature; AVYA upgraded to overweight at Morgan Stanley while remain OW on COMM, lean positive IIVI and cautious where we see potential cash burn (INFN, CASA, PLT)


Market commentary provided by Catena Media Financials US, LLC, a firm separate from and not affiliated with Regal Securities. Regal Securities has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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