| Monday's Headlines 1. US markets bounce up from Friday's steep losses 2. Chinese markets sink on coronavirus as government steps in 3. Oil has slid into a bear market 4. Tesla explodes 20% on analyst upgrade Markets Closed
 Markets Today U.S. markets rebounded a bit from Friday's steep losses, but concerns about impacts of the coronavirus persisted as the number of those infected continues to rise and spread throughout other countries. Provinces and cities making up two-thirds of the Chinese economy will remain closed for business this week. The local and provincial governments took the extraordinary step of extending the Lunar New Year holiday to help curb the spread of the disease. The coronavirus has claimed more than 360 lives with almost 17,400 confirmed cases. 11 cases have been confirmed in the U.S. so far.
Stocks in mainland China plummeted overnight in their first session since closing for the Lunar New Year holiday. The Shanghai Composite fell by 7.7% and the Shenzhen Composite fell by 8.4%. The Japanese Nikkei 225 also fell 1%. There is growing concern that China's growth will be slowed by the outbreak, which will impact its trading partners and commitments it has made to purchase more U.S. agricultural goods as part of Phase One of the U.S.-China trade agreement. The Chinese government took measures on Monday to backstop its economy and financial markets through these and other tactics:
Headlines:
chart courtesy OxfordEconomics.com  Measuring the Impact of the Coronavirus While still a great unknown, many economists are starting to predict the impact of the coronavirus to China's economy and that of its trading partners. China has been forced to restrict the travel of tens of millions of people, close its financial markets until today, and shutter businesses making up two thirds of its economy as it struggles to contain the outbreak. We've described the measures the government has taken to cushion the impact on financial markets and the economy, but damage has been done, and will continue until the virus is contained.
Tommy Wu at Oxford Economics has estimated that the hit to China's economy, its neighbors in the APAC region, and around the world will be most severe in the first quarter, then abate throughout the rest of the year. At its worst, the outbreak will deliver a 2% hit to China's GDP this quarter, but by the end of the year it will only contract by a total of 0.6%, according to Wu. That prediction is predicated on international health organizations containing the virus in this quarter, so take it with a grain of salt.
It's also important to remember that China's GDP is still growing at around 6%, which is pretty high given the recent trade war with the U.S. and other issues the country is facing on the geopolitical front. It's strong growth, but it is fading, and the coronavirus isn't helping.
chart courtesy YCharts  Tesla Unchained Tesla has been the story stock of 2020 so far and today added to its lore. The stock soared nearly 20% today as one analyst raised his price target to $808/share from $556. That analyst, Bill Selesky from Argus Research, cited Tesla's strong financials from its most recent quarterly report as his basis for raising his target. Shares of TSLA opened the day at $717/share and closed at $786.14, so it was already closing in on Selesky's target. Tesla said Wednesday that its vehicle deliveries should "comfortably exceed 500,000 units" for 2020. It had already reported deliveries of 112,000 vehicles globally during its fourth quarter. The delivery, a record for Tesla, exceeded analysts' average estimates 106,000. Shares of the electric car maker are up more than 85% in 2020, but it also remains one of the most shorted stocks in the S&P 500, according to S3 Analytics. With a market value of more than $140 billion, Tesla passed the following companies' valuations: Costco, Eli Lilly, PayPal, Philip Morris, Amgen, IBM, Union Pacific, and Lockheed Martin, to name just a few. Tesla has an operating price to earnings ratio of 905.77. In other words, investors are willing to pay $905 per one dollar of pre-tax earnings for the automaker. These are serious believers or fearless traders.
chart courtesy YCharts 
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(chart courtesy YCHARTS)  Electric car maker Tesla soared even higher today after 2 analysts raised their price target, with one analyst predicting a share price of $7000 by 2024. Bankrupt California utility PG&E rose after it proposed a revised bankruptcy plan. The plan falls short of what the governor, who needs to approve it, wants. Biotech firm bluebirdbio rose today after receiving an upgrade to "Outperform" by Evercore ISI. Electronic broker Interactive Brokers Group rose after it released its monthly performance metrics for January  Cybersecurity firm Nortonlifelock dropped 39% after it returned a $12-a-share special dividend after the sale of their enterprise assets to Broadcom. ON Semiconductor fell today after an earnings miss. Word of the Day A progressive tax is a tax that imposes a lower tax rate on low-income earners compared to those with a higher income, making it based on the taxpayer's ability to pay. That means it takes a larger percentage from high-income earners than it does from low-income individuals.  Today in History February 3, 1913 Today in 1913 Congress ratified the 16th Amendment to the U.S. Constitution, establishing the right of the government to collect an income tax. An income tax had existed before the amendment, during the Civil War, but it expired in 1872. However, a later income tax in 1894 was struck down by the Supreme Court. The 16th Amendment settled the debate by making the federal government's ability to level direct taxes explicit. Before the income tax, virtually all government revenue had come from tariffs. As tariffs raise the price of consumer goods, they are a regressive form of taxation, meaning they disproportionately affect poorer people. Income taxes, with higher brackets for the rich, replaced this with a progressive taxation system, meaning the burden is more on the wealthy. In addition, the income tax allowed the expansion of free trade, because the government no longer required tariffs to fund its basic functions.
Source: https://www.moaf.org/publications-collections/financial-history-magazine/129/_res/id=Attachments/index=0/From%20Tariffs%20to%20Taxes.pdf
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Monday, February 3, 2020
Extraordinary Measures
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