| Monday's Headlines 1. US markets rise on Amazon's coattails 2. The 10-year US Treasury yield drops to 1.54% 3. Earnings weaken despite rising asset prices 4. What's in Trump's $4.8 trillion budget proposal? Markets Closed
 Markets Today Investors got their buying appetites back to start the week and sent the S&P 500 and the Nasdaq to new record highs despite growing concerns about the spread of the coronavirus. The virus, which has sickened more than 40,000 people and killed at least 1000 people at latest count, has now officially surpassed SARS in terms of the number of people affected. China is vowing to spend up to $10 billion to combat it, and other countries, including the U.S. have pledged financial and resource support.
Chinese companies attempted to restart production and manufacturing throughout the country today, nearly two weeks after they closed down for the Lunar New Year celebration. Still, several multi-national companies, including Burger King, announced more store closures due to the outbreak. Foxconn, a key supplier to Apple, reopened its China-based factories today, according to Reuters, but only 10% of the workforce was able to return.
On these shores, shares of Amazon rallied 2.6% to a record high after Morgan Stanley put it on its 'fresh buy' list. Netflix, Apple, and Facebook also managed gains while Tesla, last week's story stock, rose 3% in another volatile session. With the 10-year U.S. Treasury yield scraping 1.54% at its lows today, investors looked to stocks in search of higher highs. They found them. Headlines:
 chart courtesy Morgan Stanley
Industrials Earnings are Hurting Earnings season is winding down this week as about 80 companies in the S&P 500 are set to report results. While around 70% of companies have beaten estimates, there has been a palpable weakness in the results reported by industrial companies. It's not as bad as the energy sector, which is dealing with a multi-front assault on balance sheets across the industry, but it is weak and may get weaker. Part of that can be attributed to the uncertainty around the U.S.-China trade war that raged through 2019. That came on top of a pullback in industrial production that was predicated on a slowing of the global economy. The coronavirus is now causing more economists to forecast a drop in global growth, which will surely cause industrial companies to reign in their own forecasts. That will amplify the downtrend we have been seeing for industrial earnings since 2018.
chart courtesy MorganStanley  Heavy Budget President Trump's fiscal 2021 budget proposal was released today, and it contains some $4.8 trillion in spending for the upcoming fiscal year. While it is just a proposal, and will be argued over for months, here are some of the key takeaways:
The budget naturally throws into focus the ballooning national debt and annual deficits. According to the White House, the federal budget deficit will fall below $1 trillion next year to $966 billion, and the budget will be balanced after 2025. The economy will grow at an average rate of 3% for the next 15 years (CBO projects 1.7%) and the 10-year Treasury yield will rise to 3% in 10 years. Those are huge assumptions, and the past three years have shown they aren't realistic.
The Trump administration wants to slash spending by $4.4 trillion over the next decade and suggests $2 trillion in savings come from reducing access to mandatory spending programs like disability benefits, Medicaid, food stamps, and changes to Medicare prescription-drug pricing. Experts expect this budget to be dead on arrival for this reason. For those unfamiliar with the U.S. federal budget process, the President will submit his proposal to both Houses of Congress where budget resolutions are then drafted.
Here's how the current U.S. budget is allocated for comparison.
chart courtesy CBPP.org 
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(chart courtesy YCHARTS)  Mall real estate investment trust (REIT), Taubman Centers, skyrocketed by over 50% today on news that its rival, Simon Property Group, would purchase it. Fellow mall REIT, Macerich, also rose on the news. Ride-hailing firm Lyft rose today after analyst shop Northcoast upgraded its shares from neutral to buy.  Oil prices continued to slide due to a combination of lower demand due to the the coronavirus limiting travel and Russia refusing to further cut production. The slide, along with lower natural gas prices due to a very warm winter, has sent a whole host of energy companies down across the board. Word of the Day The federal budget is an itemized plan for the annual public expenditures of the United States.  Photo by Yvonne Hemsey/Getty Images
Today in History February 10, 1996 In one of the first high-profile achievements of artificial intelligence, today in 1996 world chess champion Gary Kasparov lost a game to IBM's supercomputer, Deep Blue. He'd beaten Deep Blue's predecessor, Deep Thought, in 1989, and ultimately won the 6-game match against Deep Blue 3-1, with 2 ties. He faced Deep Blue again in 1997, and lost that 6-game match, 2-1, with 3 ties.
Source: https://www.history.com/this-day-in-history/kasparov-loses-chess-game-to-computer
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Monday, February 10, 2020
Higher Highs
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