foxex: Spike

The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Tuesday's Headlines

1. US markets spike on stimulus deal hopes

2. DJIA posts biggest point gain in history

3. Congress still debating competing stimulus packages

4. Most sold-off stocks are today's biggest gainers

5. What are individual investors buying in the wreckage?

Markets Closed

Dow
20,704.91
+2,112.98 (+11.37%)

S&P
2,447.33
+209.93 (+9.38%)

Nasdaq
7,417.86
+557.18 (+8.12%)

VIX
61.67
+0.08 (+0.13%)

Bitcoin
$6,711.02
+$247.91 (+3.84%)

US 10-Yr Yield
0.816
+0.052 (+6.81%)

Markets Today

The biggest pops in the stock market usually follow some of the biggest sell-offs, and today fit the pattern. The DJIA raced to its biggest daily point gain in history, and its biggest percentage gain since 1933, jumping more than 11% as investors are either banking on the passage of a stimulus bill, unable to resist stocks at steep discounts, or both.

Every sector of the S&P 500 rallied today, with energy, financials, and materials leading the charge. The most beaten-down stocks in the past month were the biggest gainers today. There was no sell-off in the last 30 minutes of the trading session as we saw last week, either. It was just a buyer's market and stocks spiked, erasing yesterday's losses.

We are far from out of the woods, but the political pressure to get people back to work is intensifying, as is the backlash. President Trump said he wanted people to get back to their offices by Easter, but his own health and military officials backed away from that idea. Still, there is a growing drumbeat in parts of the political and financial world that don't want "the cure to be worse than the problem." In other words, they'd rather restart the economy sooner (with new social distancing guidelines) and risk the further spread of the pandemic than see a prolonged recession or depression.

That stirred up an intense backlash across social media with the hashtag #NotDying4WallSt trending all day on Twitter and Instagram. We are in a very different place than we were during the 2008–09 financial crisis, but the echoes of the Occupy Wall Street movement are now being heard again.

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Headlines:

The Tokyo 2020 Olympics, previously scheduled to begin July 24th, will be postponed until 2021. Japanese Prime Minister Shinzo Abe and IOC President Thomas Bach agreed in a phone call Tuesday to delay the Games. No new date was set, and the postponement throws into question how athletes will qualify for the rescheduled event and what the newly rebuilt Summer Games might look like.
Nike (NKE) reported 3Q earnings of $0.53 per share and $10.1 billion in revenue, which was a 5% increase from the same period a year ago. The athletic retailer said China sales were down 4% following 22 consecutive quarters of double-digit growth. However, during the first two months of the third quarter, Greater China's revenue grew strong double digits, offset by the impacts of COVID-19 beginning in late January. Shares are up 6% after-hours.
Boeing CEO David Calhoun suggested he would decline taxpayer aid if lawmakers require the government to take an equity stake in the beleaguered aerospace giant. "I don't have a need for an equity stake," Mr. Calhoun said in a Tuesday interview on Fox Business Network. "If they forced it, we'd just look at all the other options, and we have got plenty."
The U.K. economy is shrinking at a faster pace than during the 2008–09 financial crisis due to the COVID-19 outbreak. The flash composite PMI was 37.1 in March, down from 53.0 in February. Chris Williamson of IHS Markit said the decline "will likely be the tip of the iceberg and dwarfed by what we will see in the second quarter." Eurozone preliminary PMI estimate plunged to a record low (since 1998) 31.4 in March from 51.6 in Feb.
Microsoft CEO Satya Nadella said Tuesday that the hardware supply chain is coming back online as the coronavirus outbreak eases up in Asia, but he also said that the big question would be whether demand holds up in the U.S. and Europe.
Top executives at U.S.-traded companies sold a total of roughly $9.2 billion in shares of their own companies between the start of February and the end of last week, according to The Wall Street Journal. The selling saved the executives—including many in the financial industry—potential losses totaling $1.9 billion, according to the analysis, as the S&P 500 stock index plunged about 30% from its peak on Feb. 19 through the close of trading March 20.
Gilead Sciences' experimental drug remdesivir has received the "orphan drug" status. Remdesivir is to be used against COVID-19 and is currently being studied in clinical trials on human beings.
Activist investor Bill Ackman has made a "recovery bet" on stocks worth $2.5 billion. Ackman told Bloomberg he has removed his short positions in the credit market and reinvested in several of his portfolio companies, including Lowe's, Hilton, and Berkshire Hathaway. "We think the country is getting to the right place on this issue. I feel like the Trump administration has upped its game," he said.
Ransomware attacks rose 131% in 2019, according to cyber insurer Beazley. Besides deploying ransomware via phishing emails, cyber criminals also breached poorly secured remote desktop protocol (RDP) used by employees to access their work computer desktops or company's primary server from home.

Volatility Is Easing... a Little

Even though equity markets have had subsequent days of 5–10% losses and gains in the past week, volatility is noticeably tamer. The CBOE VIX or Volatility Index, which measures implied volatility in the markets based on options prices, has fallen from its peak last week. It is still sky high—make no mistake about it—but the trend is lower, which is a good sign for the formation of a bottom for stocks.

This is not to say that markets won't fall further. They probably will as economic and earnings reports start rolling in next week and into April, but a mellowing of volatility is a pre-condition to establishing a range for markets—even if its lower.

We put this handy guide together for our readers who are asking us a lot of questions about how to navigate their investments and personal finances in times of heavy volatility. Take a look. We hope it helps.

chart courtesy KoyfinCharts

Which Stocks Popped Today?

On days like today, it's interesting to look at which stocks made the biggest moves to see if and where market leadership is coming from. The chart above shows that bargain hunters were on the move in a big way, scooping up shares of beaten-down cruise lines, airlines, casinos, retailers, and energy companies.

None of these sectors are recession plays and all are at extreme risk of even bigger sell-offs as the economy moves into low gear. The news has not changed any of the fundamentals behind these companies or these sectors, but for risky buyers, the price was apparently right... at least for today.

What Were Individual Investors Buying Today?

Individual investors have also not tapered their appetite for stocks lately, either. Trading data from Fidelity Investments shows the buy to sell ratio for the most active stocks is still 2:1.

Individual investors are buying big tech stocks like Amazon (AMZN), Microsoft (MSFT), and Apple (AAPL), and they are doubling down on tech by buying TQQQ, the Ultra ProShares Nasdaq ETF. They are chasing after Tesla (TLSA) and even Boeing (BA), which is seeking a $60 billion government bailout.

Investopedia's readers are also showing some fearlessness, as well. Article searches for the Top Airline ETFs and Top Oil ETFs have been spiking for the past two weeks.

Risk is a curious animal. Be careful out there.

More News:

Live Nation Stock Extends Rally After Citi Upgrade

Dollar Store Stocks Could Bring Relief to Battered Portfolios

Charts Show Transport Stocks Nearing Support Levels

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(chart courtesy YCHARTS)

Shares of Royal Caribbean are up by over 18% following the cruise line entering into a $2.2 billion secured credit line, boosting its liquidity in order to survive the business shutdown caused by the coronavirus. Coty's stock price rose by 15% after the beauty company began manufacturing hand sanitizer, which it's currently distributing for free to medical and emergency services.

Shares of Macy's and Kohl's fell by more than 20% and 17%, respectively, as retail chains continue to suffer from a lack of brick-and-mortar store traffic caused by consumers choosing to self-quarantine. The energy sector is similarly struggling during these difficult times, as seen by the stock price of Hollyfrontier and Valero Energy dropping 16% and 15%, respectively.

Word of the Day

Stimulus Package
A stimulus package is a package of economic measures put together by a government to stimulate a floundering economy. The objective of a stimulus package is to reinvigorate the economy and prevent or reverse a recession by boosting employment and spending. The theory behind the usefulness of a stimulus package is rooted in Keynesian economics, which argues that the impact of a recession can be lessened with increased government spending.

Today in History

March 24th, 1777:

The U.S. foreign debt is born as the Farmers General of France, a group that collects taxes from French citizens on salt, tobacco, and other products, agrees to lend the United States 2 million livres (roughly $381,000 at the time). The loan is repayable in bales of tobacco.

William G. Anderson, The Price of Liberty: The Public Debt of the American Revolution (University Press of Virginia, Charlottesville, 1983), p. 4.