Friday, December 28, 2018

Historic Volatility Marks Closing Days of 2018 Weekly Market Update: Historic Volatility Marks Closing Days of 2018 

In the wake of the most bruising week of trading since the financial crisis holiday week trading opened with the worst Christmas Eve performance in the history of the US stock market. Concerns surrounding global growth and the potential for a recession, along with dysfunction in Washington DC remained a toxic concoction for investor sentiment while year-end tax loss selling kept technical readings in an extremely precarious state. US economic data deteriorated led by a particularly poor Richmond Fed reading which saw manufacturing indicators decline at a record pace in December. The picture was further muddied by delays in other key US readings due to the partial government in Washington. The S&P briefly sniffed bear market territory following the Transports, NASADQ and Russell which had already decline more than 20% from their peaks. Oil prices plumbed to new lows along with US Treasury yields and the VIX traded above 36 before global equity markets were closed for the Christmas holiday. 

Wednesday saw a snap back rally of epic proportions when the Dow gained more than 1,000 points in one session for the first time ever. Oil prices surged roughly 9% in tandem with stocks and Treasury yields rose resulting in steepening along the curve. Many were quick to call it a dead cat bounce as it had many of the attributes of a typical bear market rally. There was no major news catalyst to point to while much of the most aggressive buying was seen in the most beaten down names suggesting algorithmic short covering. Many of those investors felt vindicated when markets turned around Thursday morning giving back more than half of the post-Christmas rally before a vicious snap back rally ensued into the close. Markets were volatile again on Friday, as traders searched for a new pattern. In a week of violent trading, the S&P ended up 2.9%, the DJIA gained 2.8%, and the Nasdaq rose 4%. 

In corporate news this holiday-shortened week, Amazon caught a bid after reporting ‘record-breaking’ holiday season orders. Fitness industry software developer Mindbody announced a go-private deal with PE firm Vista Equity for $1.9B. Canadian cannabis firm Aphria rebuffed a C$11/share takeover offer from Green Growth Brands. Tesla named Oracle's Larry Ellison and Walgreens Boots' Kathleen Wilson-Thompson as new independent board members. Deal renewal talks between Verizon and Disney reportedly hit a snag, which could black out a slew of Disney channels, including ESPN, for Verizon customers at the start of the New Year. 

SATURDAY 12/22 (US) Pres Trump has discussed firing Fed Chairman Powell after the December FOMC rate hike; advisers not convinced he would actually go through with it – press (US) Treasury Sec Mnuchin: Trump "never suggested firing" Fed Chair Powell, Trump does not believe he has the right to fire Powell - press 
SUNDAY 12/23 (CN) China Finance Ministry will not levy tariffs on 94 items including fertilizer and iron ore, to adjust tariffs on items, effective Jan 1st, 2019; to implemented temporary import tariffs on more than 700 items; to remove import tariffs on goods produced in Hong Kong and Macau (US) Treasury Sec Mnuchin: Called CEOs of largest banks over the weekend all confirmed have ample liquidity 
MONDAY 12/24 MB To be acquired by Vista Equity Partners for $36.50/shr in cash valued at $1.9B (US) Appaloosa's David Tepper: I have been buying some stocks today - CNBC 
TUESDAY 12/25 (CN) China Association of Automobile Manufacturers official: China will cut electric vehicle (EV) subsidy by 30% in 2019 - China Securities Times (US) President Trump said to be getting increasingly frustrated with Treasury Sec Mnuchin, while still publicly supporting him - US press 
WEDNESDAY 12/26 *(US) DEC RICHMOND FED MANUFACTURING INDEX: -8 V +15E (record drop for data series) (US) White House Econ Adviser Hassett: Fed Chair Powell's job is not in jeopardy; Powell is 100% safe; there's no hidden liquidity crisis - Fox Business interview 
THURSDAY 12/27 HUAWEI.CN Trump administration said to be looking to issuing an executive order in January barring US companies from buying Huawei & ZTE products - US Financial Press (CN) China PBoC: To maintain its prudent policy stance; to comprehensively use multiple policy tools - Q4 quarterly meeting statement (US) Nevada reports Nov casino gaming Rev $967.2B, +6.4% y/y; Las Vegas strip Rev $534.5M, +10% y/y *(US) DEC CONSUMER CONFIDENCE: 128.1 V 133.7E (lowest since July) (US) Association of American Railroads weekly rail traffic report for week ending Dec 22nd: 567.3K, +4.2% y/y 12/27 APHA.CA Green Growth confirms intention to launch C$11/shr takeover bid for Aphria 
FRIDAY 12/28 (DE) GERMANY DEC CPI SAXONY M/M: +0.4% V -0.1% PRIOR; Y/Y: 1.9% V 2.1% PRIOR (DE) GERMANY DEC PRELIMINARY CPI M/M: 0.1% V 0.3%E; Y/Y: 1.7% V 1.9%E (US) DOE CRUDE: -0.05M V -2.5ME; GASOLINE: +3M V 0ME; DISTILLATE: +0.0M V 0ME TSLA Names Oracle's Larry Ellison and Walgreens Boots' Kathleen Wilson-Thompson as new independent Board members