- Global stock markets fell into full-blown crisis this week amid panic selling related to the global spread of coronavirus. The S&P plunged through the 200-day moving average and into correction territory at the fastest rate in history. Investors saw three sessions in a row with the Dow down 1000+ points and the VIX surged towards 50 on Friday. New Covid-19 transmissions outside of China overtook the number within China for the first time, spreading to more than 50 countries. Hotspots in Italy and South Korea continued to provide worrying signals surrounding the rate of spread, while the first US community-spread transmission was confirmed in California. By Friday, global cumulative cases topped 83K and cumulative deaths approached 2,900. US officials even acknowledged that school closures here are a real possibility and testing capacity needs to be dramatically ratcheted up. US Treasury yields careened lower alongside stock indices in just as eye-popping a manner. Futures markets are now pricing in 75 bps of cuts by the FOMC this year beginning at the March meeting. Fed officials remained much more circumspect, saying they want to see more data and how the virus situation unfolds before deciding to take action. A debate raged on whether central banks even can or should play a role in the response, but late on Friday Chairman Powell released a statement emphasizing the Fed will “act as appropriate to support the economy,” suggesting to some the door was opened for Fed action as soon as next month. - At President Trump’s directive, VP Pence was tapped to lead a new US coronavirus task force. The President, clearly frustrated with the vaporizing stock market gains, suggested the declines were likely being exacerbated by embellished media coverage, as well as potential positioning by investors after Bernie Sanders seemed to solidify his lead to head the Democratic ticket following his Nevada primary win. Separately, speculation grew surrounding potential fiscal stimulus packages that could offset what appears to be a throwaway Q1 in terms of economic growth. Germany signaled they were exploring a plan to temporarily suspend the constitutional balanced-budget rule to reduce the debt burden of some local municipalities while the US Congress is set to vote next week on a supplemental funding bill that could unlock up to $8B to fight the outbreak. The US 10-year yield dropped more than 30 bps on the week, below 1.15% for the first time ever. Gold rallied early on and sold off late in the week amid what appeared to be indiscriminate portfolio deleveraging. Oil prices dropped significantly back to levels not seen since the lows of 2017. With Brent testing $50 and the dramatic move in yields, potential distress in the high-yield markets re-surfaced on many investors’ radars. OPEC meets next week and Russia indicated they remain reluctant to support further coordinated production cuts being pushed by the Saudis. For the week the S&P plunged 11.5%, the Dow lost 12.4% and the NASDAQ dropped 10.5%. - In corporate news this week, United Airlines withdrew its FY20 guidance on coronavirus disruption, though it said it still expects Q1 Adj EPS to remain within its prior outlook range and targets earnings growth in 2021. Mastercard announced a CEO transition and cut its outlook amid coronavirus concerns but noted there still are many unknowns about the duration and severity of the situation. Home Depot reported better-than-expected Q4 earnings and same-store sales, citing broad-based growth across all geographies and merchandising departments. Microsoft acknowledged Q3 personal computing segment revenue will not meet their prior guidance but affirmed the outlook for the rest of the company. Macy's earnings topped estimates, sending shares higher, boosted by a solid amount of last-minute holiday buying. Best Buy profit for the quarter beat consensus as the electronic retailer saw its own strong holiday sales. Longtime Disney CEO Bob Iger announced he would step down as CEO, though he plans to stay on as executive chairman through 2021 while Bob Chapek takes the reins of the entertainment giant.
MONDAY 2/24 *(DE) GERMANY FEB IFO BUSINESS CLIMATE: 96.1 V 95.3E; CURRENT ASSESSMENT: 98.9 V 98.6E UAL Withdraws FY20 guidance on coronavirus disruption; expects Q1 Adj EPS to remain within prior guidance range of $0.75-1.25 v $$0.95e - filing MA Cuts Q1 net rev growth to +9-10% if coronavirus trends continue (prior 'low double-digits'); cuts FY20 net rev growth to 'low end of the low-teens range' if virus effects are limited to Q1 only (prior 'growth low double-digits')
TUESDAY 2/25 HD Reports Q4 $2.28 v $2.10e, Rev $25.8B v $25.7Be; Raises Quarterly dividend 10.3% to $1.50 from $1.36 (indicated yield 2.5%) M Reports Q4 $2.12 v $1.95e, Rev $8.34B v $8.32Be *(US) FEB RICHMOND FED MANUFACTURING INDEX: -2 V +10E (US) CDC spokesperson: coronavirus epidemic is 'rapidly evolving and expanding' - call comments DIS Bob Chapek named CEO, effective immediately; Bob Iger assumes role of Executive Chairman through 2021
WEDNESDAY 2/26 LOW Reports Q4 $0.94 v $0.91e, Rev $16.0B v $16.1Be (DE) German Fin Min Scholz said to plan a temporary Debt Brake suspension to aid the local govt - German press NVAX Advances development of Novel COVID-19 Vaccine; Phase 1 clinical trial planned for May or June *(US) JAN NEW HOME SALES: 764K V 718KE *(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.25%; NOT EXPECTED - Decision to keep policy steady was NOT unanimous (2 dissenters again called for 25bps cut (Cho Dong-Chul and Shin In-Seok) -MSFT Cuts Q3 'more personal computing' segment Rev to not meet prior guidance of $10.75-11.15B due to coronavirus; other guidance unchanged
THURSDAY 2/27 (JP) Japan PM Abe reportedly asks schools to shut from Monday, Mar 2nd until spring break citing virus concerns - press *(EU) EURO ZONE FEB ECONOMIC CONFIDENCE: 103.5 V 102.8E *(IT) ITALY DEBT AGENCY (TESORO) SELLS TOTAL €6.5B VS. €5.5-6.5B INDICATED RANGE IN 5-YEAR AND 10-YEAR BTP BONDS BBY Reports Q4 $2.90 v $2.76e, Rev $15.2B v $15.1Be; Raises quarterly dividend 10% to $0.55/shr *(US) Q4 PRELIMINARY GDP PRICE INDEX: 1.3% V 1.4%E; CORE PCE Q/Q: 1.2% V 1.3%E *(US) JAN PRELIMINARY DURABLE GOODS ORDERS: -0.2% V -1.5%E; DURABLES (EX-TRANSPORTATION): -0.1% V +0.2%E (DE) Germany Econ Min Altmaier: Germany considering bringing some measures forward in response to coronavirus, but reaction won't be a classic stimulus program BIDU Reports Q4 $3.81 v $3.71e, Rev $4.15B v $4.06Be *(US) JAN PENDING HOME SALE M/M: 5.2% V 3.0%E; Y/Y: 6.7% V 2.1%E
FRIDAY 2/28 UBSG.CH Reports final FY19 Net $4.30B v $4.52B y/y, Rev $28.9B v $30.2B y/y Brent oil trades below $50/barrel (1st time since Dec 2018) - traders (CN) Former China govt official: China will 'definitely' honor its agricultural purchase commitments as part of its 'Phase 1' trade deal but may invoke a force majeure - SCMP *(DE) GERMANY FEB PRELIMINARY CPI M/M: 0.4% V 0.3%E; Y/Y: 1.7% V 1.7%E (US) Nevada reports Jan casino gaming Rev $1.04B, +5.5% y/y; Las Vegas strip Rev $572M, +7.5% y/y *(US) FED CHAIR POWELL: CORONAVIRUS POSES 'EVOLVING RISKS TO ECONOMIC ACTIVITY'; FED WILL ACT AS APPROPRIATE TO SUSTAIN THE ECONOMY