US equities cratered during Wednesday’s session, following global peers lower in a decidedly inauspicious start to what will be a psychologically daunting quarter.
Florida Governor Ron DeSantis instructed residents to stay indoors, the latest state effort to crack down amid a worsening epidemic that’s expected to claim between 100,000 and 250,000 American lives, Trump administration officials say.
Global coronavirus cases are approaching 1 million, and according to sources, US intelligence has informed the White House that China may have “intentionally” understated their own infection count, leaving the world in the dark about the true nature of the threat.
Wimbledon is canceled, Germany extended its lockdown until at least April 10 and Italy until April 13, deaths in the UK surged by nearly a third and European Commission President Ursula von der Leyen indicated the EU will take steps to prevent businesses in Europe from firing workers.
The number of new fatalities in Italy was 727 in the last 24 hours, down from Tuesday’s 837, and the lowest in six days. Statisticians say the Lombardy region may have seen the peak when it comes to new infections, but Prime Minister Giuseppe Conte said it’s too early to ease the lockdown.
Austria is set to suspend repayments on nearly $200 billion in consumer loans after unemployment surged to 12%, Shinzo Abe is quarantining anyone arriving from abroad and Indonesia had its deadliest day yet, with 21 fatalities.
And that’s just a smattering of the news flow.
Stocks hated it – to say the least. US equities plunged nearly 5%. Believe it or not, Wednesday was the 15th session since February 27 that the S&P has moved 4% or more in either direction.
Economic indicators are generally seen as being woefully stale, but even so, gauges of manufacturing activity in Asia, Europe and the US are rolling over and America’s small businesses slashed the most jobs since 2009 in March, ADP said Wednesday.
Amid the gloom, there’s no shortage of doomsaying, that’s for sure.
“Boarded up luxury shops all over NYC waiting for the storm of mass looting”, Nouriel Roubini said, posting a picture of plywood over store front windows to his Twitter account. “This crisis is faster and more furious than the Great Depression!”, he went on to exclaim. Roubini also shared an aerial view of cars lined up at a food bank and wondered “When will the food riots start?”
It’s worth noting that since the turn of the year, at least 45 companies in the S&P have withdrawn their sales or earnings guidance for Q1, the full year or both, blaming the coronavirus. “That compared with zero withdrawals for all of 2019”, Bloomberg’s Crystal Kim remarked, adding that “the spread of the virus and subsequent rolling breakdown of economies around the world rendered previously issued forecasts moot”.
That echoes SocGen’s Andrew Lapthorne, who this week noted that consensus estimates for corporate profits are likely being artificially inflated by the fact that only some companies have withdrawn or altered their guidance to reflect the new, stark economic reality. That, in turn, means EPS forecasts are probably falling “at twice the headline rate”.
“I can’t remember ever seeing the Flash EPS estimate so far away from the usual consensus”, Lapthorne said in a subsequent tweet. “This will have to narrow up to and during Q1 reporting season”.
“The IBES analyst consensus still expects 3% 2020 EPS growth for the S&P 500 and 2% for STOXX 600”, Lapthorne’s colleagues Roland Kaloyan and Sophie Huynh wrote in a Wednesday note, cautioning that “this is too optimistic, based on our calculations [as] even in our softer scenario net profit drops 6% in the US and 14% in Europe (excluding financials)”.
(SocGen)
Meanwhile, billions in RCFs are due in the second quarter from IG US firms. According to Bloomberg’s calculations (based on company filings) US corporates tapped their revolvers for at least $162 billion from March 9 through the end of last month. Here’s a snapshot of what’s on the horizon, via Bloomberg data:
Nancy Pelosi on Wednesday told reporters the House is set to act on a fourth aid package to bolster the economy soon after lawmakers return to Washington on April 20. The legislation will include at least $760 billion in infrastructure spending.
“I think we come back April 20, God willing and coronavirus willing, but shortly thereafter we should be able to move forward”, she said.
The Speaker’s remarks come a day after Donald Trump took to Twitter to essentially demand that Congress authorize $2 trillion to rebuild the nation’s in some cases derelict roads, bridges and tunnels.
Oh, and the UST-bund spread that effectively drove Bill Gross into retirement is within striking distance of tightening inside 100bps.
It’s far too late for the old “bong king”, though. He can only watch from the sidelines as his successor regales the world with “tales of two sinks“.
Jeesh. Roubini working overtime to (re)earn his nickname.
One thing that will become increasingly clear, is that a YUGH tsunami of investors are going to be seen as the equivalent of investors also known to be linked to Ninja Loans. For the past ten years, virtually any moron could brag about what great returns they were getting, and what great investors they used to be. The forward expectations most people had were absurd, but one doesn’t need to look too far to see how Trump is doing, with his measure of excellence! Regardless of volatility surges, picking stocks going forward will be exactly like spinning a roulette wheel at high speed. Maybe the Decade of The Ninja isn’t over, but the odds aren’t in their favor.
Congress returning to session on 4/20; Bill Gross being the old “bong king” …. if I didn’t know any better, I’d say this fact combined with this typo were H’s extremely subtextual April Fool’s joke!
Nah; he plays his cards too close to the vest for that.