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The last three days were like the good old days of the bull market. Well, actually, they were even better than that.
Since Monday's lows, the S&P Mid Cap 400 has risen 24.5%, the Dow Jones Industrial Average has risen 23.8%, the Russell 2000 has risen 22.1%, the S&P 500 has risen 20.0%, and the Nasdaq Composite has risen 17.6%.
This morning, however, is looking more like the bad old days of the bear market. The S&P futures are down 80 points and are trading 3.5% below fair value. That means the cash market is poised to start the day noticeably lower.
That's a reversal of recent fortune, partly because the recent fortune has been so good against a backdrop of not-so-good news. There seems to be a reorientation this morning to the bad news beacon:
- The U.S. has surpassed China as having the largest number of coronavirus cases.
- The House is still deliberating over passing the $2 trillion fiscal stimulus bill, which threatens to delay its passage and the receipt of money that so many businesses and people need.
- EU leaders failed to agree on the details of a coronavirus stimulus relief package, but they did agree to talk about it again.... in two weeks!
- China is closing its borders to foreign nationals, starting tomorrow, in an effort to mitigate the risk of a second wave of domestic coronavirus infections. China also reported industrial profits for the January-February period plummeted 38.3% yr/yr, lending some context to the impact of its own shutdown dealings.
- More and more companies (e.g. Gap, Hilton, Dell, VMware, Lear) have announced that they are pulling their 2020 guidance, suspending stock buybacks, and/or dividend payments.
Some good news is that KBHome (KBH) reported much better than expected fiscal first quarter earnings. The bad news is that the homebuilder's quarter ended in February.
Some other good news is that personal income rose a stronger than expected 0.6% (Briefing.com consensus +0.4%). The bad news is that this report was for February.
Unfortunately, the market's economic pre-occupation now isn't on the period left behind, it is on what lays ahead and yesterday's initial claims report left it apparent that a lot of bad economic news lays ahead in coming weeks, notwithstanding the stimulus efforts afoot.
The scientific fact of the matter is that the coronavirus caseload curve has yet to flatten out and the political fact of the matter is that the direct payments afforded under the fiscal stimulus bill won't arrive for three weeks after the bill's signing and businesses still need to figure out how to navigate the aid labyrinth.
Now, quarter-end rebalancing efforts could help recoup some of today's early losses, but it's fair to say that consumer, business, and investor confidence is still shaky and that the uncertainty factor is still quite high. That's why it is reasonable to think that the bull market effort of the last three days is apt to get reined in.
