That Would Be Incorrect
The Friday trading session came and went, and pretty much looks in the rear-view mirror as the day had been advertised going in... A somewhat negative looking day that capped an overtly positive looking week on absolutely face-ripping aggregate trading volume. That's not what anyone was incorrect about. Breadth more or less was negative for the Friday session. At least at the New York Stock Exchange. Conditions were a little more "glass half-full" up at the Nasdaq Market Site. There was some good reason for such action.
Not only did Tesla's (TSLA) inclusion (I did finish getting myself flat just after the close on Friday) in the S&P 500 cause some broad bloodletting across the firm's new peers. Not only did the Fed, at least in my opinion, maintain a decidedly accommodative stance in regards to monetary policy as the fiscal authorities - while constantly tripping over themselves - kept on working toward accomplishing something. Not only did the Information Technology sector lead the way for the week as a report out of Asia showed that Apple (AAPL) had plans to boost iPhone production through H1 2021, but ever-expanding knowledge just started to be uncovered revealing that there had been some kind of extremely sophisticated cyber-espionage campaign launched against not just the U.S. government, but much of the planet, including many corporations. This put bids under a core group of cybersecurity or cloud-based security specialist software type stocks as Zscaler (ZS) , Crowdstrike (CRWD) , and CyberArk (CYBR) .
This brings us to the two questions that entered your head last night as you placed that melon of yours on that greasy thing you call a pillow. One. You want to know if the professional distribution experienced on Friday will carry into the holiday shortened week. The correct answer is short and simple, though less than helpful. It does not have to, but it's getting ugly overnight. Typically, the Monday after a "quadruple witching" event is quiet. Typically, the ranks of more elite, higher level traders thin out during holiday weeks, meaning that you might have thought that you could "ease" your way into the holiday.
This thinking would be incorrect. For one... there's more market-shaking news circulating this morning than anyone might want to shake a stick at. I'll give you a minute. Give it a try... Nothing? Yeah, didn't work here either. Secondly, algorithms seek market inefficiency and do so at incredible speed. They do not celebrate religious holidays. They do not celebrate cultural holidays. They will, however, eat your lunch should you leave something out there somewhere awkwardly exposed. (You can put the stick down now.) Thirdly, just what are these traders going to do if they take some time off? Lay on the couch? They're not going out. They are not going to visit friends. They are not having their kids and grandkids over. They can hang out with those in their household, much as they have done for every day since March. More of these traders are going to work this week than you might expect. At least that's what my instinct is telling me. At least that's what I am doing. All hands on deck through at least Wednesday? Maybe. All hands include the "ugly stick"? Oh, yes, THAT stick is out and about.
Good News !
Your pretty little head may not fully grasp the fact that there is some good news making the rounds as Sunday night melts into Monday morning. First off, initial shipments of the just authorized for emergency use, the Moderna (MRNA) Covid-19 vaccine started rolling on Sunday as trucks departed the facility in Olive Branch, Mississippi. Making the media rounds on Sunday, Dr. Moncef Slaoui, who heads "Operation Warp Speed", stated that he expected "nearly 8 million doses" to be distributed on Monday between the Pfizer (PFE) /BioNTech (BNTX) vaccine as well this Moderna product.
Thankfully, this expands supplies of Covid vaccines available to front-line healthcare workers, and residents of long-term care facilities. The rest of us are going to have to wait, perhaps into the spring until there is enough supply for all of us. Speaking just for me, I would want my family to get vaccinated as soon as possible, and would do so myself at the earliest possibility if I only knew what these vaccines might do to those who have suffered the overactive immune system post-Covid response inflammatory syndrome that attacks one's internal organs after they shed the virus itself. So far, crickets on that and I have heard (don't know for sure) that we make up as many as 5% of all Covid victims.
Kind Of Good News !
As a self-confirmed hater of all those "serving" on both sides of the aisle, I will always probably be a little slow to credit our "esteemed" legislators with anything. The fact is that the key participants did work through the weekend, did avoid a government shutdown, and did agree on a fiscal package that will at a minimum provide some help for smallish employers and households in need. While what appears to have been agreed to will cost the federal government a rough $900 billion, and will of course, be funded largely through increased deficit spending and ultimately added to the Federal Reserve Banks' balance sheet, the number is also quite obviously not enough.
There will be some helicopter money. A graduated $600 in direct payments to individuals, a $300 eleven week stipend to be added to state level unemployment benefits. There will be another $280 billion earmarked for the Paycheck Protection Program, there will be increased funding for food stamps, vaccine distribution and Covid testing. Neither side got exactly what they were looking for, and if you'll recall, I have long written that this package needed to run more than twice as large as it does. This is the first leg of what will be required fiscally of the federal government in calendar year 2021. Round two comes after a new seating of the two houses of legislature as well as after Inauguration Day. Then there will be movement from the left on aid to states and municipalities, as well as movement from the right to protect employers trying to remain open or reopen. With so many individuals on the sidelines, and labor markets weakening into year's end, there will also be a likely bi-partisan push into a large infrastructure build.
When do we "jump the shark" on public debt? Wrong tense. You mean "when did we?" Right? Now, it's just extending the entire super-cycle for as long as possible... out of necessity.
Why The Beat-Down?
I am now two hours into my workday. European equities and U.S. equity index futures have been in free-fall for pretty much that entire time. There are two negative overhangs impacting financial markets right now. The least of which is the size, scope and scale of this massive cyber-espionage campaign launched against the U.S. government, many other governments around the globe, and enough corporations as well. We know not "the who?", nor "the why?" Certainly there is a specific who, and certainly, "they" have an objective.
Act of war, requiring kinetic response? "Mere" reconnaissance requiring a response in kind? Surely this information is classified. We likely will not learn much more than that until it is "safe" for us to know, and even then what we, the public, will learn will be scrubbed. This is surely a negative, but not yet "the negative."
The headline story this morning is a "new" strain of Covid-19 that is already accelerating the spread of the virus in the UK as well as South Africa. Several European countries and Canada have already banned travel in and out of the UK in response. (We need to do this. Hello.) Markets are moving toward a risk-off/shut-down positioning on Monday morning. I will point out that this news strain does appear to be more contagious, but so far there is no evidence that it is either deadlier or more severe than the strain that we in the U.S. have already been dealing with. One thing I do think that we have to assume is that the new strain is already probably among us. On line at the bank. In the produce aisle. Walking past you on the sidewalk. Filling the car next to you at the pump. Double down on mitigation until we know more.
Is this the end of the world? I can not speak for the Almighty, nor would I ever pretend to, but I don't think so. There is a potential complication with this strain involving a mutation, or mutations to the spike protein. This could possibly render even recently developed antibodies quite defenseless against new infection. While most experts do expect the vaccines already under distribution to be effective against this new strain, there is still some hope even if not. One of the real advantages of messenger RNA technology would be the ability to customize the end product rather quickly. So, as the flu shot is adjusted every year on a sort of guesswork basis, this could be done more effectively, more quickly and with more precision. Still, the pandemic situation now intensifies in real-time to the short to medium term.
Helmets, full battle rattle, two sources of water, clean socks, and a full combat load. You're going to have to defend yourself this morning. Oh, and buckle those chinstraps and remember "it" reads "Front toward Enemy" for a reason. Keep it simple, gang.
Economics (All Times Eastern)
13:00 - Twenty Year Bond Auction: $24B.
The Fed (All Times Eastern)
No public appearances scheduled.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (FDS) (2.74)
After the Close: (HEI) (0.41)