A year ago this week the stock market was hitting new highs and it was all aboard. Buyers had all but ignored the so-called Wuhan virus and were buying pretty much everything in sight given the strong earnings just reported during an excellent reporting season.
Underneath, though, there was a story simmering that would cause one of the swiftest bear markets in history.
This is the story of that bottom.
The week of March 16 was a raucous one for the coronavirus-roiled financial markets. And, as highlighted in Part 2 of "The Birth of a Market Bottom," it largely wasn't a pleasant one for stocks running the gamut from airlines and automotive to restaurants and retail. But it wasn't all doom and gloom as the market sought out a bottom.
Interestingly and worthy of note, the market began to see some rallies in tech names related to the work-at-home movement once it was certain that the central office was in jeopardy. In each case the moves had started before the pandemic. There were stocks such as Zoom Video Communications (ZM) and DocuSign (DOCU) that were methods to communicate and close deals. Teledoc for telemedicine. Etsy (ETSY) and Shopify (SHOP) for the new, small-business non-brick-and-mortar shops. PayPal (PYPL) and Square (SQ) for fintech .
Their basing signaled something that so few talked about: a new, different economy and stock sector that didn't correlate with the decline. At the same time, the pantry stocks bottomed, led by the Cloroxs (CLX) of the world. The former transition would prove to be lasting. The latter, ephemeral, with the hoped-for vaccine progress.
The bifurcation had begun.
The impact of politics also began to be felt, though not initially in a positive way.
Sometimes it's oh so difficult to merge politics with Wall Street. Just like the catatonic days of 2008, Washington seemed incapable of realizing its horrendous impact on prices. So, when the Senate failed again to come up with a fiscal stimulus agreement on Monday, March 23, stocks hit the low for the duration, with the fabled intraday 18,213 low on the Dow Jones Industrial Average representing a painful decline of more than 10,000 points from only a month earlier.
Stocks had now fallen faster than at any time since 1987 or the Great Depression, even as the oscillator I follow did not take out the previous week's low -- another sign that you needed to hold your nose and buy.
Treasury Secretary Steven Mnuchin did talk about getting "very close" on a deal, but it sure didn't seem like it, now with the Dow on March 23 down 4,600 points from where it stood 10 days before. It was a day when the strategists blinked and blinked hard, with Goldman Sachs slashing earnings growth for the third time in 30 sessions -- a major mistake because it did not see the deus ex machina of the Fed. It was evidence of just how wrong even the best market wizards were.
Apple (AAPL) closed below $1 trillion for the first time since breaking that market cap barrier and only Microsoft (MSFT) stayed above the vaunted benchmark. There were downgrades everywhere, particularly among travel and leisure. Most noteworthy was a Wells Fargo downgrade from hold to sell for Carnival (CCL) , the epicenter of the crisis, with Wells cutting the price target from a well-behind $53 to $6 as the cruise operator was desperate for liquidity.
Tuesday, March 24, proved a relief day -- hard to believe given that we got a PMI of 39 and saw multiple downgrades across the board. We got so many tech slashings that day, including companies that were killing it, companies such as Twilio (TWLO) , but no one was in the mood to figure out what was working and what wasn't. To me, the most salient was, once again, someone who urged trading Apple, cutting the price target from $343 to $260, something that has become a staple of every downturn.
Once again we heard all day other fixed-income markets freezing up; it became a game of Whac-A-Mole and I suspected it was simply attempts to probe, to see where the weaknesses were, not to out actual pockets of potential financial catastrophe.
After the close, though, we got the first real sign that earnings were not going to fall off a cliff: Nike (NKE) reported a remarkable quarter, strength across the board, green shoots in China and a burgeoning direct-to-consumer business. The stock would catch seven price target boosts the next morning, at $72. It would go on to double, as the new way to buy beyond Amazon (AMZN) dawned. The oscillator closed over minus 20 for the first time, at -18.
I hated Wednesday the 25th, because, while we started with a gentle rally, it gave way to losses. One reason: The huge victory lap hedge fund manager Bill Ackman took, $2 billion, buying stocks seven days after his "hell is coming" and "American will end as we know it" declarations. Perhaps in that week he learned that the pandemic wouldn't kill our children? (See Part 2 for details on Ackman's March 18 apocalyptic pandemic rant.) I felt better already.
Not all analysts were cowed. Deutsche Bank went hold to buy on Apple. And Amy Zelman, my favorite homebuilder analyst, went out extremely positive. Talk about a great call, although she admitted that it was on valuation; I always say it is better to be lucky than good. Walmart (WMT) and Lowe's (LOW) announced hiring. Chipotle Mexican Grill (CMG) let it be known that its balance sheet was superb. The stock stood at $641. It had plans to become as profitable outdoors as in. The company soon delivered and up caught a double.
It didn't matter, though. The gloom prevailed as we knew what awaited us that Thursday, March 26: The worst weekly initial jobless claims report on record.
But before we could get those dreaded numbers, something extraordinary happened. Federal Reserve Chairman Jay Powell went on NBC's "Today" Show at the top of the hour. It was a remarkable performance.
And it would turn the market tide.
(Part 4 of Jim Cramer's four-part look at the turmoil that rocked the markets as the impact of Covid-19 set in and how a bottom was achieved will run Friday, Feb. 19. Read Part 1 of "The Birth of a Market Bottom" series here and Part 2 here.)
