Morning Minutes 3/17/2020

Morning Minutes

Stocks Stabilize as Cash Flows Into US Dollars, Retail Sales In Focus

March 17, 2020
8:45 am EDT

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

An eerie calm has descended over world markets overnight after the Dow had its worst day since 1987 with a 2,997-point, 12.9% plunge Monday. Instead of following through with steep declines, Asia Pacific markets turned in a mixed day with Sydney rallying 5.8% and Hong Kong climbing 0.8% while Seoul fell 2.4%.

US index futures are up moderately this morning, climbing between 0.9% and 1.4%. Dow futures are up 229 points. European indices are down slightly, varying between a 0.1% dip for Milan, to 1.6% declines for London and Frankfurt. Commodities are mixed this morning. WTI crude oil is up 0.9% near $29.00/bbl while Brent Crude has slipped under $30.00/bbl with a 0.4% decline, and copper is down 1.25%.

Capital continues to flow into the US with the Dollar soaring again overnight. Today the greenback is up 1.7% against the Euro, 1.3% against the Pound, 0.95% against the Yen, 0.85% against Gold and 0.80% against the Loonie. With US index futures flat and the US 10-year treasury yield hovering near 0.80% and implying steady bond prices, it would appear that capital is flowing into USD cash positions this morning.

US retail sales for February are out and results have been mixed. Headline sales fell by 0.5% in February, significantly worse than the 0.2% increase the street had expected. Part of this miss can be attributed to an upward revision for January sales growth to 0.6% from 0.3%. This suggests that the impact of COVID-19 on US consumer spending was relatively small in February compared with China, who earlier this week reported that its February retail sales plunged 20.5% from the same period a year ago. US index futures gained slightly on this news.

Other news overnight has been mixed. More companies are suspending operations due to the pandemic including WestJet suspending international flights, Cineplex closing its theatres across Canada and Nordstrom closing all of its US stores for two weeks. Meanwhile, Regeneron Pharmaceuticals moved up its timetable for the start of clinical trials on a COVID-19 antibody treatment to early summer from later in the year.

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