Markets rocket back up - Politico

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Quick Fix

Markets go risk on — All three major stock indices surged over 7 percent on some positive signs that lock-downs in Europe and the U.S. may be slowing the rise of Covid-19 cases. All three remain about 20 percent below their peaks hit in February, which is still bear market territory but just barely.

The jumps came even as former Fed chair Janet Yellen warned of a “devastating hit” to the economy and a drop in second quarter GDP of 30 percent or more; U.K. Prime Minister Boris Johnson entered intensive care for Covid-19; And JPMoganChase CEO Jamie Dimon told shareholders to expect “a bad recession combined with some kind of financial stress similar to the global financial crisis of 2008.”

So why the rally? Some Wall Street analysts are taking the encouraging coronavirus news to suggest we could avoid a long recession, meaning stocks might truly have hit bottom on March 23 when the Dow closed at 18,591.

Andrew Slimmon of Morgan Stanley Investment Management on a company podcast: “We can conclude that the equity market is pricing a deep, but more importantly, a short recession. … We can check the boxes to conclude that likely March 23 was the initial panic low. … I expect some retest of the lows. They call the retest phase the ‘demoralization phase.'”

No guarantee we won’t go lower — Steven Ricchiuto US Chief Economist at Mizuho Americas: “My contention that the markets have already put in a bottom is about to get tested. Not only have the markets been warned that the next two weeks will be difficult from the coronavirus perspective, but we are also entering what is sure to be an extremely difficult earnings season.”

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Driving the Day

Larry Kudlow speaks with MM at 9:00 a.m. … Treasury Secretary Steven Mnuchin is on Fox Business at 8:30 a.m. … The Meridian International Center holds webinar at 11 a.m. with Senior Counselor to the President Kellyanne Conway … Small business optimism at 6:00 a.m. expected to take a giant plunge

Coronavirus effects

GOVS SEEM SOME CURVE FLATTENING — Our Nolan D. McCaskill: “The number of coronavirus infections and deaths continue to mount across the United States, but governors in some of the nation’s hotspots said … they see glimmers of hope in the latest data on the pandemic — evidence the rigid social distancing measures states have mandated are helping slow the spread of the virus.

“In New York, home to by far the largest outbreak in the country, more than 130,000 people have now tested positive for Covid-19 … The number of fatalities … has been ‘effectively flat for two days,’ New York Gov. Andrew Cuomo said … New Jersey now has the second-worst outbreak of the virus … But Gov. Phil Murphy tweeted Monday that New Jersey’s curve is also flattening.”

FOR YOUR CALENDAR POWELL TO SPEAK THURSDAY — Fed Chair Jay Powell will talk about the central bank’s actions and do a Q&A hosted by Brookings on Thursday at 10:00 a.m.

FASTEST BEAR MARKET EVER — Leuthold’s Jim Paulsen: “This has been a speedy Bear Market. Measured through the first 22 days of all bear markets in post-war history, the contemporary bear market declined by almost 6.5 times more than all the others!

“In 2020, the market dropped 32% in 22 days versus an average of just -5.1 for the previous 13 bear markets. … We also believe a re-test, or multiple re-tests of the recent stock market low, is likely, and it could well establish a new crisis low as it often has in the past.”

FED STEPS UP AGAIN — Our Zachary Warmbrodt: “The Federal Reserve said … it will provide financing to banks issuing loans to small businesses under the government's $350 billion bailout program, addressing a key request by lenders struggling to make the federally backed loans. … Banks have been asking the Trump administration to have the Fed buy the loans off their books to help maintain lending capacity.”

Cowen’s Jaret Seiberg: “We believe this is a positive step as we have been unsure if banks could keep originating Paycheck Protection loans without liquidity from the Federal Reserve."

RSM’s Joe Brusuelas: “In our estimation this move represents a de-facto rescue of the Trump administrations signature $350 billion program which has experienced at best a tenuous and difficult launch over the past few days.”

STILL, PROBLEMS PERSIST — Also via Zach: “Banks … struggled to assist thousands of small businesses vying for $350 billion in government-backed loans as lenders reported that a Small Business Administration system used to process the applications was crashing.

“The small business aid program — a crucial part of the government's record $2 trillion plan to rescue the economy from the coronavirus pandemic — has been snarled since it was launched Friday in large part because of technical problems with the SBA's "E-Tran" system, which banks must use to authorize the loans. … This week will be the biggest test yet for the so-called Paycheck Protection Program.”

Trump said at his presser that JPMorganChase is now on board, joining Bank of America and others, after initially saying it wasn’t ready to offer loans through the program. ... He also said he had a warm chat with former VP Joe Biden about the virus response, which is a pretty remarkable thing. Then he yelled at reporters for quite a long time.

SCHUMER PICKS BAILOUT WATCHDOG — Our Marianne LeVine and Kyle Cheney: “Senate Minority Leader Chuck Schumer will appoint Bharat Ramamurti, a former Elizabeth Warren aide, to a newly created panel meant to police the Trump administration's handling of a $500 billion coronavirus relief fund. Schumer described Ramamurti on Monday as ‘ferocious in his desire to protect the public from abuse.’ …

“Ramamurti was a top economic adviser to Warren during the Massachusetts Democrat's presidential campaign, as well as senior counsel for banking and economic policy in her personal Senate office.”

BORIS JOHNSON IN INTENSIVE CARE — Our Charlie Cooper in London: “Boris Johnson was moved to intensive care in hospital this evening, 24 hours after being admitted with Covid-19. A No. 10 spokesperson said the prime minister's condition had worsened over the course of this afternoon and that he has been moved to the intensive care unit at London's St Thomas' Hospital.”

DEMS DEMAND CONSUMER PROTECTIONS — Our Katy O'Donnell: “Top Senate Democrats are calling on financial regulators to crack down on predatory lending practices during the economic crisis caused by the coronavirus.”

BANKS WARN TREASURY AGAINST MAILING STIMULUS CHECKS — Also via Zach: “Banks are urging the Treasury Department to distribute coronavirus stimulus money electronically and to avoid mailing millions of paper checks that could become a huge source of fraud and force Americans to leave their homes to deposit the funds”

FIRST LOOK: CUT MORE REGS? — CEI is out today with a report “that identifies #neverneeded regulations lawmakers should get rid of so the private sector can do what it does best – provide people with the goods and services they need now more than ever.”

HUAWEI SENTS MASKS TO CANADA — Via The Globe and Mail: “Chinese telecommunications giant Huawei is quietly flying millions of masks to Canada, as health authorities and hospitals struggle to acquire adequate safety equipment for medical workers dealing with the deadly coronavirus outbreak.”

ITALY ADDS MORE FIREPOWER — Our Giorgio Leali: “Italy … adopted a new package of economic measures including the strengthening of anti-takeover rules, and public guarantees for €400 billion-worth of loans and investments to help business. … Rome will guarantee up to 90 percent of loans to businesses for €200 billion via the public owned export credit agency SACE, Finance Minister Roberto Gualtieri explained.”

Markets

WALL STREET LEAPS 7 PERCENT — AP’s Stan Choe and Alex Veiga: “Investors grabbed hold of a few glimmers of hope … that the coronavirus pandemic could be slowing and sent stocks surging in a worldwide rally, capped by a 7% leap for the U.S. market. The number of new coronavirus cases is dropping in the European hotspots of Italy and Spain.

“The center of the U.S. outbreak, New York, also reported its number of daily deaths has been effectively flat for two days. Even though the U.S. is still bracing for a surge of deaths due to COVID-19 and New York’s governor said restrictions should stay in place to slow its spread, the encouraging signs were enough to launch the S&P 500 to its best day in nearly two weeks.”

CORONAVIRUS MUDDIES U.S. ECONOMIC DATA — Reuters’ Lucia Mutikani: “A near total closure of U.S. businesses as authorities try to control the spread of the novel coronavirus could make U.S. economic data unreliable in the coming months and harder to get a clearer picture of the severity of the recession caused by the virus.”

CRISIS REVEALS CRACKS IN EUROPE’S SHARED CURRENCY — AP’s David McHugh: “The virus outbreak is exposing cracks in the foundation of Europe’s 21-year-old shared currency and festering animosities among its members, even as governments struggle to come up with a unified response where success or failure could mark the continent’s politics for years to come.”

Fly Around

U.S. NOWHERE CLOSE TO REOPENING ECONOMY — NYT’s Jim Tankersley: “How long can we keep this up? It is still very early in the U.S. effort to snuff a lethal pandemic by shutting down much of the economy. But there is a growing question — from workers, the White House, corporate boardrooms and small businesses on the brink — that hangs over what is essentially a war effort against a virus that has already killed more than 9,000 Americans. There is no good answer yet, in part because we don’t even have the data needed to formulate one.”

BIG BANKS FAVOR CERTAIN CUSTOMERS IN SMALL BUSINESS LOAN PROGRAM — WSJ’s Ruth Simon and Peter Rudegeair: “Griff Neal set his alarm for 3 a.m. on Friday so he could be among the first to apply for a loan under a new federal program designed to help small businesses weather the coronavirus pandemic.

Bank of America Corp. turned him away that same morning. The reason: The auto-parts supplier he runs, Encap Technologies Inc., hadn’t borrowed from the bank before. ‘I was literally floored,’ said Mr. Neal, the company’s president. Encap, he said, has had checking and savings accounts with Bank of America for two decades, and the bank manages its employee retirement accounts.”

For Your Radar

FORMER OBAMA AIDE JOINS GOLDMAN— Per Goldman Sachs memo from CEO David Solomon: “We are pleased to announce that Kathryn H. Ruemmler will join the firm this month as global head of Regulatory Affairs and a member of the Management Committee. … Kathy rejoined Latham & Watkins in 2014 after serving for almost six years in the Administration of US President Barack Obama.”

BLACKSTONE ANCHORS COVID FUND — Per Blackstone: “Gov Cuomo announced during his daily press conference that Blackstone is the anchor contribution to the new New York State COVID-19 First Responders Fund.

“We are contributing $10 million to the First Responders fund and an additional $5 million to organizations orchestrating food delivery to healthcare workers and first responders, as well as others supporting vulnerable populations in New York City.”

NEW AT BPI — Per release: “The Bank Policy Institute announced that Anna M. Harrington has joined its regulatory team today, leading BPI’s regulatory advocacy efforts on capital and other key prudential regulatory matters. Ms. Harrington previously served in senior roles at the Federal Reserve Board, and as U.S. Head of Bank Regulatory Policy at Barclays.

NEW GIG FOR COHN — Per release: “Starling, an applied behavioral sciences technology company, has announced the appointment of Gary D. Cohn to its Risk & Governance Advisory Board.”

NEW FROM EX-IM — Per release out this a.m.: “The Export-Import Bank of the United States (EXIM) has announced changes to the fee structure of its Delegated Authority (DA) loans and Fast Track Loans. This change will give small businesses better transparency into the fee structure and will lower the fee rate by an average of 10 basis points.”

A message from the Ad Council:

It’s important to stay home to lower the risk for others. If you have symptoms, call your doctor, and stay home. If you don’t have symptoms and you can stay home, stay home. Let’s all do our part.

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