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Morning Commentary

ROSE-COLORED VISION

By Charles Payne, CEO & Principal Analyst
3/19/2020 9:29 AM

S&P 500 Index -5.18%
Communication Services (XLC) -3.32%
Consumer Discretionary (XLY) -5.74%
Consumer Staples (XLP) -2.57%
Energy (XLE) -14.36%
Financials (XLF) -8.49%
Health Care (XLV) -3.32%
Industrials (XLI) -7.37%
Materials (XLB) -6.39%
Real Estate (XLRE) -7.02%
Technology (XLK) -3.77%
Utilities (XLU) -4.35%

Consumer Staples were off the least out of all the sectors. Americans are taking comfort in the names and products folks grew up on, and are using them to get through this period of quarantine and isolation:

The global panic and market meltdown are overshadowing the immense destruction of crude oil, which was already problematic years before the self-destructive war between Saudi Arabia and Russia. Some actions seem more like a suicide pact to take out American shale producers. It’s working.  The better names in shale however are going to get federal government help.

On that note, I’m getting a lot of calls and emails on which names are best to be ‘long’ for the one-two punch of government bailouts and Saudi ceasefire. I’m leaning toward Hess Corp (HES) and Pioneer Natural Resources (PXD), but I am not sure. I would caution not to be so focused on the big oversold pops in the oil patch or the overall market.

Get in names that will rally for several years, so you can look back on these days with a silver lining.

My Rose-Colored Glasses

Ray-ban Sunglasses Ja-jo Women Bronze-copper Frame Red Lenses 55-20

Midway through yesterday’s session, I wrote that I was seeing positive signs in the market, and I took a fair amount of heat. I know even as someone that sees the world through rose-colored glasses, I know that I rankled some feathers, even in good times; my positive suggestion in the middle of another meltdown didn’t go over well. 

But watching the tape minute by minute, there were signs of greater demand to buy the dip, even as the downside bias remained firmly to the downside. The tsunami in selling is a beast that feeds on itself and there is no way to douse it in a single shot. There was accumulation between the flames yesterday, and the market caught a bid into the close.

Yesterday was the fourth time in this 2020 Meltdown that saw so much carnage the circuit breakers were tripped (S&P 500 down 7%).  The close however was much better than the prior three occasions.  The S&P 500 rallied 118 points from the low into the closing bell.  That’s encouraging.

Circuit Breakers

Decline

Session Low

Session Close

Points from Low

March 9

-7.8%

2,734

2,746

+12

March 12

-10.0%

2,478

2,480

+2

March 16

-12.9%

2,381

2,386

+5

March 18

-6.3%

2,280

2,398

+118

By the way, I was a guest on my show, Making Money with Charles Payne on Fox Business, and when I finished my first hit, the S&P 500 turned around and never looked back.  #CPEffect

Bond Market Message

I know a lot of winners are being sold during the meltdown, but the surge in the ten-year yield is more than folks cashing in on bond positions. Most bond buyers are true believers and would hold until yields hit 0.0%.

It’s not just that yields are erupting higher, but the yield curve is also widening rapidly. We know there has been major ruckus over the past year when the curve was flattening on the way to inverting.

After the Close

Five Below (FIVE) beat the Street and shares edged higher. While the fact it was higher is interesting, there are other parts of the release that I felt were worth sharing.

The company opened six new stores and saw strong margin growth. The stock took it on the chin when coronavirus was all about supply chain and getting in products. 

Management successfully tested ‘ten below,’ as the company expanded its senior executive roles and upgraded its IT systems. Although COVID-19 made guidance impossible, I love this statement:

“As we announced earlier today, all of our stores will be temporarily closed beginning Thursday evening through March 31st. We will be paying our associates through this period.”

Portfolio Approach

I’m eager to put money to work before the weekend. Standby.

Today’s Session

Equity futures have been under pressure all morning, although poised to open well off the lowest points, which signaled an almost 1,000 Dow point decline.  By now, everyone knows trading ranges can but a couple thousand Dow points in a single session. 

Prove It

There was lots of central bank action overnight with interventions and rate cuts, including:

The ECB implemented the Pandemic Emergency Purchase Program (PEPP) less than a week after Christine Lagarde hinted at a more limited role for the central bank in the European bond market.  This is her way of saying “my bad.”

"There are no limits to our commitment to the euro," stated President Christine Lagarde.

The problem with these extra packages and actions is it underscores how central banks are chasing issues and challenges, which is not the same as getting in front of them.  Fiscal and monetary policy are both woefully following the crisis, and its making matter worse. 

They must get in front of the harshest potential economic impact now.

Initial Jobless Claims

Initial jobless claims spiked 70,000 to 281,000.  This is the highest level since September 2, 2017.

Biggest Increases:

Biggest declines:

United States Initial Jobless Claims

I thought this number would be a lot higher, and the fact of the matter is, it will climb, especially in the hard hit regions of the nation.  This is why every company that announces it will limit or hold back on layoffs must be cheered, but many are only doing this assuming the cavalry is coming around the corner.

The market is oversold, but as I have always said, especially in the last couple of weeks, it doesn’t mean it can’t go lower. In fact, at this point, each tick lower is more likely to trigger more ticks lower.   But the speed of this descent is remarkable, and the bounce will also set new standards, although not for every sector or company.


Comments
I remain confident in the perseverance of the USA andPresident Trump.. We are a great nation by God for His purpose. Thank you Charles Payne

Al Breed on 3/19/2020 10:34:50 AM
We are the greatest nation and we are going to get this right.  Trump of Art of the Deal needs to override the generals and go big- I know he will.  Thanks Al

Charles Payne on 3/19/2020 10:37:37 AM
I have kept about 30 percent in market for two reasons: longer term funds and not add to the carnage! If no one oversold most of this large drop would have been averted!

Harry Ehrlich on 3/19/2020 11:01:39 AM
Charles, I am always thankful your "rose-colored glasses" commentaries. You are always objective and thoughtful, and you call it as you see it. Amidst the all the hysterical end-of-the-world commentaries, you are the voice of calm and reason.

I wish there were more like you, but . . . you are one of kind. Thank you for being there.

R J Herson on 3/19/2020 11:17:08 AM
I'm humbled by your kind comments thank you very much.  CP

Charles Payne on 3/19/2020 11:30:53 AM
Please keep up with those "rose-colored" commentaries, Charles! America is all about can-do optimism, not defeatism. Your commentaries are always thoughtful and objective. You epitomize what is best about America.

The mass hysteria that characterizes our media today is really concerning. I wish there were more like you in the media, but you are one of a kind.

Thank you for being there. And keep you your outstanding work.

R J Herson on 3/19/2020 11:28:59 AM
Thank you for giving me hope & honest summation of this critical time in history. I have to remain optimistic, yet determined to overcome my $$loss, cuz important thing is grace, family,country, world..not self. Love is all we take with us, Charles🙏💙🇺🇸

Glenda on 3/19/2020 11:39:19 AM
sue china for intentionally withholding info on corona while in the process infecting the world.....their open air wet markets are a breeding ground for such.....scarificing health for growth is one of their M.O's....

if they locked down their country from the onset and warned the world.....the damage would have been limited to a minimal

sue them for the trillions that it will cost ...also freeze their bond holdings..better yet keep them ...no selling of their bonds starting today

seems like an easy lawsuit to win

ps......sorry charles my email is fake as i dont use emails....i read you everyday...keep it up thanks.



frank wright on 3/19/2020 11:52:28 AM
Charles, we are newbies to your hotline and are thrilled to be with you! Thanks to Adam for helping us get in when we needed to! We are waiting for our bank to send the money to our brokerage account. We are learning how to invest and your perspective is one that I greatly admire and want to mimic. We have your book and will be learning how to do this so we can hopefully retire in the next 5 years. Thanks for your Rose Colored Glasses commentary, it's very insightful! One quick question - what are your thoughts on investing some in ETF's right now? Again, many, many thanks! We love watching you on FOX daily and are PROUD Prez Trump supporters. I hope this crash doesn't hurt him in the coming election - he doesn't deserve that after all his hard work over the last 4 years. We pray for him, you and this country every day! Stay safe everyone!

Amanda Howard on 3/19/2020 4:48:46 PM
Hello Amanda I think ETFs and passive mutual funds have added to this selloff.  Folks have tried to save money by putting investments on autopilot with this instruments and its wonderful when the market is moving higher but a bummer on the downside as selling triggers additional selling as funds dump stocks based on lower valuations.   I think the best thing any investor can do is build and management ehir own portfolio.   Thank you for your kind comments and yes I think President Trump will be reelected based on his handling of the virus and of course the economy before it was derailed.  There are issues like tests kits where there is blame to go around but now the focus is on moving ahead and mitigating rick as we flatten the curve.   CP

Charles Payne on 3/19/2020 5:28:36 PM
I'm already angry at the media, so maybe this wasn't the best night to watch Richard Jewell on demand.

frank wright on 3/23/2020 9:08:45 AM
 

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