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When Apple unexpectedly announced last week that it wouldn’t be able to meet its quarterly guidance issued less than three weeks earlier, stocks dipped… and then almost instantly roared higher, with AAPL itself filling the gap from the guidance cut in just days (a far cry from the devastation and FX flash crash when AAPL did the same in January 2019).

Yet while there was nothing materially new announced over the weekend, if only for those who have been closely following the news of China’s encroaching economic paralysis, the collapse of global supply chains and the accelerating spread of the coronavirus offshore, markets finally puked today, with the Nasdaq briefly suffering its biggest intraday point loss in history.

At the same time, as tech stocks finally got hammered, the 10Y yield finally dipped below the 1.40% “tipping point” which according to BofA is a harbinger of both a recession and zero interest rates in the next 12-18 months. But mostly a recession, and unless the Fed cuts rates immediately – as Kocherlakota demanded – stocks may not be able to recover ther mojo any time soon.

Finally, there was the technical consideration of Friday’s op-ex expiration which as we noted earlier released tens of billions in dealer gamma, and wiped out most of the downside market buffer, potentially triggering billions more in systematic selling if today’s liquidation isn’t stopped on time.

So which of these catalysts was the primary reason behind today’s selling avalanche which has hammered the S&P the most since December 2018, or as Bloomberg puts it, “What in this weekend’s news explains the shattering of calm that had enveloped U.S. equities all year?” While we doubt there is one correct answer, here is what several prominent traders told Bloomberg when asked to list their reason(s):

Alec Young, managing director of global markets research at FTSE Russell:

“We knew for a while that it would slow Chinese growth and that it would have a negative impact on the global supply chain for any company that sources a lot of their input products from China. What’s new is that we’re getting significant outbreaks in Italy, for example. It happens to be close to Milan, which obviously is the financial center of Italy and it’s also close to southern Germany and Switzerland, which together that region is really the manufacturing hub of Europe. That’s new,” he said.

“The spread of the virus to Europe, the worsening situation in China but also now South Korea — which is also a major global export hub — it’s ratcheting up the uncertainty. Unfortunately, this issue is very unusual in markets where information normally comes pretty quickly, it can be discounted. This issue by definition comes in dribs and drabs over a period of many weeks and months. It’s very dangerous. A lot of people were too dismissive of this too early.”

Michael Antonelli, managing director and market strategist at Baird:

“The economic data was overwhelming the virus fears. There was a subtle shift last week in how the market viewed the virus. It was right to ignore the virus in the sense that the human death toll doesn’t seem to be on pace to be one of the worst in history. The subtle shift was the market concern about supply chains. The concern now is about how do businesses continue to function in a world where borders start to get shut. That’s the concern they started to worry about. Then you saw the outbreak in Italy and Japan and Korea. If all of a sudden Korea and Japan had to shut down borders and now Italy, now it looks like the global economy screeches to a halt.”

Quincy Krosby, chief market strategist at Prudential Financial Inc.:

“What we saw over the weekend was the path of the virus — you have the duration, how long this is going to last and you have the direction — and the direction is moving away from China and moving onto areas that we haven’t seen before,” she said. “If this were to hit the U.S. in ways — and remember the U.S. is large — in ways where in New York City, and LA and Chicago started to see the number of cases starting to build and folks actually in hospitals and dying, you’re going to see people much more nervous.”

Jim Paulsen, chief investment strategist at Leuthold Group:

“The 30-year yield last week broke to new lows and the 10-year yield is on the cusp of that. I think that is a bigger culprit behind the sell-off than most appreciate. All the headlines are about the coronavirus, but I think the bigger thing in the room is the bond market. It’s been a chronic fear for some time — actually, it has been a fear throughout this recovery — but it certainly has been since last year when the stock market took off and bond yields went down. There’s been this idea: what does the bond market know that the stock market doesn’t? And the bond market seems to be suggesting some near-term calamity while stocks seem to be ignoring it and it’s creating a lot of fear.”

Delores Rubin, a senior equity trader at Deutsche Bank Wealth Management:

“Last week the news was China was sending people back to work so containment of the virus seemed to be in place. But the news out of South Korea and Italy, especially hearing Milan events canceled outright, has created real concerns about a prolonged effect. If these waves of outbreaks persist, we could see the economic effect of the precautions put in place by governments and companies.”

Source: Bloomberg

Authored by Paul Joseph Watson via Summit News,

Respondents to a CNN article about a swarm of Africanized bees that attacked a group of firefighters and police complained that using the term ‘Africanized bees’ was racist.

Yes, really.

The Africanized honey bee is also known colloquially as the ‘killer bee’, but the former name is scientifically accurate.

The bee was introduced into Brazil in 1956 but subsequently spread throughout North America. Africanized honey bees can chase people for a quarter of a mile and have killed around 1,000 humans.

“A group of firefighters and police that were responding to a bee sting were attacked by a swarm of nearly 40,000 Africanized bees. Three of the first responders were rushed to the hospital, while the others quickly shut down the block,” CNN tweeted.

A group of firefighters and police that were responding to a bee sting were attacked by a swarm of nearly 40,000 Africanized bees.Three of the first responders were rushed to the hospital, while the others quickly shut down the block.
https://t.co/loS6W9kc4z

— CNN (@CNN) February 22, 2020

Woke respondents were soon on alert to claim that using the term ‘Africanized bees’ was a racial slur against black people.

“It’s 2020 and media still uses ‘Africanized’” wrote one.

It’s 2020 and media still uses ‘Africanized’

— Magdalena (@mags_iarba) February 22, 2020

“The use of the word “Africanized” perpetuates bias against African people and people of color. Please stop,” added another.

The use of the word “Africanized” perpetuates bias against African people and people of color. Please stop. #BlackIsBeautiful #DarkIsBeautiful #BlackIsNOTBad #DarkIsNOTBad #NoMoreDarkIsBad #NoMoreBlackIsBad #WordsMatter #BlackLivesMatter pic.twitter.com/9zpcFEGOts

— 包弫 Bao1 Zhen3 “弫” means “impactful, powerful.” (@OriginofABCs) February 22, 2020

“Some may not think this is a big deal, but this is an example of a microaggression that leads to implicit bias,” claimed another.

So the “Africanized” bee is actually a hybrid of both African and European bees. But, “Europeanized” isn’t as scary. Or let’s just call them “killer bees”. Some may not think this is a big deal, but this is an example of a microaggression that leads to implicit bias.

— Knancy Pelosi’s Paper Shredder (@NaughtKnot) February 22, 2020

“Kinda racist calling angry dangerous bees African bees….” asserted another respondent.

Kinda racist calling angry dangerous bees African bees….

— Undercover Tiger (@propilot123) February 22, 2020

In fact, the entire thread was full of people angry at CNN for using the official scientific term for the bees.

Next time a black panther mauls someone to death at a zoo or an African elephant stampedes through a village, expect many people on Twitter to be on the lookout for racism.

*  *  *

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China’s mobile phone industry cratered in January as shipments plunged by more than a third, according to a new report from China Academy of Information and Communications Technology (CAICT). 

China shuttered dozens of cities, closed major manufacturing hubs, shutdown retail stores, and placed more than 700 million people in lockdown for virus containment purposes, creating one of the most massive demand shock the country has ever seen, resulting in the bust of the mobile phone industry in January. 

CAICT reported domestic mobile phone shipments were around 20.8 million units, down 38.9% year-over-year. 

The report noted mobile phone shipments by local brands reached about 18.3 million units, down 42.9% year-over-year, which accounted for 88% of the domestic mobile phone shipments. 

It also noted, smartphone shipments were 20.4 million units for the month, down 36.6% year-over-year, which accounted for nearly 98% of all domestic mobile phone shipments in the month. 

We’ve cited several estimates in the last several weeks that made it entirely clear that China’s economic paralysis would lead to a full meltdown of its tech industries. 

The first hint was Qualcomm earlier this month, warned the virus outbreak would disrupt the mobile and smartphone industry.  

On a quarterly view, research firm Canalys suggested China’s smartphone sales could plunge upwards of 50% for 1Q, as retail phone stores and production of semiconductors/smartphones remain closed.

“Vendors’ planned product launches will be canceled or delayed, given that large public events are not allowed in China,” Canalys said.

“It will take time for vendors to change their product launch roadmaps in China, which is likely to dampen 5G shipments.”

International Data Corporation (IDC) estimated that shipments over the quarter could tumble by 30%. 

TrendForce Corp. said Apple could see a 10% decline in iPhone sales in 1Q, from 45.5 million to about 41 million units.

TrendForce slashed its 1Q global smartphone production forecast by 12% Y/Y, due to factory closings across Greater China. It warned global smartphone production in 1Q would be around 275 million units, a 5-year low in production.

The risks are now skewed to the downside for China and the global mobile phone industry, suggesting demand and supply shocks will compound into massive disruptions through 2Q. This all suggests the global technology bubble, seen in the Nasdaq, is about to pop.  

* * * 

As we’ve outlined, S&P500 semiconductors and semiconductor equipment industry groups have 30% of revenue exposure to China and Hong Kong, thus being the most exposed to a collapsing China and or global phone industry thanks to the virus crisis.

 

Authored by James Howard Kunstler via Kunstler.com,

The metaphysical question, what does Russia want, is sounding a lot like the cosmic conundrum posed by Sigmund Freud: what do women want? Is Vladimir Putin transitioning to “become” a woman? It seems like the hormones are getting to him. One day he’s got a crush on Donald Trump, the next day he’s mashed on Bernie Sanders. At least according to America’s Intel Community.

Or was that just Rep. Adam Schiff’s spin on the sigint served up to his House Intel Committee by one Shelby Pierson, “a senior intelligence official responsible for overseeing the issues of election interference,” as The New York Times described her. It looked, for a moment, like Mr. Schiff was trying to tee up a new killer-diller impeachment shot. But as usual with Mr. Schiff, the ploy went all Acme on him and blew up in his face.

Amazing how quickly the narrative flip-flopped, though, by whatever supernatural means the news media employs these days – Ouija boards, astral vision, virtual warping, metapotence, psionic equilibrium distortion, consort with the ghost of Allen Dulles… One might deduce that the Democratic Party nomenklatura realized in a flash of insight that Russia’s affections were far more useful applied to Mr. Sanders than Mr. Trump, whose status among the Dems these days ranks as “worse than Satan.” Not much to work with there.

They’ve been struggling to find some means to stuff Bernie into the memory hole. They tried hauling Michael Bloomberg onstage to call Bernie a communist. That bombed (along with Mr. Bloomberg altogether). Everybody already knows Bernie spent his honeymoon in the Soviet Union waiting on line with the new missus for tin plates of kohlrabi soup. Sunday night, they duped Bernie onto a 60-Minutes workout, with Anderson Cooper playing inquisitor. Andy put the screws to him on the question as to how America will pay for all the free stuff Bernie proffers. The answers were embarrassingly inconclusive and nobody cared, perhaps because nobody believes it anyway, not even the most righteous Bernie Bros.

If nothing else, Bernie’s timing on free this-and-that couldn’t be worse from the vantage of history. Government health care and tuition-free college worked in some nations in the decades after the Second World War because of a steadily rising global GDP, which itself was pegged to a reliable and affordable fossil fuel supply. That’s over. The shale oil “miracle” has bamboozled the public for ten years. It was a great stunt, but that’s all it was, and it’s going to wither now for a lack of available capital, and there isn’t any combo of alt energy thingies to take its place. Neither the Woke half of America nor the MAGA half groks this situation. The money’s not there. And a lot of things that pretend to be money are figments of the banking-and-finance industry, soon to melt away.

And now the Corona virus steps onstage to ramify that situation, beginning with a virtual shut-down of the excessively complex, over-engineered, just-in-time global economy. Things are not being produced and supply lines are shutting down. Car-makers outside China have a couple of weeks before their production lines halt for a lack of parts. But, of course, every other industry will have similar problems and stoppages. Many working Americans are barely getting by from one paycheck to the next. How many missed paychecks will it take for genuine hunger to kick in and desperation with it? We don’t know because the US news media has been busy conjuring the many loves of Vlad Putin.

This is getting serious now. Today, Mr. Market woke up, like Rip Van Winkle, and discovered that the world changed while he was sleeping. There’s a fair chance that the conditions of daily life in America will deteriorate sharply in the months ahead. We’ve been remote-viewing the empty streets of Wuhan and other Chinese cities since January, thinking it was like one of our cable-network horror shows. It’s not inconceivable that an American City, or more than one, will be subject to quarantine, or that a whole lot of people just won’t leave their houses for a period of time. Will the truckers still truck things that people need? We don’t know. How do you hold a political convention in a situation like that, or even an election?

The situation in China may be too far gone already. The country’s finances were a gigantic game of pretend. In the old Soviet Union, beloved by Bernie, the joke was, “they pretend to pay us, and we pretend to work” — not a great formula for enduring prosperity. In China, the updated joke was “we pretend to make loans, and you pretend to pay them back.” The China boom was a lot like the shale oil “miracle.” They were both great stunts. They produced a lot of stuff by borrowing from the future. Now we have all that stuff and we have to maintain it, keep if running, borrow more money to make that happen… and suddenly, that’s no longer plausible. The entire industrialized world has fallen for the debt stunt. Observers have been waiting to see what would finally provoke the unwinding of massive false promises. Looks like the wait is over.

Apparently, Mike Bloomberg’s piss-poor debate performance in Las Vegas has turned off one of the wealthiest men in America. Berkshire Hathaway Chairman and CEO Warren Buffett, the ‘Oracle of Omaha’, said last year during his annual long-form sit-down with CNBC’s Becky Quick that he liked Bloomberg, and would support the former mayor if he chose to run.

At the time, Buffett said he was partial to Bloomberg because the entrepreneur understood business, markets and – most importantly – people.

But during this year’s interview, which aired on CNBC Monday morning, Buffett sounded surprisingly lukewarm, declining to lend Bloomberg his endorsement ahead of the billionaire’s first appearance in a Democratic primary, and actually said some nice things about Bloomberg’s main rival, Bernie Sanders, before conceding that he would still probably pick Bloomberg over Sanders.

Buffett said “I don’t think another billionaire supporting him would be the best thing to announce,” in response to Quick’s question about an endorsement.

Though he added that “I’m a Democrat and would have no trouble voting for Bloomberg”

…”I don’t think I want to get into handicapping the race but I would say this in terms of Sanders: I actually agree with him in terms of certain things he would like to accomplish.”

“In terms of the fact that we ought to do better by the people left behind by the capitalist system…but I don’t think we should kill the golden goose, let’s let it keep laying eggs. But I don’t think anybody should be left behind” he said before adding that he would support changing the earned income tax credit, as well as other unspecified ‘changes’.

I would vote for Mike Bloomberg over Sanders if given the choice, says Warren Buffett pic.twitter.com/fScTuWp3SD

— Squawk Box (@SquawkCNBC) February 24, 2020

If faced with a choice, Buffett said, he would definitely support Bloomberg over Sanders…

“I actually agree with [Sanders] in terms of certain things he would like to accomplish. I don’t agree with him in many ways. But in terms of the fact that we ought to do better by the people that get left behind by our capitalist system. I don’t think we should kill the capitalist system in the process. I think we should make sure that the golden goose keeps laying more eggs. And it’s worked wonderfully since 1776…”

And on Sanders plan to force ownership of some portion of large companies to the state and mandate workers on the board, Buffett was not impressed at all…

“…I think that would be a particularly bad idea…I don’t think that putting 20% of the capitalists on a labor union is probably a good idea either. And I think the market system works very, very well in terms of developing more goods and services.”

And while Buffett was very careful not to entirely slam Sanders, his views on what direction the market would move if Sanders won was clear…

“I normally would never make a comment on something like that, but I would say that if you had Sanders and a Democratic House and Senate or if you had Trump with a Republican House and Senate there would be a significant difference.”

Though Buffett displayed a little more self-awareness than Bloomberg’s other billionaire backers (we’re talking about you, Lloyd), his words have once again illuminated Bloomberg’s biggest flaw: He’s a plutocrat, and basically a walking picture of the globalist ‘Davos Man’ that President Trump built his campaign on opposing.

Though if Buffett has his heart set on Bloomberg…we suspect he might be disappointed:

It looks like our good friend, Benoit Gilson over at the BIS, just got the nod…

… and is “yellow” at 830pm, Basel time:

Gold prices just suddenly plunged on the back of over $3 billion notional of futures being dumped through the market…

Silver was also hit, though not as much…

The orders hit at 1430ET – right as one typically sees margin calls issued – which suggests that perhaps someone just sold whatever they could to cover the collateral calls on their equity market losses.

We also note that JPY weakened at the same time as the gold puke…

For now it’s not helping stocks.