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Authored by Richard Breslow via Bloomberg,

Today shouldn’t count.

We are coming off a long weekend, but with little joy to show for the extra rest and holiday.

With a lot of the world taking an extra day off there hasn’t been much interest in trading. Or anything else, apparently.

It’s raining in New York City. Which, with all of us locked inside, shouldn’t matter – but it’s added to the list nonetheless.

Markets are sagging and there seems to be a surfeit of people who are feeling crabby.

Tomorrow can be the do-over. At least we had better hope so. We talk a good game about this experience being akin to a marathon, but do need to see some mile-posts pass by.

The Fed went over the top last Thursday. They bet a lot on waving their magic wand to save capitalism as we are going to get to know it. Which was impressive, but also risky. They need everyone to accept that they have unlimited firepower. And maybe they do, in buying securities they wouldn’t have touched even 12 years ago. But that isn’t the imperative people are focusing on.

OPEC+ came to what we agreed to call a historic deal. And Brent is trading at remarkably familiar prices in the low $30 range. The EU wants us to believe that they are coming closer together than ever before. Good luck with that. And it’s off, by video conference, to the G-7, G-10, IMF/World Bank meetings this week when all of your problems will be discussed.

Everyone is looking at graphs and praying they will continue to show we’ve peaked. But have no answer to the question of when we can get out again. We seem to have spent a lot of bullets but without the satisfaction of it making anyone feel particularly chuffed. Unless you bought into the market at the beginning of last week. We need one of those turn around Tuesdays commentators love to cite. And not just for capital markets. We’ll call this “Blah Monday.”

It’s entirely possible that today will not be representative of the rest of the week. Equity futures are down, but the cash markets looked pretty good when we closed up and stayed home last week. Give them a chance to show what they are made of when they get going. Futures trading this thinly don’t mean a whole lot.

The S&P 500 back above 2,800 could force a lot of potential buyers to get involved. It’s such a nice pivot level, no matter your inclination. Nothing like a good technical level that’s close.

The dollar has become the currency everyone wants to hate all of a sudden. If you believe that, you have to make the leap of faith that a lot of the world’s economic troubles are being solved. Maybe that’s indeed so. And the central banks can declare mission accomplished. In any case, the resistance zone remains 99.80/100 for the Dollar Index. It’s a good pivot area.

Take everything you see today with a grain of salt. Tomorrow will not only be another day, it will be the real Monday.

Shortly after Mexico won a historic “Mexican standoff” with Saudi Arabia on Sunday afternoon, and was exempt from a historic 9.7mmb/d oil production cut by OPEC+ member states (which Mexico had held up for the previous 4 days after refusing to agree to the across the board 23% cut), we said that “OPEC Reaches “Historic” Deal To Cut Oil Production As Mexico Wins “Mexican Standoff” With Saudis… But It’s Not Enough.”

A few hours later, Goldman echoed what we said in a note titled “A historic yet insufficient cut“, writing that “taking into account updated core-OPEC production guidance from April, this 9.7 mb/d “headline” deal represents a 12.4 mb/d cut from claimed  April OPEC+ production (given the Saudi, UAE, Kuwait ongoing surge) but an only 7.2 mb/d cut from 1Q20 average production levels.” Doing the math, the Goldman analyst calculated that “the OPEC+ voluntary cut would only lead to an actual 4.3 mb/d reduction in production from 1Q20 levels” adding that “based on our updated oil balances, such OPEC+ voluntary cuts would still require an additional 4.1 mb/d cut in May  production at the binding storage capacity constraint” which means that “at the 35% compliance level outside of core-OPEC, the necessary production cuts need would need to be 0.5 mb/d larger.”

In short, and as we have been repeating all along, the 10 9.7mmb/d production cut is nowhere near enough to offset the plunge in demand which based on various estimates is anywhere between 20 and 36mmb/d.

It’s also why after knee-jerking higher, oil – which had priced in a 10mmb/d production cut as far back as the middle of last week – has been drifting lower…

… in the process infuriating the US president who had hoped the OPEC+ deal would send oil sharply higher. Alas, even algos can do math now, and everyone by now understands that a 9.7mmb/d supply cut is nowhere near enough to offset 36mmb/d in less demand.

The result: after watching Brent drift lower, Trump finally snapped this morning and in hopes of doing OPEC’s job for them, the US president tired his best to jawbone oil higher by saying that “the number that OPEC+ is looking to cut is 20 Million Barrels a day, not the 10 Million that is generally being reported.”

….disaster, the Energy Industry will be strong again, far faster than currently anticipated. Thank you to all of those who worked with me on getting this very big business back on track, in particular Russia and Saudi Arabia.

— Donald J. Trump (@realDonaldTrump) April 13, 2020

Trump has a point… the only problem is that 20 million b/d number also includes several million in US production cuts, which Trump refuses to order! In fact Trump believes that between covering Mexico’s 300kb/d shortfall (which will be met with organic production declines not an actual supply stop as of May 1), the US does not need to cut further.

So if Trump really wants to send the price of oil higher – and he does to avoid mass layoffs in the re-election critical state of Texas even if it means much higher gas prices at the pump – it is up to Trump to somehow find 2-3 or more million barrels in US production cuts. Without those, Brent will keep drifting lower because while the US president may not do supply/demand math, everyone else in the energy sector now does.

Amazon has paused new grocery orders and decreased store hours at Whole Foods as it struggles to handle the “unprecedented demand” from Americans stuck in quarantine, a blog post from the company read. 

Shoppers over the weekend noticed that they had difficulty ordering groceries online due to the lack of available delivery slots. Starting Monday, new orders will be placed on a waiting list while the company works to build capacity.

“We’re increasing capacity each week and will invite new customers to shop every week,” Stephenie Landry, vice president of Grocery at Amazon, wrote in a blog post on Sunday.

“We still expect the combination of restricted capacity due to social distancing and customer demand will continue to make finding available delivery windows challenging for customers,” Landry wrote. 

Currently, Amazon operates 487 Whole Foods stores in the US. It says it will ‘adjust store hours’ for the public so its employees can fulfill online grocery orders.

Amazon has had to increase online grocery order capacity by 60% to handle the influx of demand as the pandemic has left tens of millions of Americans confined to their homes, unable to eat at restaurants or shop at malls. The world’s largest online retailer said in March that it would hire an additional 100,000 people to satisfy demand.

As the online retailer boosts capacity and preps for a post-corona world, some employees have gone on strike, demanding the company provide hazard pay and protective health equipment. 

In recent weeks, employees at Amazon fulfillment centers and Whole Foods stores have been given temperature checks. The company has said it is using advanced cleanliness protocols to decrease the spread of the virus.

As for Amazon customers who are now placed on delivery waitlists, there was no timeline in the company update on when grocery orders would be sent. Such a move could leave many people hangry.

With the lack of 3M N95 masks and people placed on Amazon waitlists for grocery orders, this could force many into supermarkets, causing the virus to spread even more.  

We noted over the weekend that a single cough from a COVID-19 carrier could disperse across several aisles, as shown in the simulation below:

Will food delivery delays force people into supermarkets or place orders on other online platforms? 

Authored by Alex Nitzberg via JustTheNews.com,

The U.S. was given inaccurate information about the coronavirus at the beginning of the crisis Director of the National Institute of Allergy and Infectious Diseases Dr. Anthony Fauci said on Saturday.

When Fox News host Jesse Watters asked Fauci if he believes China or the World Health Organization “misled” him or if the WHO leader himself could have been “deceived,” Fauci noted that while he does not know the details behind the inaccurate information, it was disseminated from the start of the crisis.

“You know I don’t know where the missteps went, the only thing I know what the end result was, that early on we did not get correct information,” Fauci said.

“And the incorrect information was propagated right from the beginning because you know when the first cases came out, that were identified I think on December 31st in China and we became aware of this, they said this was just animal to human period.”

“Now we know retrospectively that there was ongoing transmission from human to human in China, probably at least a few weeks before then,” he said.

Fauci said once the illness hit the U.S. it became evident “that was misinformation right from the beginning.”

He added that “whosever fault that was, you know, we’re gonna go back and take a look at that when this is all over, but clearly it was not the right information that was given to us.”

Dr. Fauci is getting a lot of praise but there are many people who are angry at him. What does Dr. Fauci have to say to the critics? Watch to find out. #FoxNews pic.twitter.com/J6qCetvijk

— Watters’ World (@WattersWorld) April 12, 2020

One week ago, around the time Jeffrey Gundlach said he was covering his shorts and looking for stocks to rebound, Wall Street’s formerly biggest bear, Morgan Stanley equity strategist Michael Wilson, flipped a U-turn and surprised many of his peers – especially JPMorgan which had turned uncharacteristically bearish and on March 31 was saying it’s too early to buy stocks – by becoming one of the market’s biggest bulls, saying that he is a “buyer of dips” since “2400-2600 on the S&P 500 will prove to be very good entry points for those with a time horizon of 6-12 months.” The catalyst behind his shift in sentiment?  An expectation that the unprecedented stimulus will trigger sharply higher inflation and a lower dollar.

This triggered a domino effect of downstream bullish calls, with Howard Marks saying it’s time to stop playing defense, just days after saying the worst is still to come for asset prices, and this morning Goldman Sachs, which spent last weekend explaining how the coming 50% collapse in stock buybacks will wreak havoc on the S&P500 where the single biggest buyer of stocks will be MIA for the foreseeable future, and which three weeks ago said it could see the S&P dropping as low as 2,000 as it cut its EPS target by 33%…

… also threw in the towel on its cautious position and decided to follow both Morgan Stanley’s Wilson, and the momentum of the broader market, and in a note published this morning, Goldman’s David Kostin writes that the combination of  unprecedented policy support and a flattening viral curve have dramatically reduced downside risk for the US economy and financial markets and lifted the S&P 500 out of bear market territory.

Specifically, “the Fed and Congress have precluded the prospect of a complete economic collapse. Reduced “left tail” risk translated into a higher P/E multiple.” This takeover of capital markets means that Goldman’s “previous near-term downside of 2000 is no longer likely” even as its “year-end S&P 500 target remains 3000 (+8%).”

To be sure there is one potential downside case: if the US experiences a second surge in infections after the economy reopens. Until then, however, the “do whatever it takes” stance of policymakers means the equity market is unlikely to make new lows, Kostin writes, while noting that “real improvement in two of the three items on our checklist suggests our previous near-term downside target of 2000 is no longer likely, and increases our confidence that the S&P 500 will reach our year-end target of 3000, which is just 8% above the current level. A return to the March 23rd low of 2237 would represent a 20% fall from today’s index level.”

But what about the epic crash in EPS that Goldman itself was pounding the table on just weeks ago as a catalyst for the S&P dropping to 2,000? Apparently that doesn’t matter any more because – drumroll – the price makes the narrative and the price is now higher:

Despite the likely steady stream of weak earnings reports, 1Q earnings season will not represent a major negative catalyst for equity market performance. While earnings season always conveys backward-looking data, rarely has the information content of quarterly earnings reports been as outdated as the figures US companies will release starting this week. We expect investors will mostly “look through” reported 1Q results, which will capture only the start of shutdowns that began at the end of the quarter. In fact, many investors we have spoken with have discounted 2020 earnings altogether, and are focused instead on the outlook for 2021.

Translation: nobody cares about earnings any more, Goldman certainly doesn’t. And since nobody has any idea what 2020 will bring, everyone is suddenly convinced that things will be so much better in 2021 so… buy!

Does this also mean that Goldman no longer believes that this is just a bear market rally, as it did just two weeks ago? On this topic Kostin is far more elusive, but in general it appears that the bank changed its opinion on this matter as well.

We have previously highlighted the similarity between recent market performance and the “bear market rallies” that were catalyzed by policy stimulus measures in late 2008. The multiple 10%-20% rallies eventually faded and stock prices traded lower until economic data bottomed in March 2009. In this case, however, policy measures and the trough of the economic data appear to be occurring in much closer proximity. The historical relationship between equity bear markets and second-derivative inflections in economic data support the market bottoming before economic data reach their nadir, which will likely occur this month.

In other words, “this time it’s different” only it isn’t, because in the very next paragraph Goldman admits that there is nothing about this rally that is actually different, and it is all a function of unprecedented fiscal and monetary stimulus:

The numerous and increasingly powerful policy actions have spurred equity investors to adopt a risk-on view. The series of important monetary policy measures started on Sunday, March 15th with the Fed cutting the funds rate by 50 bp to 0%-0.25%. On March 17th the Fed unveiled a Commercial Paper Funding Facility (CPFF) that back-stopped short-term borrowing by investment-grade (IG) issuers. The central bank has subsequently provided liquidity further out on the risk spectrum culminating with the April 8th announcement of a $2.3 trillion loan facility to ensure credit availability for small businesses and municipalities that also included high yield (HY) issuers. Fiscal stimulus, most recently in the form of the $2 trillion CARES Act, has also been significant, although implementation remains a work in progress.

In summary…

The combination of unprecedented policy support and a flattening viral curve have dramatically reduced downside risk for the US economy and financial markets and lifted the S&P 500 out of bear market territory. At 2790, the S&P 500 now stands 25% above its March 23rd low of 2237.

Amusingly, not even Goldman can believe the unfounded optimism it is spewing, and writes the following:

“surprisingly, the largest shock to the global economy in 90 years has left equities only 18% below the record highs of mid-February and roughly in line with the market price in June 2019, just 10 months ago.”

And yet here we are, and while this time may be different one thing that has certainly not changed is banks telling you to sell at the lows, and turning bullish after a 25% rally… just as Goldman has now done.

A preview of a new study by the US Centers for Disease Control and Prevention – the CDC, for short – released last night offers some distressing news for health-care workers, as well as their families, partners and friends: New research suggests that nurses, doctors and others can track the virus out of the ward and into another – perhaps a more public, or less well-protected – environment, helping to spread the disease in a new way that public health officials haven’t really considered.

The study, entitled “Aerosol and Surface Distribution of Severe Acute Respiratory Syndrome Coronavirus 2 in Hospital Wards, Wuhan, China, 2020”, was conducted in two wards at Wuhan’s Huoshenshan Hospital by large team of Chinese researchers back in February and March. Though the team insisted that “respiratory droplets and close contact” remain the primary vectors for the disease, the possibility for hospital workers to transmit the virus on their shoes and clothes wasn’t really well understood, until now.

And unfortunately, if the data are confirmed, it would suggest that wards where coronavirus patients are treated are literally crawling with the virus, placing these health-care workers at extremely high risk for infection.

According to the research, “94% of swabs taken from the ICU floor and 100% of swabs taken from one of the general wards used to treat patients with severe symptoms tested positive for coronavirus.”

Here’s a summary of the research that describes how the GW and ICU were found to have the highest levels of the virus present on the floors and walls, as well as in the air. The rate of positivity was higher for the ICU than the GW, which makes sense.

Even samples taken from the floor in the nearby hospital pharmacy showed ‘weak positive’ for the virus. Patients are not allowed in the pharmacy, meaning there’s only one way the samples could have gotten there.

From February 19 through March 2, 2020, we collected swab samples from potentially contaminated objects in the ICU and GW as described previously. The ICU housed 15 patients with severe disease and the GW housed 24 patients with milder disease. We also sampled indoor air and the air outlets to detect aerosol exposure. Air samples were collected by using a SASS 2300 Wetted Wall Cyclone Sampler at 300 L/min for of 30 min. We used sterile premoistened swabs to sample the floors, computer mice, trash cans, sickbed handrails, patient masks, personal protective equipment, and air outlets. We tested air and surface samples for the open reading frame (ORF) 1ab and nucleoprotein (N) genes of SARS-CoV-2 by quantitative real-time PCR.

Almost all positive results were concentrated in the contaminated areas (ICU 54/57, 94.7%; GW 9/9, 100%); the rate of positivity was much higher for the ICU (54/124, 43.5%) than for the GW (9/114, 7.9%) (Tables 1, 2). The rate of positivity was relatively high for floor swab samples (ICU 7/10, 70%; GW 2/13, 15.4%), perhaps because of gravity and air flow causing most virus droplets to float to the ground. In addition, as medical staff walk around the ward, the virus can be tracked all over the floor, as indicated by the 100% rate of positivity from the floor in the pharmacy, where there were no patients. Furthermore, half of the samples from the soles of the ICU medical staff shoes tested positive. Therefore, the soles of medical staff shoes might function as carriers. The 3 weak positive results from the floor of dressing room 4 might also arise from these carriers. We highly recommend that persons disinfect shoe soles before walking out of wards containing COVID-19 patients.

The authors suggested that “air flow” and the forces of gravity might be responsible for moving the samples to the floors and the walls.But this certainly doesn’t bode well for anybody arguing that the subway and restaurants will be able to go quickly back to normal, since an asymptomatic diner can leave the virus at their table for the next customer to pick up even if the table sits empty for hours – or even overnight.