There's going to be two newsletters today. I think that's okay. I think that's warranted.
The next one has my thoughts about what's underneath this insane price action. John Authers of the Financial Times put it best yesterday on Twitter: "An emergency [rate] cut is supposed to respond to an emergency, not create one."
"The five trading days since the Fed's emergency rate cut have really been something," he added. (My word: disastrous.) And that was before the 10-year Treasury yield went below 0.35% overnight! Not a typo.
How much of this latest leg down is because of the separate collapse in crude? Probably a fair bit. But it's all intertwined anyhow. Crude is down more than it otherwise would be on OPEC's supply mayhem because of economic demand concerns. And crude's collapse is taking stocks and even the 10-year down more than they otherwise would have been because of the impact crude's collapse will have on the economy.
Also not helping things: a bunch of the biggest banks and trading firms have moved employees out of Manhattan today, because of coronavirus. So liquidity and trading flows are probably a bit off of normal, which may be exacerbating the erratic price action. The S&P 500 triggered the circuit breakers that stopped all stocks from trading when it fell 7% just four minutes into the market open. When we reopened fifteen minutes later, the Dow was briefly down more than 2000 points before "recovering" to less than a 1500-point drop as I write this. If you want this in picture/video form, check out my Instagram story (@realkellyevans).
We have nonstop coverage of all of this starting at 1 p.m. today. Jeremy Siegel just said on "Squawk on the Street" that "The Fed needs another 50 basis point rate cut." The market is apparently now pricing in a full point rate cut, according to Steve Liesman -- which means we'd be all the way back at zero. Z-e-r-o.
Keep that in mind when you read the next newsletter about why this all happening, and what might stop it. This is scary stuff to me. Not credit crisis/financial collapse scary, like 2008-09. It's "ruin of capitalism" scary (and yes, I actually consider that scary). So even if plunging oil and rates is great for the U.S. consumer--and it probably will be--it's hard to give that a full cheer.
More to come....