Your Wednesday Market Blip 3/11/20

Your Wednesday Market Blip 3/11/20

It used to be that Seattle was the largest city in the State of Washington. Seattle is now “Coronaville” and voters are leaning toward electing Jimmy Buffett as mayor.
The World Health Organization or WHO declared a global pandemic today stating that 90% of infections are in 4 countries with two of these, China and South Korea, now seeing declining rates. The WHO upgrade sparked a market reversal with the Dow beating a retreat dropping 1,464 points to close at 23,553. IBD noted that trading volume was off significantly from yesterday’s level which, in a day of red, means that big institutions were not huge sellers.
It’s a perfect storm for Boeing which today announced a hiring freeze and is drawing on a line of credit to bolster its cash position. Both Boeing and Airbus are delaying deliveries which is affecting supply chains as reduced global air travel puts airliners under pressure to preserve cash. Delta Airlines said it will begin to park aircraft and defer capex spending. Alaska Airlines is also looking to consolidate and reduce the number of flights. The company has $2 billion in cash plus 133 fully paid for jets.
Banks have been sold off as investors predict they will suffer an earnings drop due to lower interest rates and pressure on loan exposure to energy companies. What makes this so interesting and frustrating is that gurus who say banks will see lower earnings are also saying that banks have ample liquidity and will see rising book values and dividends at the same time. Bank of America, for example, has $400 billion in liquidity and $16.4 billion in direct energy related loans which is 1.7% of total loans outstanding and 4% of its liquidity. The current market sentiment however has driven share prices down by 30% which represents approximately $80 billion in market cap. What we might be seeing now is the baby being thrown out with the bathwater as uncertainty magnifies swings in the market.