China, Covid and Travel Want to invest in Bitcoin? Lockheed’s Hot Streak, AMC

Not even one.

Markets were already sliding on thin ice this week. Of course, seasonality is on the side of the bulls. Not much has happened so far as the trend reversal on November 13 is confirmed by volume. Not the easiest inversion to read in real time, nor to confirm your mind, but in its own opaque way… confirmed.

Global investors have watched the turmoil in China as Beijing moves away from a zero-Covid policy that has crippled the Chinese and global economies and hit global supply chains for almost three years. The real-time fear is that as new infections of the SARS-CoV-2 coronavirus rage across mainland China, a new and more dangerous variant, something distinctly different than just another sub-variant of Omicron, could develop. This could very well dampen economic activity both regionally and globally. Funny how reboots work after forced shutdowns fail one way or another.

On Wednesday, two commercial planes from China landed in Milan, Italy. Italian authorities tested passengers on these flights for Covid. 38 percent of the 92 passengers on one flight and 52 percent of the 120 passengers on the other flight tested positive. Remember that back in 2020, Milan was the first major city outside of China to become the global epicenter of the initial surge of the virus for a while. Italian and global authorities are desperate to prevent a repeat of what happened in 2020.

Italy will now test all passengers arriving from China and has called on the European Union, of which Italy is a part, to impose a bloc-wide testing requirement. Japan, India and Taiwan also quickly imposed testing requirements on the Chinese, with an announcement expected from South Korea shortly after.

This has left the markets on edge. What set off the algorithmic chain reaction was the news that the CDC in the US will require travelers from China, Hong Kong and Macau to travel directly from China, Hong Kong and Macau, or who have been in those regions within 10 days before traveling to the US, from January 5. the area will need to show a negative PCR or antigen Covid test or proof of recovery from a recent infection.

So, This…

Shares fell for the second day in a row and for the third time in a fourth day. The Nasdaq Composite gained 1.4% and the S&P 500 gained 1.2%. However, it was the small caps that took the biggest hit. The S&P Midcap 400 lost 1.69%, while the Russell 2000 and S&P SmallCap 600 lost 1.57% and 1.89%, respectively. All US Treasuries suffered another day of losses. The US 10-year note paid more than 3.88% at Wednesday’s lows.

On the equity side, all 11 S&P sector-select SPDR ETFs were in the red for Wednesday’s session, led by the same Energy ( XLE ) sector that was the sole survivor on Tuesday. Seven of the 11 gave up more than one full percentage point for the day.

This is where it gets interesting. Losers beat winners about 7-2 on the NYSE and about 2-1 on the Nasdaq. Increased volume accounted for just 17.8% of NYSE-listed composite trading and 34.9% of the same metric for Nasdaq listings. Aggregate trading volume rose by the slimmest of margins for names listed on both of New York’s major stock exchanges. Technically speaking, this would qualify as a professional distribution day, if only slightly.

So the message is weak. I hate how weak any endorsement is during this recession. It becomes difficult to determine what should be thrown away and what should be hung up. Trading volume increased slightly in both the S&P 500 and the Nasdaq Composite. However, all trading across all measures has been lighter over the last three sessions than anything seen since the half-day after Thanksgiving. Throwing out this shortened session, you have to go back to the dog days of summer to find trading volume in this light.

Cracks in the pavement

On Wednesday, the National Association of Realtors reported Pending Home Sales in November. Pending home sales are the leading indicator for existing home sales, which lag about two months in responding to changes in 30-year mortgage rates.

For November, on an unadjusted basis, contract signings were down 39% year-over-year, with a monthly broken sales contract in all four US regions. On a monthly basis, pending home sales fell 4% in November, the sixth consecutive month of contraction and the twelfth monthly contraction in the past 13 years. November existing home sales reported by the same agency last week showed a tenth consecutive monthly contraction, as the gauge’s monthly pace was about 35% below the pace a year ago.

Pending home sales are now linked to Durable Goods Orders, Central Bank Lead Indicators, Existing Home Sales, Building Permits, S&P Global PMI flash for Manufacturing, S&P Global PMI flash for Services, Industrial Production, Capacity Utilization, Empire State Manufacturing Index, Philly Fed Manufacturing Index and Retail Sales, not only down, but as macroeconomic data points that have clearly declined over the past two weeks for November or December. Besides, economy cooks with gas.

Want to invest in Bitcoin?

I don’t, but if you have a crypto-capable account or don’t have one, you can just buy MicroStrategy (MSTR). I wouldn’t do it again, but if there was one,

MicroStrategy apparently acquired about 2,400 bitcoins between November 1st and December 21st, worth an average of $17.9K. The company then sold 704 Bitcoins at an average price of $16,800 on December 22, planning to offset capital losses from this transaction against previous capital gains. MicroStrategy then bought 810 Bitcoins on December 24 at an average price of $16.8K.

As of December 27th, MicroStrategy held approximately 132,500 Bitcoins at an average price of $30,400, representing a 45% decline in MicroStrategy’s investment in Bitcoin at the last sale. The company also sold 218,600 shares at an average price of $213.16 between October 1 and December 27, earning $46.4 in net income.

You Don’t Say…

On Wednesday, S&P downgraded AMC Entertainment’s ( AMC ) long-term debt to CC from CCC+ in reaction to the company’s proposed debt for equity transaction. S&P also gave AMC a negative outlook going forward.

S&P noted: “We believe that the announced debt for equity exchange is difficult and tantamount to default. We believe that the holders of the secondary debt will receive less than originally promised because they subordinated the secured debt to equity. In our view, AMC is proceeding with this transaction because its capital structure is unsustainable and has limited options to reduce debt burden and improve cash flow”.

Hmm, tell us how you really feel.

Hot streak

Contracts were coming in almost daily for Lockheed Martin ( LMT ). Last Tuesday, the company was awarded a $382 million modification contract by the US Navy to purchase spare parts in support of the F-35 Lightning. That same day, Lockheed was awarded a $226 million contract by the US Air Force to maintain the Sniper Complex Targeting Pod. Last Thursday, Lockheed awarded a $1.05 billion purchase contract to the US Air Force, US Navy, US Marine Corps, Foreign Military customers and non-US DOD participants for parts, materials, production and supply of 118 F-35 fighter jets was awarded with

Last Tuesday, Lockheed received a $222 million contract from the US Navy to manufacture and deliver 36K sonobuoys. Finally, yesterday (Wednesday), the company was awarded a $527 million contract by the Missile Defense Agency to expand the performance of the Aegis Weapon System.

On Thursday morning, news broke that Lockheed Martin’s Sikorsky division is challenging the GAO (Government Accountability Office) over its award to the US Army’s Textron ( TXT ) Bell division to develop the next-generation Future Long-Range Attack Aircraft (helicopter). ), is expected to serve the Army for 40 years. The contract is initially worth $1.3 billion and will eventually replace the 2K Black Hawks (I still miss the Hueys, at least you could stand on those rails when you needed to snap.) The engineering and manufacturing development phase could be worth $7 billion, the expected duration of the program we can talk about 70 billion dollars.

The Bell entry is the V-280 Valor, a tiltrotor aircraft, and the Sikorsky entry, in collaboration with Boeing (BA), is the Defiant X helicopter with coaxial rotor blades. The army said it was expecting a protest and would not comment further. A decision by GAO is requested by April 7.

Economy (All Time Eastern)

08:30 – Initial Jobless Claims (Weekly): 224K, Last 216K expected.

08:30 – Ongoing Claims (Weekly): Last 1.672M.

10:30 – Natural Gas Stocks (Weekly): Last -87B cf.

11:00 – Oil Stocks (Weekly): Last -5.894M.

11:00 – Gasoline stocks (Weekly): Last +2.53M.

Fed (All Time Eastern)

No public appearances are scheduled.

Today’s Earnings Highlights (Consensus EPS Expectations)

A quarterly earnings report is not scheduled.

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