'Nothing Goes To Heck In A Straight Line'

“Nothing Goes to Heck in a Straight Line,” Not Even Stocks Today

Wolf Richter

OK, all kinds of things were going on today. First, in mid-plunge this afternoon, the Fed came out and said it’s going to print antibodies or something. To soothe the rattled nerves of the Wall Street crybabies on TV, as the worst weekly sell-off in stocks since 2008 was heating up, Fed Chair Jerome Powell released a one-paragraph Fed-speak statement Friday afternoon (in full):

“The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.”

The thing is, interest rate cuts and QE or whatever other shenanigans the Fed concocts aren’t going to solve the problem posed by the appearance of the coronavirus. If you don’t want to get on a plane in order to avoid catching the virus, you’re not going to change your mind because T-bill yields dropped 50 basis points.

The second thing going on: “Nothing goes to heck in a straight line.”

This was predictable, with it only being a question of when. The effect – “Nothing Goes to Heck in a Straight Line” – is also printed on our handsome and hilarious heavy-duty WOLF STREET beer mugs, that are ideal for contemplating days and weeks like these, and for musing about the 15-minutes-before-the-close spike like this.

The thing is, sooner or later, buyers in form of humans and algos always emerge. This is the nature of trading. If there’s blood in the streets….

If this happens shortly before the close on a Friday afternoon after a horrendous week, when all the sellers are done selling and are exhausted in a corner somewhere licking their wounds, when there is no liquidity left in the market, and some human and algo buyers step forward, then stocks bounce and prices explode higher. Hence the WOLF STREET beer mugs.

And this happened beautifully during the last 15 minutes of trading, when the sellers had disappeared, and it took just a little buying pressure to red-line the needle:

• The S&P 500 index skyrocketed 73 points in 15 minutes, from 2,881 to close at 2,954, down “only” 0.8% for the day.
• The Dow skyrocketed 622 points in 15 minutes, from 24,787 to close at 25,409, down “only” 1.4% for the day.
• The Nasdaq spiked 207 points in 15 minutes, from 8,360 to close at 8,567, flat for the day, and “green” because it was up 0.001%.

Despite these fireworks over the last 15 minutes of trading, it wasn’t a pretty week. The S&P 500 index had peaked on February 19 at a closing high of 3,386 – after skyrocketing 30% last year despite a slow-growth economy, and after spending the first seven weeks this year blowing off the end of QE-4, lousy corporate earnings, the coronavirus outbreak in China and all the issues this would pose for US corporate supply chains and revenues, and the near-certainty that the virus would make it to the US. But on February 20, it started to sink in.