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Technically Speaking, the Dow Just Rocketed Out of a Bear Market

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(Bloomberg) — As ridiculous as it sounds, the Dow Jones Industrial Average just climbed out of the bear market it entered two weeks ago.It’s a development that speaks to the tenuousness of market conventions in times of extreme volatility. The biggest rally since 1933 helped push the gauge up the requisite 20% from the low it hit Monday, meeting one time-honored definition of a bull market.Right now, it’s a milestone only a statistician could love given the index remains almost 25% below the record high it touched on Feb. 12 — though that doesn’t mean it won’t keep going.While weird, bounces of similar velocity happen from time to time in fast-moving markets and aren’t taken seriously by market historians until they start to show staying power. U.S. stocks justed ended one of the longest bull markets ever.Other measures of stocks are nowhere near the 20% threshold, with the S&P 500 up about 11% and the Nasdaq 100, which bottomed a day earlier, up about 10%.“We’re in this intermediary phase where we’re going to have big up periods and big down periods. I don’t think the coast is clear,” Bob Doll, Nuveen Asset Management’s chief equity strategist, told Bloomberg Television. “I’d be a buyer on red days, if you will, and a trimmer on green days. Expect choppiness.”The Dow was the first mover on the way down, too: its membership and archaic weighing system caused it to beat practically everything into a bear market. Now that’s going in reverse. Made up of only 30 blue-chip giants and weighted by share price, rather than market-capitalization, the Dow is getting an outsize boost from companies previously pressured by the coronavirus — Boeing Inc. in particular.Boeing shares have soared as much as 70% over the past three sessions amid the prospect of imminent congressional aid for the beleaguered plane manufacturer. The jet-maker makes up more than 5% of the Dow, compared to less than 0.5% of the S&P 500. The company isn’t even included in the Nasdaq 100.So far this week, the surge in Boeing shares has accounted for a fifth of the Dow’s advance, data compiled by Bloomberg show. UnitedHealth Group Inc. and The Home Depot Inc.’s performances have each driven another 10% of the Dow’s gain. United Health and Home Depot are the second and third largest weightings. Neither appear in the Nasdaq 100.The divergence also reflects the role of tech stocks as a haven during the rout — the Dow fell faster and now is rising faster. Thanks in part to internet giants like Amazon.com Inc. and Netflix Inc., whose shares are higher this year and aren’t in the Dow, the blue-chip gauge is trailing the S&P 500 by 2 percentage points year-to-date and the Nasdaq by 12 percentage points. Versus the tech-heavy gauge, the Dow is still on track for its worst quarter in eight years.“There is no doubt some of the names that have been destroyed in the past week were driven there by force selling and fear,” said Nathan Thooft, Manulife Investment Management’s head of global asset allocation. “And we are now seeing some people take a step back and say, ‘Wait, these names are not going away.”’That the bull-market milestone it came just hours after the government reported an unprecedented surge in the number of Americans seeking jobless benefits underscores how fragile the rally may be. The U.S. economy is in tatters after large regions of the country shut down to help prevent the spread of the deadly coronavirus.Market optimists point to both monetary and fiscal stimulus as reasons for the sharp comeback, though a large swath of investors would be quick to say that massive rallies happen in the deepest of bear markets. With stocks facing trading halts or limits in 10 of the last 12 days, conditions haven’t necessarily been orderly or calm.The steep decline that brought the Dow down 37% from a record resembled a “waterfall decline,” according to strategists at Ned Davis Research, marked by persistent selling over weeks, surges in volume, and a collapse in confidence. While no two scenarios are the same, usually such fast falls see the lows tested again.Of 13 similar plunges since 1929, nine of them saw the Dow break the initial lows. And of the four instances in which the benchmark didn’t fall to fresh lows, it at least retested the bottom in three of them. The only exception was the most recent case: December 2018.“We caution against recency bias,” wrote strategists including Ed Clissold. “The temptation is to breathe a sigh of relief that the waterfall is over and jump back into the market. History suggests that a more likely scenario is a basing and testing period that includes a breaching of the waterfall lows.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.



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U.S. Futures Fluctuate, Stocks Slip; Dollar Jumps: Markets Wrap

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(Bloomberg) — U.S. equity futures fluctuated and stocks slipped on Monday as investors weighed a weekend full of negative coronavirus news against the stimulus measures that triggered a bounce in risk assets last week. The dollar rebounded, Treasuries edged higher and oil sank.Contracts on the S&P 500 Index swung between losses and gains after President Donald Trump abruptly abandoned his ambition to return American life to normal by Easter. Abbott Laboratories surged in the pre-market after unveiling a five-minute coronavirus test. Shares in Europe followed earlier declines across much of Asia, though they came off their lows. The dollar was on course to snap a four-session losing streak.Core European bonds rose after the outbreak killed more than 3,000 in Spain and Italy over the weekend. Pessimism returned to credit markets, where the cost to insure high-yield debt jumped in both Asia and Europe, as Moscow and Tokyo joined other cities urging residents to remain at home. Brent crude extended recent losses and was set for its worst month in history, down about 54%.Investors are beginning the week digesting word that the biggest economy will stay crippled for longer after Trump heeded advice from the government’s top doctors that re-opening the U.S. in two weeks risks greater loss of life as the coronavirus outbreak accelerates. The president said in a news conference “social distancing” guidelines would remain until at least April 30, while his top infectious-disease expert said 100,000-200,000 may die.“Markets are still in uncharted territory,” said Medha Samant, director of investment at Fidelity International. “When you look at the stages of this pandemic, you’ve gone into escalation,” she said. “The epicenter has shifted to the U.S.”In the latest stimulus moves, China’s central bank lowered short-term funding rates and injected cash into its financial system, Australia announced a job-support program and limited public gatherings to just two people, while Singapore unveiled an unprecedented easing in policy.“The assumption that we can turn a switch in a month or two and everything is going to be okay is a faulty opinion,” David Kotok, chief investment officer at Cumberland Advisors Inc., told Bloomberg TV. “We are waiting to see the closer timetable of treatment, testing, and vaccine — that’s very important to us.”Elsewhere, Australian shares were the notable exception to broad declines, with the equity benchmark surging by a record thanks to the new stimulus measures. Emerging currencies including South Africa’s rand and Mexico’s peso tumbled amid concern about debt downgrades.Quarter-end strains could add to investor nervousness on Monday and Tuesday as financial firms rein in collateral lending to shore up balance sheets, while Japanese banks face their fiscal year-end. The MSCI gauge of global equities is down about 23% since the start of the year, on course for its worst quarter since the end of 2008.These are the main moves in markets:StocksFutures on the S&P 500 Index advanced 0.4% as of 12:27 p.m. London time.The Stoxx Europe 600 Index decreased 0.8%.The MSCI Asia Pacific Index dipped 0.9%.CurrenciesThe Bloomberg Dollar Spot Index jumped 0.7%.The euro declined 0.8% to $1.1048.The British pound decreased 0.5% to $1.2398.The Japanese yen fell 0.1% to 108.06 per dollar.BondsThe yield on 10-year Treasuries decreased two basis points to 0.66%.Germany’s 10-year yield decreased six basis points to -0.53%.Britain’s 10-year yield declined six basis points to 0.305%.CommoditiesGold fell 0.1% to $1,625.72 an ounce.West Texas Intermediate crude decreased 5.2% to $20.39 a barrel.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.



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Finding a middle ground to tackle the coronavirus crisis

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Good morning.

President Trump’s talk of reopening the economy on Easter, which he has now backed off of, has helped launched an important debate. At the moment, we seem stuck between two unrealistic alternatives: 1) a quick return to work, or 2) a widespread lockdown until a vaccine is ready (a year or more in the future). Both alternatives could lead to social and economic breakdown. But no one has articulated a clear vision for what the reasonable middle ground would look like.

What might it look like? The elements of a possible strategy are beginning to emerge. It will probably involve a nationwide lockdown that lasts at least through the end of May. Then, the return to work needs to roll out gradually, and include the following elements: continued protection/isolation for vulnerable populations; continued restrictions on large gatherings; increased production of protective equipment and ventilators; some proven therapies for treating the most vulnerable; priority given to those who can’t work from home over those who can; staggered start times to minimize rush hour crowding; widespread and rapid testing so new infections can be spotted quickly; sharp restrictions on travel so new infections can be isolated and contained; and antibody testing so immune individuals can be identified. The world should be watching China, Hong Kong, Singapore and South Korea as they probe the parameters of such an effort—even though more democratic societies will struggle to mimic many of their less democratic tactics.

Government needs to lead this effort; but business plays a critical role.   Fortune will be holding a virtual gathering of members of its CEO Initiative tomorrow, to begin a conversation on this topic. I’ll have more to report on Wednesday.

In the meantime, former Honeywell CEO Dave Cote—who successfully navigated the Great Recession and added $60 billion to his company’s market value before stepping down in 2017—has some advice for CEOs in the midst of this crisis.  You can read the full interview here, but some excerpts:

Focus on leadership, not consensus. “What matters is getting feedback from all your people, then making a decision.”

Hope for the best, plan for the worst. “Pick a plan and start executing as if you expect the worst to happen.”

Keep workers around for the recovery. In the recession “we did very few layoffs… Instead, we relied on furloughs.”

—In a crisis, don’t take a bonus. “When workers asked me if I intended to take a bonus for 2009, I’d say that was up to the board… That was a big mistake.”

More news below.

Alan Murray
@alansmurray

alan.murray@fortune.com



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Kumu’s KC Montero on creating quality online content

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Earlier this year, KC Montero took on the role of Head of Content at KUMU, the fastest-growing social media app in the country.

Perhaps best known as MTV’s longest-running VJ, KC’s career includes billings as host and producer on a number of shows like Celebrity Car Wars, Survivor Philippines, Discovery Channel’s Worst Vacation Ever, and GOOD TIMES on Magic 89.9. While KC’s star power and marketing talent are undeniable, what helps KC perform in the boardroom is his unique brand of creativity that ensures content on the app stays relevant to a young mobile audience.

As KUMU’s head of content, KC often gets asked, “what is good content?” It’s a question he thinks is fundamentally misguided.

“The term “good content’ can be used in such a broad sense,” he said. “Some would say that if you can watch a piece of content from start to finish, that it should be considered good content. That isn’t totally true because what’s inside that content can captivate you and keep your attention for three minutes but it doesn’t mean, to me, that it’s any good.”

KC believes audiences today want more than just flashy visuals, catchy wordplay, and a coherent aesthetic. What they’re looking for, he says, is something that makes them feel good about themselves.

“I like to use the phrase “quality content” which means that it’s thought-provoking, entertaining, and leaves you with a positive feeling,” KC said. This triumvirate guides every bit of programming KC oversees at KUMU, from the messaging to the technical executions—everything is designed to maximize quality.

The KC recipe for effective content

KC shares these three useful insights to aspiring content creators on how to keep things creative, dynamic, and worth sharing:

  • If it’s a long video, make sure you show a quick look at what happens in the video right away. You have to grab attention as fast as possible.
  • Get close. The closer the subject is, the closer the audience feels, but don’t overdo it. No one wants to see your pores.
  • Know your audience. Know what makes them tick and play into their wheelhouse.

Pushing innovative technology

More than any other device in history, smartphones are the most immediate, on-demand platforms for content consumption. With livestreaming, the bridge between consumption and creation has narrowed nearly to non-existence.

For the team at KUMU, it’s an inmate understanding of the relationships between platform, product, and people that guide their growth into everything from arts to online marketplaces.

This formula proves to be effective as KUMU now engages more than three million Filipinos around the world with its online contests, game shows, celebrity live streams, live e-commerce, and just recently audio streaming features.

“I think that content is really only bound by technology and how it’s delivered,” KC said. “I think at the moment, we’re on the cusp of an e-commerce boom and the faster and closer you can get to humanizing your process the more success you will have.”



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