Global markets are mixed this Monday morning as investors eye the latest fatality count from the coronavirus, which reached 908 this morning. More than 40,000 cases have been confirmed so far according to global health officials, making the virus more widespread than SARS. Some Chinese factories resumed operations today for the first time since the Lunar New Year holiday, but restarting the country's massive supply chains has not been without issues according to various news reports. Some provinces and districts have now told companies to not return to work until March 1, according to officials.

Earnings season is winding down this week, and the focus has shifted from last quarter's results to the impact of the coronavirus on companies' outlooks for the first quarter of 2020 and beyond. Those companies with the greatest exposure to China will continue to be under close scrutiny, including apparel brands like Nike, Apple, given its supply chain exposure from companies like Foxconn, hotel and gaming companies including Wynn Resorts and Sands, and semiconductor companies like Nvidia and Applied Materials.

With a global virus still not contained, the New Hampshire Democratic primary, a $4.8 trillion budget proposal and more corporate earnings to digest, Monday is loaded up. Let's get ready!

News Headlines

  • Trump will release a $4.8 trillion budget proposal today, according to news reports. (See below)
  • China's consumer price index (CPI), rose 5.4% year on year in January, the National Bureau of Statistics said Monday. The increase was up from 4.5% for December. Food prices grew 20.6% year on year last month, up from 17.4% in December, while non-food prices gained 1.6%, 0.3 percentage points higher than that of December.
  • Tesla shares are up 9% pre-market after its Gigafactory 3 in Shanghai resumed operations. It's unclear if the supply chain is affected and if production levels will be as they were before. The local government told Reuters it will assist the firm.
  • L Brands is nearing a deal to sell its Victoria’s Secret brand to private equity firm Sycamore Partners, according to CNBC. The deal could be announced as soon as next week. Shares are up 6% in pre-market trading.
  • Oscars 2020: Netflix took home two awards at last night's ceremony after being nominated for 24. The company denied a WSJ report that it spent well over $100 million campaigning for its films. The company's film chief Scott Stuber said the estimate is too high and they are being very smart about spending. South Korea's Parasite made history by becoming the first non-English film to win the award for Best Picture at Oscars 2020. 

The Big Story

Budget

The summaries of President Trump's fiscal 2021 budget proposal have been leaked to the press, and we have a better idea of his election-year pitch for the economy.

Here's what we know it includes:

  • Defense spending increase 0.3% to $740.5 billion, Non-defense spending lowered 5% to $590 billion
  • NASA spending increase 12% to $25 billion
  • Request for $2 billion toward building wall on Mexico border
  • Environmental Protection Agency spending decrease 26%
  • Cuts to social-safety-net programs 
  • Foreign aid spending decrease 21%
  • Extending 2017 individual tax cuts through 2035 costing $1.4 trillion

The budget naturally throws into focus the ballooning national debt and annual deficits. According to The White House, the federal budget deficit will fall below $1 trillion next year to $966 billion and the budget will be balanced after 2025. The economy will grow at an average rate of 3% for the next 15 years (CBO projects 1.7%) and the 10-year Treasury yield will rise to 3% in 10 years.

The Trump administration wants to slash spending by $4.4 trillion over the next decade and suggests $2 trillion in savings come from reducing access to mandatory spending programs like disability benefits, Medicaid and food stamps and changes to Medicare prescription-drug pricing. Experts expect this budget to be dead on arrival for this reason. For those unfamiliar with the U.S. federal budget process, the President will submit his proposal to both the Houses in Congress where budget resolutions are drafted. The Democrat-controlled House is not likely to accept the cuts to mandatory spending programs suggested.