Widespread warnings reign, regarding big-cap earnings, valuation for the tech leaders (but also almost all so-called former FANG stocks), renewed or continuing supply-demand woes returning due to issues in China, plus the Fed's Quantitative Tightening in 2023 coming, as well as the slightly grander influences of tax-related trades near yearend.

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The overall impact will vary between sectors and stocks, and there is also the health concerns, which might throttle some international travel beyond friction related to departures from China coming to the U.S. Outbound bookings from China to travel following the stringent lock-down measures 'were' up about 50 or more percent, and their average spending exceeds that of other tourists. It is impacting airlines (beyond the Southwest meltdown), and cruises or even hotel stocks, and makes sense because some were counting on new visitors.

I mentioned concerns about 'waves of COVID' last night and earlier today, as I saw data about 50% of flyers from China 'to' Milan arriving with COVID. So the officials at Frankfurt started testing, and found also more than 50% positivity on arriving passengers from China. That means more COVID just arrived in the EU, and that's problematic.

It's troubling not as xenophobia, which it's not, but as irresponsible behavior in China by going from an extreme restriction to wide-open everything, literally a fast almost overnight decision by Beijing. That's no way to govern, not that we did so much better here initially, but so much more is known 'by now'. China's variants of COVID may have mutated in a different way than over here, since a majority of Chinese citizens were inoculated with SinoVac (less effective, thus might have different variants than the Pfizer or Moderna vaccines allow).

How this impacts the economies and markets is obviously negative until the backdrop changes. But you also have big stocks with Chinese exposure more defensive, with Apple at the front of that line, but also after a long decline. As to Tesla (TSLA), in my thinking they should have focused on redesign vs. competition and not built the mega-factories in China and possibly not one in Germany.

At the same time after 2+ years of bearishness on Tesla and almost as long as regards Apple stock (not products), I resist bringing myself to 'new' bearish thoughts, because it's 'continuation' of downtrends we're long-talked about. It doesn't mean they can't go lower, but we just don't want to play that. Also we don't want to trade Disney (DIS) (bearish for ages), which besides slow business in the US (anecdotal), has a Shanghai Park (risk), and likely TV 'spin-off's' next. I might actually like Disney 'after' we work lower into the late Winter. We'll see.

In-sum: 

Limited impact of the 'testing' requirement on flyers from China, and an expectation that the European Union will follow soon. We don't know if the 'other' variants spreading in China are more pathogenic, but they might be. It is just another variable from a market perspective, as nobody knows surprises which is why traders (and travelers) want to be cautious about all of this.

Dr. Gottlieb has noted that 'cross-variant' transmission exists in China, hence a much more protracted situation than what we had here, but they is 'export' risk of that multiple-exposure situation globally, which is indeed bearish (if that is how it goes). The level of concern for COVID in the United States ease, and note that Europe didn't get much more of a problem from Ukrainian refugees, as most in Ukraine had the Sputnik vaccine (also mediocre) from Russia.

So maybe the U.S. and Europe will get lucky with the Chinese export, but too soon to know. So far we don't know if there's a more contagious variant.

Everything is so bad that it's almost good, really some stocks are being set-up for 'intervening' rebounds, others not (especially if sensitive to China news). It is my fervent hope (prayer?) that China's sudden opening isn't preparatory to invading Taiwan. Talk about something that would be ... distracting at least.

Note: a virologist at Walter Reed Hospital 'says' what China is doing now is a strategy: exporting a virus they can't control to the 'whole world'. Dr. Sean Lin, is quoted as saying:

“The CCP is not sharing data, and the international community doesn’t know how many different virus variants are spreading in China, and whether there are other compound infections".

“Under such circumstances, it is extremely irresponsible for the CCP to let people out of the country which is a huge epidemic area. Put another way, it has a very treacherous purpose and is very malicious.

Something to ponder, and as a survivor of severe COVID, having written clear warnings in January of 2020 (later the low in March), I definitely don't want to deal with everything involved as an investment analyst, mostly for humanity. If it does proliferate again (worst case scenario and premature to consider), we as a Nation cannot readily 'bail-out' society like Washington did then, while at the same time having restrictive Fed monetary policy. How do you spell clus.. and oddly enough that kind of mess would probably 'pivot' the Fed..

The S&P could go lower (I always thought it would have trouble at the higher levels), but much of this is discounted, although a return to major COVID threat isn't in the market 'quite', but it's hovering off-stage (and hopefully stays there) rather than delivering new contagious variants (health concerns already high).

Maybe one big surprise to Wall Street has been e-commerce relatively weak, as customers go back to 'brick & mortar' stores (traffic near me confirms this). That's probably more of a concern for smaller 'online only' businesses than a mega-business like Amazon, but they are shrinking too, said so months ago.

Bottom-line: 

Some say strategies that didn't work last year will work next year but there are many variables. You also have record Money Supply contraction ongoing, and you have the collapse of crypto that I suspect backdrops all this, even though nobody will acknowledge or concur about how devastating it was 'beyond' crypto in terms of impacting investor or speculator psychology.

The mood out there remains: caution, capital preservation and low optimism. However that's what we said last year, and while not extremely oversold, and hard to have a sustainable recovery while the Fed is still doing what it is, this should be closer to the late stages of descent, rather than some catastrophic 'further' hit, which is what the new naysayers contend.

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