Equities fell today as concerns over the deadly coronavirus continued to escalate.
A second case was confirmed in the U.S in Chicago from a patient that had recently traveled to the epicenter of the breakout in the Wuhan region of China and a potential third case in North Carolina is being investigated.
The World Health Organization (WHO) has yet to declare a global health emergency. Benefiting from safe-haven flows, Treasuries, gold and the U.S. dollar rose on the day.
The Dow Jones Industrial Average was down 170 points (0.6%) to 28,990
The S&P 500 fell 36 points (1.1%) to 3,290
The NASDAQ was down 88 points (0.9%) to 9,315
871 million shares were traded on the NYSE and 2.6 billion shares changed hands on the NASDAQ
WTI oil was down $1.40 to $54.19 per barrel and wholesale gasoline fell $0.04 to $1.52 per gallon
The Bloomberg gold spot price added $6.60 to $1,578.20 per ounce
The Dollar Index—a comparison of the U.S. dollar to six major world currencies—added 0.2% to 97.88
For the week, the Dow fell 1.2%, the S&P 500 shed 1.2% and the NASDAQ was down 0.8%
With Q4 earnings season shifting into high gear, of the 86 S&P 500 companies that have reported results thus far, roughly 66% have topped revenue forecasts and nearly 73% have bested profit projections, per data compiled by Bloomberg. Overall y/y revenue growth is tracking at about 3.3%, while earnings expansion compared to the prior year is modest, coming in at roughly 0.8%.
Manufacturing growth remains and services sector output continues to grind higher
The preliminary Markit U.S. Manufacturing PMI Index for January dipped to 51.7 from December’s unrevised 52.4 figure, below the Bloomberg consensus estimate calling for a slight improvement to 52.5. The preliminary Markit U.S. Services PMI Index showed growth increased more than expected this month for the key U.S. sector, rising to 53.2 from December’s 52.8 figure, above forecasts of 53.0. Readings above 50 for both indexes denote expansion.
Treasuries were higher, with the yield on the 2-year note declining 2 basis points (bps) to 1.49%, the yield on the 10-year note shedding 5 bps to 1.69% and the 30-year yield dropping 4 bps to 2.14%.
Overseas markets higher
Closing before the U.S. turned decisively lower, markets in Asia and Europe were mostly higher on the day. Yesterday’s announcement from the European Central Bank (ECB) that it will conduct a strategic review of its monetary policy for the first time since 2003 continued to support sentiment, as inflation and economic growth in the region have failed to meaningfully recover even with the central bank’s highly-accommodative measures.
The euro and British pound saw some pressure versus the U.S. dollar, while the yen benefited from safe-haven flows. Global bond yields were lower.
The U.K. FTSE 100 Index was up 1.0%, France’s CAC-40 Index rose 0.9%, Germany’s DAX Index advanced 1.4%, Italy’s FTSE MIB Index gained 1.1%, Spain’s IBEX 35 Index traded 0.5% higher, and Switzerland’s Swiss Market Index increased 0.3%.
Japan’s Nikkei 225 Index ticked 0.1% higher. Hong Kong’s Hang Seng Index gained 0.2% and Australia’s S&P/ASX 200 Index finished little changed. India’s S&P BSE Sensex 30 Index continued to recover from a recent bout of weakness, rising 0.6% to post a second-straight session in the green. Markets in mainland China and South Korea were closed for holidays.
Stocks down for the week as virus outbreak overshadows data
U.S. stocks finished lower on the week with earnings season heating up and delivering some upbeat results from the technology sector, and global economic data continuing to keep recession concerns in check. However, an outbreak of the coronavirus in China that spread to the U.S. appeared to overshadow the upbeat earnings and economic data, as it put several cities in China on lock-down and threatened the key Chinese Lunar New Year celebration that starts tomorrow and is a historically active event for the consumer.
The U.S. dollar nudged higher but remained in the downtrend that started in early October and gold moved back to near multi-year highs. The defensively-natured utilities sector led to the upside, along with the tech sector on the aforementioned earnings results, while energy issues fell as oil prices dropped, and financials saw some pressure amid a slide in Treasury yields.
Although the busiest week for Q4 earnings season is on next week’s horizon and will likely dominate the market’s attention, the economic calendar will also yield some key reports that could have a say on the moves in the markets.
New home sales will get the ball rolling, followed by the preliminary December read on durable goods orders, January’s Consumer Confidence Index, the first look (of three) at Q4 GDP, jobless claims, personal income and spending, the Chicago PMI, and the final January University of Michigan Consumer Sentiment Index.
The headlining event will likely come in the form of the midweek monetary policy decision from the Federal Open Market Committee (FOMC). The FOMC has made it clear it will likely be on hold for some time, but scrutiny of the FOMC’s statement and customary press conference by Chairman Jerome Powell could ramp up, given the eased trade tensions, signs of global stabilization, subdued inflation, and continued efforts by the Central Bank to calm the overnight lending markets, that have occurred since its last meeting in December.