Market Insights 2/4/2020

U.S. equities finished with solid gains, extending yesterday’s rebound from last week’s tumble, as coronavirus concerns continue to fade in light of the measures deployed by China to contain the spread and economic impact of the virus.

Treasury yields were higher and gold fell, giving back some of a recent flight-to-safety fueled rally, while crude oil prices declined and the U.S. dollar gained ground.

Europe and Asia finished higher amid the cooled coronavirus worries.

The Markets…

The Dow Jones Industrial Average rallied 408 points (1.4%) to 28,808

The S&P 500 Index was up 49 points (1.5%) to 3,298

The Nasdaq Composite jumped 195 points (2.1%) to 9,468

In heavy volume, 974 million shares were traded on the NYSE and 2.4 billion shares changed hands on the NASDAQ

WTI crude oil was down $0.50 to $49.61 per barrel and wholesale gasoline fell $0.03 to $1.44 per gallon

The Bloomberg gold spot price fell $21.35 to $1,555.38 per ounce

The Dollar Index—a comparison of the U.S. dollar to six major world currencies—rose 0.2% to 97.95

Factory orders top forecasts, Treasury yields rebounding following upbeat data yesterday

Factory orders rose 1.8% month-over-month in December, above the Bloomberg expectation of a 1.2% gain, and compared to November’s downward-revised 1.2% drop. Stripping out the volatile transportation component, orders grew 0.6%, north of the expected 0.1% rise and versus November’s negatively-adjusted 0.2% increase.

Treasuries were lower, as the yield on the 2-year note rose 6 basis points to 1.41%, while the yield on the 10-year note gained 7 bps to 1.59%, and the 30-year bond rate advanced 8 bps to 2.07%.

Tomorrow’s economic calendar will hold reads on the key services sector, with the Institute for Supply Management’s (ISM) Non-manufacturing Index forecasted to have ticked higher to 55.1 in January from the 55.0 posted in December, as well as Markit’s Services PMI Index, with economists projecting a final reading of 53.2 for January above the preliminary figure of 51.7, and higher than December’s 52.8 level.

Also, the ADP Employment Change report will be released, forecasted to show 158,000 private sector payrolls were added during January, as well as the trade balance, with the deficit expected to have widened to $48.2 billion for December. MBA Mortgage Applications are also on tomorrow’s docket.

Europe and Asia higher as virus concerns ease

European equities finished higher for a second-straight session, continuing to chip away at a recent selloff that came courtesy of intensified fears regarding the spreading of the coronavirus. The resiliency was fostered by yesterday’s plethora of favorable global manufacturing reports, China’s recent efforts to contain the outbreak—including stimulus measures—and today’s robust earnings calendar that is delivering results that were stronger than expected.

The euro dipped versus the U.S. dollar, following another dose of subdued inflation reports in the region, but the British pound rose in the wake of the U.K.’s recent exit from the European Union—known as Brexit—and as Markit’s U.K. Construction PMI improved more than expected.

The U.K. FTSE 100 Index and Italy’s FTSE MIB Index were up 1.6%, France’s CAC-40 Index and Germany’s DAX Index rose 1.8%, Spain’s IBEX 35 Index advanced 1.7%, and Switzerland’s Swiss Market Index gained 1.3%.

Stocks in Asia recovered from a recent bout of selling pressure, with mainland Chinese stocks trimming some of yesterday’s tumble, as the markets digested yesterday’s flood of upbeat global manufacturing data, headlined by the return to growth for the sector in the U.S.

China’s Shanghai Composite Index rose 1.3% and the Hong Kong Hang Seng Index advanced 1.2%. Japan’s Nikkei 225 Index moved 0.5% higher, as the yen continued to pare a recent safe-haven rally. South Korea’s Kospi Index jumped 1.8% and India’s S&P BSE Sensex 30 Index surged 2.3%, while Australia’s S&P/ASX 200 Index nudged 0.4% higher after the Reserve Bank of Australia left its monetary policy stance unchanged, which fostered a rally in the Australian dollar.