After The Close
Stocks opened sharply lower this morning, traded in sideways pattern for much of the afternoon, and finished the session on a weak note. Earlier today, investors were rattled by reports that the Coronavirus in China has been spreading. Furthermore, news that the virus has moved to other countries, including the U.S., likely did not help matters. In addition to health concerns, Wall Street is probably worried that the situation could hurt the global economy and corporate profits. At the close of the session, the Dow Jones Industrial Average was down 454 points; the broader S&P 500 Index was off 52 points, and the NASDAQ was lower by 176 points.
Market breadth showed widespread selling today, as decliners easily outnumbered advancers on the NYSE. Essentially all of the major equity sectors moved lower, with pronounced losses in the consumer, technology, and basic materials issues. The high-yielding utility shares displayed some relative strength, as traders looked for safety in the market.
Meanwhile, in economic news, new home sales slipped to annualized rate of 694,000 units in the month of December. A much better figure had been anticipated. Tomorrow, the pace should pick up somewhat. Of note, we will get a look at durable goods orders for the month of December, and the latest monthly consumer confidence numbers.
In corporate news, the fourth-quarter earnings season continues. Today, shares of home builder D. R. Horton (DHI) moved up in response to an upbeat report. Many large names are due to report results in the days ahead, and that may provide investors with some direction.
Technically, the market sold off sharply today. Hopefully, additional preventative measures will be announced, and the dire situation in China can be contained. Clearly, these developments are creating uncertainty for Wall Street.
– Adam Rosner
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
The penultimate trading week of January went to the bears. The primary culprit behind the selling was news that the Coronavirus had spread. Indeed, investors were unnerved last Wednesday and, more so, Friday by reports that the virus, which is life threating, had made its way from China, where it originated, to the United States. There were cases that individuals had been infected with the virus in New York, California, and Illinois. Those reports, along with news that major cities in China were under quarantine, had investors worried. The investment community is concerned about what impact the outbreak of the virus will have on China’s economy, which is already suffering from nearly two years of trade bickering with the United States.
The U.S. equity market sold off on Friday on the aforementioned Coronavirus news. Escalating concerns unnerved investors and took away their attention from what was by in large another good four-day stretch of earnings news from Corporate America, including strong quarterly results from technology giants International Business Machines (IBM – Free IBM Stock Report) and Intel Corp. (INTC – Free Intel Corp. Stock Report). For the bearish session, the Dow Jones Industrial Average, the technology heavy NASDAQ, the broader S&P 500 Index, and the small-cap Russell 2000 fell 170, 88, 30, and 22 points, respectively. The late-week selling ensured a losing abbreviated week of trading with the aforementioned indexes posting respective declines of 1.2%, 0.8%, 1.0%, and 2.2%.
Friday’s key metrics did not make for a good reading. Indeed, declining issues far outpaced advancers on both the New York Stock Exchange and the NASDAQ. Likewise, nearly all of the 10 major equity groups, save for the defensive-oriented utilities, finished deep into negative territory. The biggest laggards were the economically sensitive sectors and the healthcare groups. The Coronavirus news weighed heavily on the healthcare issues.
Looking ahead to the new trading week, the investment community will have a plethora of news to digest. In addition to the Coronavirus fallout, investors will have to tackle a heavy slate of earnings news from Corporate America and several reports from the business beat. The earnings news will be headlined by reports from 14 Dow-30 companies, including the latest results from technology behemoth Apple (AAPL – Free Apple Stock Report) after tomorrow’s closing bell, while the economic reports will include data on new home sales, durable goods orders, and the first reading on fourth-quarter GDP. That economic data will probably take a backseat to the latest Federal Reserve decision on monetary policy. We will get the latest Federal Reserve statement on Wednesday afternoon (at 2:00 EST) after the conclusion of the central bank’s two-day meeting. The consensus is that the Federal Reserve will keep interest rates steady, with an eye on providing some support for the U.S. economy amid some of the growing geopolitical concerns and emerging health worries (i.e., the Coronavirus). Given this backdrop, we would recommend that investors keep close tabs on the technology, energy, and healthcare stocks. In addition, to the Apple news, we will get quarterly data from the fellow technology giants Amazon (AMZN) and Facebook (FB), as well as the major oil companies and drug makers.
With less than an hour to go before the commencement of the final trading week of the month of January, the equity futures are indicating a sharply lower opening for the U.S. stock market. So far overseas, the trading has been dour. The main indexes in Asia finished notably lower overnight, while the major European bourses are deep in negative territory, as trading moves into the second half of the session on the Continent. Driving trading so far today has been continued worries about the Coronavirus. The death toll and number of infected individuals has climbed notably from last week, with cases reported in the United States. In addition to the health concerns, Wall Street is worried about what impact the virus will have on the global economy. Last week, festivities surrounding the Chinese New Year were canceled, as the virus spread across the Asian nation. Stay tuned.
– William G. Ferguson
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
