After The Close
The last trading day in January opened on the downside, and the major indexes accelerated their slide throughout the session.
Negative sentiment was largely driven by fears over the rapidly spreading Wuhan coronavirus. Since the World Health Organization declared a public health emergency yesterday, the number of confirmed cases has jumped by nearly 2,000, with close to 10,000 reported in China alone. Meanwhile, the Centers for Disease Control and Prevention ordered a 14-day quarantine for 195 U.S. citizens that recently returned from the epicenter of the outbreak, citing “an unprecedented public health threat”. The CDC also announced that it has 241 patients under investigation for the virus in 36 states, with six having tested positive.
Investors are clearly worried about the potential economic impact of the virus, particularly as to how it will affect China, which has grown to be a global production powerhouse and voracious consumer of goods. According to some estimates, the disease could wipe out $60 billion or more from that nation’s economy in the current quarter alone. Meanwhile, Hong Kong’s Hang Seng Index has lost more than 9% of its value over the last two weeks.
At the closing bell, the Dow 30 was down 603 points, or 21%, the S&P 500 was off by 58 points (1.8%), and the NASDAQ had shed 148 points (1.6%). The downturn was widespread, with declining issues outnumbering advancers by better than three-to-one. Nearly all of the 10 major market sectors ended in negative territory, with the biggest losses coming from energy shares, which fell 2.9%. Technology and basic materials stocks also took sizable hits, each losing about 2.5%. Consumer cyclicals were the only stocks to buck the trend, ending just above the breakeven mark for the session.
Elsewhere, oil also lost ground, with light sweet crude falling 1.1%, to around $51.60 a barrel. The price is nearly 16% lower for the month, shedding about 5% over the past five days alone. Oil traders are concerned over falling demand from China due to the virus, as it is the world’s largest consumer. Stocks in the European markets also took a beating, with Britain’s FTSE 100 and Germany’s DAX each down 1.3%. Meanwhile, France’s CAC-40 didn’t do much better, falling 1.1%.
– Mario Ferro
At the time of this article's writing, the author did not have positions in any of the companies mentioned.
1:00 PM EST
The month of January is concluding with a thud on Wall Street, at least through the first half of the current session, as fears about the fast-spreading coronavirus is causing stocks to tumble along a broad front.
Specifically, as we pass the three-hour mark of the trading day, we see that the Dow Jones Industrial Average is down 520 points; the S&P 500 is lower by 53 points; and the NASDAQ is shedding 125 points. Among the biggest contributors to the sharp setback are the airlines, some energy stocks, a number of technology issues, and the resort equities.
In all, the Dow's rapid descent today has wiped out the index's gain for the entire month, as investors now fear the potential impact from the virus's fury. The fact that we are going into a weekend, when there could be additional unsettling news on the coronavirus is also a factor in the widespread selling.
As to the virus, China confirms that there have been 213 deaths so far, and that toll is only expected to rise now that the deadly virus has spread to 18 countries.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
Before The Bell
On point, after the Dow fell by over 100 points shortly after the open. Then, that composite and the rest of the indexes recouped those deficits. However, instead of keeping the momentum going, stocks fell anew after the first hour of trading, with the Dow tumbling to a morning-worst 245-point setback. Weaker results and unimposing forecasts from such companies as DuPont (DD) also contributed to the market's decline, as did a sharp retreat at Facebook (FB). Conversely, Microsoft (MSFT – Free Microsoft Stock Report) did better than forecast, and its stock raced ahead, as did the shares of electric carmaker Tesla (TSLA), which jumped after inking a second straight profit.
The stock market then would go back and forth, while generally staying in the loss column, with Dow's deficits ranging from 100 to 200 points, for the most part. To date, earnings season has been a decent one, but there have been some notable profit misses. Still, the week has been dominated by the rising toll from the coronavirus. Meanwhile, the flow of economic reports continues. On point, after date were released in recent days showing a decline in new home sales, and uneven trend ion orders for durable goods, but some further improvement in consumer confidence, the government took its first look at fourth-quarter GDP.
As to this last item, which was issued yesterday morning, the Bureau of Economic Analysis reported that fourth-quarter GDP growth came in at 2.1%. That was in line with forecasts and with the third-quarter report. For all of 2019, growth came to 2.3%. As to the latest three months, the increase in GDP was led by gains in consumer spending, government spending, housing investment, and exports. Decreases in inventory investment and business investment limited the improvement. As to the 12 months, the 2.3% uptick in gross domestic product was less than the 2018 gain of 2.9%.
Growth, meantime, stabilized over the final three quarters of last year, following a sharp increase in the opening stanza. The 2.3% rise for the year was also the slowest since 2016. Returning to the market, the indexes would improve notably as we moved into the final hour of trading, with the Dow initially entering the green, as the World Health Organization said that it does not recommend the limiting of trade and movement amid the coronavirus, as it has confidence that China can control the virus. We shall see. Meantime, the other indexes followed the blue chips into positive territory.
The gains then would accelerate as we moved into the homestretch, with the market closing at the session highs. In all the Dow, once off by almost 250 points, would erase that setback and close higher by 124 points; the S&P 500 would gain 10 points; and the NASDAQ would climb 24 points. Even the Russell 2000, once off sharply would erase almost its entire deficit. Closing lower, though, were bond yields, as well as some basic industry issues. Now, the month concludes, and ahead of the final day's trading, the U.S. equity futures are poised to open the session to the downside on the fast-growing coronavirus fears.
