After The Close
Stocks got off to a solid start this morning, pulled back slightly after about an hour of trading, but managed to firm up again and then forged ahead in the afternoon closing near session highs. Investors were pleased to learn that researchers in China, as well as a team in the U.K., may be on the cusp of finding a treatment for the Coronavirus. However, much progress will be needed, and the situation is still a major concern. At the close of trading, the Dow Jones Industrial Average was ahead 483 points; the broader S&P 500 Index was up 37 points; and the NASDAQ was higher by 41 points.
Market breadth was quite constructive today, as advancers were nicely ahead of decliners on the NYSE. The healthcare and basic materials issues displayed strength, offsetting softness in the consumer and technology names.
Meanwhile, traders received some upbeat economic news this morning. According to Automatic Data Processing (ADP), there were 291,000 private sector jobs added to the nation’s economy in January, which was a far better reading than had been expected. Specifically, the ISM Non-Manufacturing Index came in at 55.5 for the month of January, which was a solid showing. Tomorrow, we will get a look at the latest weekly jobless claims figures, and on Friday, the government will release the January employment report.
In corporate news, the fourth-quarter earnings season is in full swing. We recently heard from a few widely followed companies. Shares of Disney (DIS – Free Disney Stock Report) traded lower today, even though investors were initially pleased about the entertainment giant’s growth prospects. Shares of Merck (MRK – Free Merck Stock Report) also put in a soft session, as investors seemed to be anticipating better top-line results from the drug company.
Technically, the stock market continues to move higher, as we move into the month of February. For now, investors seem willing to assume that a cure for the coronavirus will materialize and that the global economic outlook will remain stable.
– 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 stock market, which tumbled this past Friday on escalating fears about the fast-spreading coronavirus and its potential impact on global growth, staged a partial recovery on Monday and then really put the pressure on the bears yesterday morning, as the Dow Jones Industrial Average quickly soared more than 400 points. The rally was led by a rebound in some of the earlier casualties, and also by shares of Tesla (TSLA), which had jumped by 13% on Monday and then bounded ahead to $940 a share early Tuesday on a seeming short squeeze.
The dramatic rally yesterday was prompted by the belief that the global economies can weather the virus scare and continue to show economic resilience. That confidence was fortified by some recent reassuring economic data out of Asia and the United States, where, in the case of our country, a survey issued on Monday showed a surprising, if still modest, pickup in manufacturing activity. Meanwhile, the strength in the market continued all morning, with the Dow surging by 500 points at the noon hour in New York.
The strength would continue into the early afternoon, with strength not only in Tesla, but also in Nvidia (NDVA) and in Apple (AAPL – Free Apple Stock Report) shares, with these issues making up most of the ground surrendered late last week. As to the coronavirus, it is continuing to rage ahead, with confirmed cases and the death toll both rising, and at a relatively rapid rate. Meantime, in addition to the headline stocks noted above, shares of some of the cruise line operators and airlines rose in value. These groups also had led the way lower last week.
In other news, China's central bank indicated that it could cut its key lending rate as well as the lead bank's reserve requirement ratios to support its generally slowing economy in the coming weeks. Expectations are that China's GDP growth will fall sharply in the current quarter; the hope is that this likely additional stimulus will lend assistance to the second quarter and beyond. Stocks in Europe also turned the corner yesterday and climbed ahead of the latest surge in U.S. stocks.
The market then stabilized for much of the rest of the session before some minor selling ensued just before the close. Still, almost all of the cumulative gains for the session for retained as the final bell sounded. On point, the Dow, up just over 500 points at midday, posted a final advance of 408 points, or 1.4%. The NASDAQ did even better, surging 195 points, or 2.1% and the S&P 500 jumped 49 points, or 1.5%. Gaining stocks easily eclipsed declining issues. Bond yields also rose, with the 10-year Treasury note rising to 1.60%.
Looking ahead at a new day now and after yesterday's fireworks, we see that the equity futures are pointing to a strongly higher opening when trading resumes later this morning.
– Harvey S. Katz, CFA
At the time of this article’s writing, the author held positions in one or more of the companies mentioned.
