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Renewed Coronavirus Fears May Spark Initial Sell-Off On Wall Street

The major U.S. index futures are currently pointing to a sharply lower opening on Monday, with stocks likely to extend the pullback seen over the two previous sessions.

Concerns about the spread of the coronavirus are likely to weigh on Wall Street amid a spike in the number of confirmed cases outside of China.

South Korea announced a total of 231 new coronavirus cases earlier today, leading the government to raise the coronavirus alert to its highest level.

A jump in confirmed coronavirus cases in Italy as well as new cases in Middle East countries like Iraq and Afghanistan has raised concerns about the outbreak escalating into a pandemic.

Traders shrugged off concerns about the coronavirus earlier this month, helping propel stocks to new record highs amid optimism the outbreak would quickly be contained.

However, the continued spread of the virus along with several companies warning about the financial impact seems to have traders reassessing their positions.

Stocks showed a substantial move to the downside during trading on Friday, adding to the losses posted on Thursday. The Nasdaq and the S&P 500 pulled back further off the record closing highs set on Wednesday.

The major averages all closed firmly in the red, although the tech-heavy Nasdaq posted a particularly steep loss. While the Nasdaq plunged 174.37 points or 1.8 percent to 9,576.59, the Dow slid 227.57 points or 0.8 percent to 28,992.41 and the S&P 500 tumbled 35.48 points or 1.1 percent to 3,337.75.

For the week, the Nasdaq slumped by 1.6 percent, while the Dow and the S&P 500 fell by 1.4 percent and 1.3 percent, respectively.

The sell-off on Wall Street came as traders continued to keep a close eye on the latest coronavirus news, with Chinese officials reporting 1,109 new confirmed cases of the coronavirus, up sharply from 349 cases the previous day.

South Korean health authorities also reported 52 new cases of the fast-spreading disease, raising the national tally to 156, while the number of confirmed cases in Japan increased by 23 to 728.

A number of companies have warned about the impact of the coronavirus, with Coca-Cola (KO) forecasting the outbreak will trim 1 to 2 cents per share off its first quarter earnings.

Semiconductor and software stocks extended the sharp pullback seen in the previous session, with the Philadelphia Semiconductor Index and the Dow Jones U.S. Software Index plunging by 3 percent and 2.7 percent, respectively.

With the continued weakness on the day, both indexes pulled back further off the record closing highs set on Wednesday.

Significant weakness was also visible among oil service stocks, as reflected by the 2.6 percent slump by the Philadelphia Oil Service Index.

The weakness in the oil service sector came amid a decrease by the price of crude oil, with crude for April delivery falling $0.50 to $53.58 a barrel.

Natural gas, brokerage, and computer hardware stocks also saw considerable weakness on the day, moving lower along with most of the other major sectors.

Meanwhile, gold stocks were among the few groups to buck the downtrend, with the NYSE Arca Gold Bugs Index soaring by 4 percent to its best closing level in well over three years. The rally by gold stocks came amid a jump by the price of the precious metal.

On the U.S. economic front, the National Association of Realtors released a report showing a pullback in existing home sales in the month of January.

NAR said existing home sales slumped by 1.3 percent to an annual rate of 5.46 million in January after surging up by 3.9 percent to a revised rate of 5.53 million in December. Economists had expected existing home sales to tumble by 1.8 percent.

Despite the monthly decrease, the report noted existing home sales in January were up by 9.6 percent compared to the same month a year ago.

Commodity, Currency Markets

Crude oil futures are plunging $2.10 to $51.28 a barrel after sliding $0.50 to $53.38 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,680.10, up $31.30 from the previous session's close of $1,648.80. On Friday, gold spiked $28.30.

On the currency front, the U.S. dollar is trading at 111.28 yen compared to the 111.61 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.0813 compared to last Friday's $1.0847.

Asia

Asian stocks fell on Monday and safe-haven assets such as gold and the dollar rose as investors fretted about a surge in the number of new coronavirus cases reported outside China and the potential impact on the global economy. The Japanese markets were closed for the Emperor's Birthday.

South Korea raised its coronavirus alert to the highest level, while Italy and Iran confirmed an uptick in coronavirus infections.

China's Shanghai Composite Index fell 8.44 points, or 0.3 percent, to 3,031.23 despite assurances from the government that it would step up efforts to help cushion the blow to its economy from the coronavirus outbreak. Hong Kong's Hang Seng Index tumbled 487.93 points, or 1.8 percent, to 26,820.88.

Australian stocks tumbled, with weak global cues and disappointing corporate earnings dampening investor sentiment. The benchmark S&P/ASX 200 Index plummeted 160.70 points, or 2.3 percent, to 6,978.30, while the broader All Ordinaries Index plunged 165 points, or 2.3 percent, to 7,065.40.

Qantas Airways slumped 7.5 percent amid the contagion fears. Woodside Petroleum, Santos, Origin Energy and Oil Search plunged 3-6 percent after oil prices fell more than 2 percent in Asian trading.

Miners BHP, Rio Tinto and Fortescue Metals Group declined 2-3 percent, while gold miner Evolution Mining rose 1.1 percent, Newcrest Mining climbed 5 percent and Northern Star Resources rallied 3.3 percent.

The big four banks fell between 0.9 percent and 1.5 percent. BlueScope Steel plummeted 7.9 percent after a warning that the coronavirus outbreak will heavily impact its China business.

NIB Holdings tumbled 7.1 percent as the health insurer reported a 23 percent decrease in first-half profit. Outdoor advertiser oOh!media lost 3.4 percent after reporting a 54 percent drop in statutory profit for the full year.

Seoul stocks nosedived, with the benchmark Kospi plummeting 83.80 points, or 3.9 percent, to close at 2,079.04 after South Korea raised its coronavirus alert to the "highest level" for the first time in a decade, following a rapid spike in cases over the weekend.

Airline stocks succumbed to heavy selling pressure, with Korean Air Lines and Asiana Airlines falling more than 6 percent after both suspended flights to the city of Daegu amid the contagion worries.

Market heavyweight Samsung Electronics tumbled 4 percent after confirming a coronavirus case at its mobile device factory complex in the southeastern city of Gumi.

New Zealand shares fell sharply as reports of surging coronavirus infections in South Korea, Italy and Iran dashed hopes the outbreak might be contained. The benchmark NZX 50 Index ended down 216.22 points, or 1.8 percent, at 11,857.12.

The total volume of retail sales in New Zealand gained a seasonally adjusted 0.7 percent sequentially in the fourth quarter of 2019, Statistics New Zealand said today.

That was shy of expectations for an increase of 0.8 percent and down from the upwardly revised 1.7 percent gain in the three months prior (originally 1.6 percent).

Singapore's Straits Times Index slumped 1.2 percent. A government report showed that Singapore's consumer price inflation rose 0.8 percent year-on-year in January, the same as seen in December. Economists had expected a 0.9 percent increase.

Malaysia's KLSE Composite Index tumbled 2.7 percent amid political turmoil surrounding potential changes in the ruling government coalition.

Europe

European stocks have tumbled on Monday after Italy became Europe's epicenter for coronavirus cases over the weekend. Contagion fears have gripped markets after an 84-year-old man became the fourth person to die in the country from the virus outbreak.

Italian bank Intesa Sanpaolo has decided to close 4 branches in the country as the government imposed strict quarantine restrictions in two northern "hotspot" regions close to Milan and Venice.

About 50,000 people cannot enter or leave several towns in Veneto and Lombardy for the next two weeks without special permission.

While the U.K.'s FTSE 100 Index has shown a 3.3 percent nosedive, the French CAC 40 Index and the German DAX Index are tumbling 3.8 percent and 3.9 percent, respectively.

Banks Commerzbank, Deutsche Bank, BNP Paribas, Credit Agricole and Societe Generale have moved sharply lower as the yield on 10-year U.S. Treasuries fell to the lowest since 2016.

Automakers are also sharply lower on global growth concerns stemming from the coronavirus outbreak. BMW, Daimler, Volkswagen, Renault and Peugeot have plummeted.

Airline and travel-related stocks have also suffered heavy losses on fears over the coronavirus outbreak becoming a pandemic.

Barclays has also slumped. The bank is preparing to start the search for a new chief executive officer to replace Jes Staley, the Financial Times reported.

Associated British Foods has also fallen. In a trading update for the 24 weeks ending February 29, the company said that operating profit for Primark was expected to be "marginally down" from the prior year.

On the other hand, outsourcing firm Bunzl has soared after its pretax profit for 2019 rose 6.7 percent on higher revenue and margins

In economic news, German business confidence improved in February, survey data from the ifo institute showed. The business climate index rose to 96.1 from 96.0 in the previous month.

The score was above the forecast of 95.3. The assessment of current situation weakened from last month, while expectations improved.

U.S. Economic Reports

No major U.S. economic data is scheduled to be released today, although reports on consumer confidence, new home sales, durable goods orders, and personal income and spending may attract attention in the coming days.

At 3 pm ET, Cleveland Federal Reserve President Loretta Mester is due to speak on U.S. outlook and monetary policy at the 36th NABE Economic Policy Conference in Washington, D.C.

Stocks In Focus

Shares of Aurora Cannabis (ACB) and Tilray (TLRY) are moving sharply lower in pre-market trading after Cowen downgraded both stocks to Market Perform from Outperform due to an increasingly cautious outlook for cannabis sales in Canada.

Banking giant Wells Fargo (WFC) may also see initial weakness after agreeing to pay $3 billion as part of a settlement with the Justice Department and the SEC resolving the agencies' investigations into the company's fraudulent sales practices.

Shares of Intuit (INTU) may also move to the downside after a report from the Wall Street Journal said the financial software maker is close to acquiring credit monitoring company Credit Karma for about $7 billion in cash and stock.

On the other hand, shares of Xperi (XPER) are seeing notable pre-market strength after the tech licensing firm said it has received an unsolicited takeover offer from private equity firm Metis Ventures for $23.30 per share in cash.

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