Market Analysis

Beyond the Numbers

Lingering Worries About Coronavirus Outbreak May Generate Selling Pressure
1/23/2020 8:54 AM

The major U.S. index futures are pointing to a modestly lower opening on Thursday following the lackluster performance seen over the course of the previous session.

Lingering concerns about the impact of the Chinese coronavirus may weigh on Wall Street after contributing to a sell-off in the Asia-Pacific markets.

Despite efforts to contain the outbreak, deaths from the new coronavirus have risen to 17, with nearly 600 cases confirmed worldwide.

A negative reaction to earnings news from Procter & Gamble (PG) may also generate some selling pressure in early trading.

Shares of P&G are slumping in pre-market trading after the consumer products giant reported fiscal second quarter earnings that beat estimates but on weaker than expected revenues.

Stocks moved higher in early trading on Wednesday but gave back ground over the course of the session to end the day little changed. The Nasdaq and the S&P 500 reached new record intraday highs before pulling back near the unchanged line.

The major averages eventually finished the session mixed. While the Dow edged down 9.77 points or less than a tenth of a percent to 29,186.27, the Nasdaq inched up 12.96 points or 0.1 percent to 9,383.77 and the S&P 500 crept up 0.96 points or less than a tenth of a percent to 3,321.75.

A positive reaction to earnings news from IBM Corp. (IBM) contributed to the early strength on Wall Street, with the tech giant jumping by 3.4 percent.

The advance by IBM came after the company reported better than expected fourth quarter results and provided upbeat full-year 2020 guidance.

Positive sentiment was also generated in reaction to news of the Chinese government's efforts to stop the spread of the Wuhan coronavirus outbreak.

Chinese health officials told the Wall Street Journal that hospitals are stepping up preventive measures and government officials are recommending that people not enter or leave Wuhan.

Buying interest waned as the day progressed, however, with traders seemingly reluctant to make significant moves ahead of earnings news from a slew of other big-name companies in the coming days.

Meanwhile, traders largely shrugged off a report from the National Association of Realtors showing U.S. existing home sales rebounded by much more than anticipated in the month of December.

NAR said existing home sales spiked by 3.6 percent to an annual rate of 5.54 million in December after tumbling by 1.7 percent to a rate of 5.35 million in November. Economists had expected existing home sales to jump by 1.2 percent to an annual rate of 5.43 million.

With the much bigger than expected monthly increase, existing home sales in December were up by 10.8 percent compared to the same month a year ago.

On a full-year basis, NAR said total existing home sales came in at 5.34 million in 2019, unchanged from the previous year.

Most of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Natural gas stocks showed a significant move to the downside, however, with the sector extending the sell-off seen in the previous session. The NYSE Arca Natural Gas Index fell by 1.7 percent to its lowest closing level in over a month.

The continued weakness among natural gas stocks came even though the price of the commodity regained some ground following the nosedive seen on Tuesday.

Considerable weakness also emerged among oil service stocks, as reflected by the 1.5 percent loss posted by the Philadelphia Oil Service Index. A steep drop by the price of crude oil weighed on the sector.

On the other hand, steel stocks regained some ground after falling sharply in the previous session, driving the NYSE Arca Steel Index up by 1.2 percent.

Commodity, Currency Markets

Crude oil futures are slumping $1.03 to $55.71 a barrel after tumbling $1.64 to $56.74 a barrel on Wednesday. Meanwhile, after slipping $1.20 to $1,556.70 an ounce in the previous session, gold futures are falling $2.20 to $1,554.50 an ounce.

On the currency front, the U.S. dollar is trading at 109.84 yen compared to the 109.57 yen it fetched at the close of New York trading on Wednesday. Against the euro, the dollar is valued at $1.1090 compared to yesterday’s $1.1093.


Asian stocks fell on Thursday after deaths from China's new coronavirus rose to 17, with nearly 600 cases confirmed.

Investors remain worried about the contagion as the week-long Lunar New Year holidays start on Friday, when millions of Chinese travel domestically and abroad.

Chinese shares plunged on concerns the deadly virus will worsen over the week-long trading break. The benchmark Shanghai Composite Index plunged 84.23 points, or 2.8 percent, to 2,976.53, marking its worst end to a Lunar Year in its three-decade history.

Hong Kong's Hang Seng Index tumbled 431.92 points, or 1.5 percent, to 27,909.12 as Beijing tries to contain the new SARS-like virus.

Japanese shares hit two-week lows amid heightened anxiety about the spread of the new coronavirus in China. Investors were also wary ahead of corporate earnings.

The Nikkei 225 Index slumped 235.91 points, or 1 percent, to 23,795.44, while the broader Topix closed 0.8 percent lower at 1,730.50.

Commodity-related and other cyclical stocks paced the decliners as the rapidly spreading coronavirus stoked worries about economic growth in China and a dent in the travel sector in the Asia Pacific.

Exporters also declined as the yen firmed to a 1-1/2-week high versus the dollar on safe-haven buying.

Meanwhile, semiconductor automated test equipment maker Advantest rallied 2.5 percent after its U.S. competitor Teradyne's fourth quarter earnings beat estimates.

In economic news, Japan posted a merchandise trade deficit of 152.5 billion yen in December, a government report showed. That narrowly beat forecasts for a shortfall of 152.6 billion yen following the 85.2 billion yen deficit in November.

Exports were down 6.3 percent year-over-year, missing expectations for a drop of 4.3 percent, while imports sank an annual 4.9 percent versus forecasts for a decline of 3.2 percent.

Australian markets fell notably as a tumble in oil prices pulled down energy stocks and upbeat jobs data tempered rate cut expectations. The benchmark S&P/ASX 200 Index dropped 44.70 points, or 0.6 percent, to 7,088, while the broader All Ordinaries Index ended down 50 points, or 0.7 percent, at 7,199.

Heavyweight CIMIC Group plummeted 20 percent after it decided to exit the Middle East. Engineering services provider Downer EDI gave up 18 percent after cutting its full-year profit guidance.

Origin Energy, Oil Search, Worley and Santos declined 1-2 percent after oil prices dropped sharply overnight on worries of excess supplies. Beach Energy shares slumped 6 percent.

Biotherapeutics firm CSL eased 0.4 percent on profit taking after scaling a new peak in the previous session.

Australia's inflation expectations increased in January, survey data from the Melbourne Institute showed today. The expected inflation rate increased 0.7 percentage points to 4.7 percent in January.

Separately, the unemployment rate in Australia came in at a seasonally adjusted 5.1 percent in December. That beat forecasts for 5.2 percent, which would have been unchanged from the November reading.

The Australian economy added 28,900 jobs last month, beating expectations for an increase of 10,000 jobs after gaining 38,500 jobs in the previous month.

Seoul stocks ended sharply lower amid rising concerns over the spread of Wuhan coronavirus. The benchmark Kospi gave up 21.12 points, or 0.9 percent, to finish at 2,246.13 ahead of the Lunar New year's holiday break that runs Friday through Monday.

Market heavyweight Samsung Electronics tumbled 2.4 percent and South Korea's No. 2 chipmaker, SK Hynix Inc., fell 2.3 percent.

On the other hand, Samsung BioLogics surged 6.9 percent and Hyundai Motor advanced 2.8 percent.


European stocks have moved mostly lower on Thursday as investors continue to fret over the potential fallout from the outbreak of a new coronavirus that has been spreading in China. Deaths from the virus rose to 17, with nearly 600 cases confirmed.

Investors remain worried about the contagion as the week-long Lunar New Year holidays starts on Friday, when millions of Chinese travel domestically and abroad.

Traders are also digesting news the European Central Bank announced the launch of a review of its monetary policy strategy, the first such exercise since 2003, as it left its interest rates, asset purchases and forward guidance unchanged.

While the French CAC 40 Index has fallen by 0.3 percent, the U.K.’s FTSE 100 Index and the German DAX Index are down by 0.5 percent and 0.6 percent, respectively.

Anglo American has moved to the downside after the company said that its fourth-quarter copper equivalent production increased 4 percent, led by the continued successful ramp-up at Minas-Rio in Brazil.

Infrastructure company John Laing Group has also fallen. The company announced that Chief Executive Officer Olivier Brousse has tendered his resignation in order to take up a senior position at Veolia Group.

Daily Mail And General has also slid after the media company said its first-quarter Group revenue declined 4 percent from last year, while underlying revenue increased 1 percent, in line with expectations.

German construction major Hochtief has also slumped. The company announced that it plans to recognize a one-off, post-tax impact of around 0.8 billion euros in fiscal 2019 as part of the plan by its 72.8 percent-owned unit CIMIC Group to exit the Middle East region.

Renault has also moved sharply lower on news that France's anti-corruption agency was carrying out checks at the company.

On the other hand, semiconductor company STMicroelectronics NV has jumped. The company's quarterly profit fell year-on-year but beat analyst estimates. Revenue for the fourth quarter increased 4 percent to $2.75 billion.

U.S. Economic Reports

First-time claims for U.S. unemployment benefits showed a modest increase in the week ended January 18th, according to a report released by the Labor Department on Thursday.

The report said initial jobless claims rose to 211,000, an increase of 6,000 from the previous week’s revised level of 205,000.

Economists had expected jobless claims to climb to 215,000 from the 204,000 originally reported for the previous week.

The Conference Board is scheduled to release its report on leading economic indicators in the month of December at 10 am ET. The leading economic index is expected to dip by 0.2 percent.

At 11 am ET, the Energy Information Administration is due to release its report on oil inventories in the week ended January 17th.

Crude oil inventories are expected to decrease by 1.1 million barrels after falling by 2.5 million barrels in the previous week.

The Treasury Department is also scheduled to reveal the details of this month’s auctions of two-year, five-year and seven-year notes at 11 am ET.

Stocks In Focus

Shares of VF Corp. (VFC) are moving significantly lower in pre-market trading after the apparel maker reported weaker than expected fiscal third quarter revenue and lowered its full-year guidance.

Hotel and casino operators Las Vegas Sands (LVS) and Wynn Resorts (WYNN) are also likely to see further downside amid concerns about the potential impact of the coronavirus outbreak.

On the other hand, shares of Citrix Systems (CTXS) are seeing considerable pre-market strength after the software company reported fourth quarter results that beat analyst estimates.

Electronic testing equipment maker Teradyne (TER) is also likely to move to the upside after reporting better than expected fourth quarter results and providing upbeat guidance.
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