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Beyond the Numbers

Futures Pointing To Sharply Lower Open On Wall Street
1/27/2020 8:53 AM

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 previous session.

Growing concerns about the coronavirus outbreak in China are likely to weigh on the markets amid worries about the impact on the global economy.

Chinese officials said the death toll from the new coronavirus has jumped to 81, with more than 2,800 people infected globally.

The continued spread of the coronavirus is likely to weigh on travel, tourism and hospitality stocks as well as companies with major exposure to China.

Some traders are likely to use the opportunity created by the outbreak to cash in on some of the recent record gains in the markets, potentially exacerbating the pullback.

After failing to sustain an initial move to the upside, stocks showed a significant downturn over the course of the trading session on Friday. The major averages pulled back well off their early highs and firmly into negative territory.

The major averages climbed off their worst levels going into the close but remained stuck in the red. The Dow fell 170.36 points or 0.6 percent to 28,989.73, the Nasdaq slid 87.57 points or 0.9 percent to 9,314.91 and the S&P 500 slumped 30.07 points or 0.9 percent to 3,295.47.

With the drop on the day, the major averages also moved lower for the holiday-shortened week. The Dow tumbled by 1.2 percent, the S&P 500 dropped by 1 percent and the Nasdaq fell by 0.8 percent.

The pullback on Wall Street came after the Centers for Disease Control and Prevention confirmed the second case of the Chinese coronavirus in the U.S.

The CDC said the patient, a woman in her 60s, recently returned from a trip to Wuhan, China, and is currently doing well and in stable condition.

The public health agency said another sixty-three patients in twenty-two states are being monitored for signs of infection.

The news led to a resurgence in concerns about the impact of the coronavirus outbreak after the World Health Organization helped tamp down worries on Thursday by saying it is too early to declare the situation a global health emergency.

The markets initially benefited from a positive reaction to earnings news from big-name companies like Intel (INTC) and American Express (AXP).

Shares of Intel surged up by 8.1 percent after the semiconductor giant reported fourth quarter results that exceeded analyst estimates on both the top and bottom lines.

Intel also provided upbeat guidance for the current year and said its board of directors approved a five percent cash dividend increase.

American Express also ended the day notably higher after the financial services giant reported better than expected fourth quarter results.

Energy stocks turned in some of the market's worst performances on the day amid a continued nosedive by the price of crude oil.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plunged by 3 percent, the NYSE Arca Natural Gas Index slumped by 2.2 percent and the NYSE Arca Oil Index slid by 1.3 percent.

Substantial weakness also emerged among biotechnology stocks, as reflected by the 2.1 percent loss posted by the NYSE Arca Biotechnology Index.

Steel, banking and healthcare stocks also saw notable weakness, while gold stocks moved higher along with the price of the precious metal.

Commodity, Currency Markets

Crude oil futures are slumping $1.61 to $52.58 a barrel after tumbling $1.40 to $54.19 a barrel last Friday. Meanwhile, an ounce of gold is trading at $1,582.80, up $10.90 from the previous session’s close of $1,571.90. On Friday, gold climbed $6.50.

On the currency front, the U.S. dollar is trading at 109.04 yen compared to the 109.28 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is valued at $1.1029 compared to last Friday’s $1.1025.

Asia

Asian stocks fell on Monday amid mounting concerns about the potential impact of a new coronavirus that has killed at least 80 people in China. Trading volumes were thin as several markets were closed for the Lunar New Year holidays.

Japanese shares tumbled as the coronavirus spread to France, Nepal, Australia, and Malaysia. Investors also shifted their focus to corporate earnings results that will be out this week.

The Nikkei 225 Index plunged 483.67 points, or 2 percent, to 23,343.51, while the broader Topix closed 1.6 percent lower at 1,702.57.

Market heavyweight Fast Retailing plummeted 5.7 percent, Fanuc declined 2.1 percent and SoftBank Corp slumped 4.1 percent.

Automaker Nissan Motor shed 3 percent, Mazda Motor lost 2.2 percent, Honda Motor fell 1.7 percent and Toyota Motor gave up 1.5 percent as the yen jumped on safe haven demand. Honda has a plant in the quarantined city of Wuhan, where the virus emerged.

Japan Airlines lost 3.9 percent and ANA Holdings gave up 3 percent on concerns over the coronavirus outbreak. Cosmetics maker Shiseido plunged 5.5 percent on fears of lower demand from Chinese tourists.

The Australian markets were closed due to the public holiday in lieu of Australia Day, which fell on Sunday.

Markets in China, Hong Kong, Malaysia, Singapore, South Korea and Taiwan were also closed for public holidays.

New Zealand shares ended lower amid rising fears over the spreading coronavirus and its impact on the global economy. The benchmark NZX-50 Index dropped 70.67 points, or 0.6 percent, to 11,807.14.

Travel-related stocks succumbed to heavy selling pressure, with Air New Zealand falling 2.4 percent and Auckland International Airport declining 1.5 percent.

Europe

European stocks have moved sharply lower on Monday amid growing concerns over the coronavirus outbreak. The death toll from China's new coronavirus grew to 80 Sunday, with more than 2,700 people infected globally.

China's National Health Commission said the new coronavirus is contagious even in its incubation period, which lasts up to 14 days, and that the virus' ability to spread is getting stronger.

Political events also remain on investors' radar after Matteo Salvini's attempt to trigger a crisis for Italy's coalition government by seizing control of the left-wing region of Emilia-Romagna failed.

Meanwhile, British Prime Minister Boris Johnson said that Britain would become a "global, trail-blazing country" as he unveiled the government's full plans to mark "Brexit day" this Friday. The U.K. will officially leave the European Union at 11 pm on Friday, January 31.

While the U.K.’s FTSE 100 Index has plummeted by 2.3 percent, the German DAX Index and the French CAC 40 Index both down by 2.4 percent.

Airline stocks and luxury goods makers have been among the worst hit. British Airways owner IAG and luxury brand Burberry are posting steep losses.

German airline Lufthansa, French luxury goods maker LVMH and Gucci owner Kering have also tumbled on concerns over a slowdown in Chinese demand. Miners have also succumbed to heavy selling pressure.

TI Fluid Systems is also posting a notable loss after the company said it anticipates fiscal 2019 results to be in line with its guidance.

H&M has also fallen. The fashion retailer said that data security breaches found at its German unit were unacceptable and it is cooperating with authorities.

In economic news, survey data from the ifo institute showed German business confidence weakened in January. The business climate index dropped to 95.9 in January from 96.3 a month ago. The index was expected to rise to 97.

U.S. Economic Reports

The Commerce Department is due to release its report on new home sales in the month of December at 10 am ET. New home sales are expected to climb by 0.8 percent in December after jumping by 1.3 percent in November.

At 11:30 am, the Treasury Department is scheduled to announce the results of its auction of $40 billion worth of two-year notes.

The Treasury Department is also slated to announce the results of its auction of $41 billion worth of five-year notes at 1 pm ET.

Stocks In Focus

Shares of Arconic (ARNC) are moving notably lower in pre-market trading after the maker of engineered metal products reported fourth quarter results that missed analyst estimates.

Cosmetics makers Estee Lauder (EL) may also see initial weakness after Oppenheimer downgraded its rating on the company’s stock to Perform from Outperform.

Meanwhile, shares of AbbVie (ABBV) may see initial strength after the biopharma company reached agreements to sell assets to AstraZeneca (AZN) and Nestle as part of efforts to obtain approval for its acquisition of Allergan (AGN).
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