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Beyond the Numbers

Easing Coronavirus Concerns May Generate Early Buying Interest
2/19/2020 9:01 AM

The major U.S. index futures are pointing to a higher open on Wednesday, with stocks likely to move back to the upside after ending the previous session mostly lower.

Easing concerns about the coronavirus outbreak may contribute to early strength on Wall Street after Chinese officials reported the lowest number of newly confirmed cases since late January.

China’s National Health Commission reported 1,749 new cases of the coronavirus, brining the nationwide total to 74,185. More than 2,000 people have died as a result of the outbreak.

A rebound by shares of Apple (AAPL) may also generate some positive sentiment, with the tech giant rising by 0.5 percent in pre-market trading after slumping by 1.8 percent on Tuesday.

Apple warned of weaker than previously forecast second quarter revenue due to the coronavirus outbreak, but traders seem optimistic the impact will only be temporary.

Stocks moved mostly lower during trading on Tuesday as traders returned to their desks following the long holiday weekend. While the Nasdaq managed to end the day slightly higher, the Dow and the S&P 500 closed in negative territory.

The Nasdaq inched up 1.57 points or less than a tenth of a percent to 9,732.74, but the Dow slid 165.69 points or 0.6 percent to 29,232.39 and the S&P 500 fell 9.87 points or 0.3 percent to 3,370.29.

The weakness on Wall Street came after tech giant Apple warned of weaker than previously forecast second quarter revenue.

Apple said it expects to miss its forecast for second quarter revenue of $63 billion to $67 billion due to lower iPhone production and weak Chinese demand as a result of the coronavirus outbreak.

Disappointing earnings news from Walmart (WMT) also weighed on the markets after the retail giant reported weaker than expected fourth quarter results and provided disappointing guidance.

Meanwhile, the Federal Reserve Bank of New York released a report showing growth in New York manufacturing activity saw a notable acceleration in the month of February.

The New York Fed said its general business conditions index climbed to 12.9 in February from 4.8 in January, with a positive reading indicating growth in regional manufacturing activity. Economists had expected the index to inch up to 5.0.

The bigger than expected increase by the headline index came as the new orders index shot up 16 points to 22.1 and the shipments index climbed to 18.9.

A separate report from the National Association of Home Builders showed a slight deterioration in homebuilder confidence in the month of February.

Commodity, Currency Markets

Crude oil futures are jumping $0.83 to $52.88 a barrel after closing unchanged at $52.05 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,607.70, up $4.10 compared to the previous session’s close of $1,603.60. On Tuesday, gold jumped $17.20.

On the currency front, the U.S. dollar is trading at 110.73 yen compared to the 109.87 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is unchanged compared to yesterday’s $1.0792.

Asia

Asian stocks ended mostly higher on Wednesday, although the upside remained limited amid renewed worries about the economic impact of the coronavirus outbreak.

Chinese shares declined to snap a three-day winning streak as the death toll from the coronavirus outbreak in mainland China crossed 2,000, weighing on business activity in the country.

The benchmark Shanghai Composite Index dropped 9.57 points, or 0.3 percent, to 2,975.40, while Hong Kong's Hang Seng Index ended up 125.61 points, or 0.5 percent, at 27,655.81.

Japanese shares rebounded as the yen retreated after the release of weak core machinery orders data. The Nikkei 225 Index rallied 206.90 points, or 0.9 percent, to 23,400.70, while the broader Topix closed 0.4 percent higher at 1,671.86.

Gainers were led by precision instrument, rubber product and marine transportation companies.

The value of core machine orders in Japan was down 12.5 percent sequentially in December, the Cabinet Office said, coming in at 824.8 billion yen. That missed forecasts for a decline of 8.9 percent following the 18.0 percent surge in November.

On an annual basis, core machine orders sank 3.5 percent - again missing expectations for a drop of 1.3 percent after climbing 5.3 percent in the previous month.

Exports posted a 14th straight month of decline in January, but the 2.6 percent annual drop was markedly better than the 7 percent contraction forecast by economists.

Australian markets swung between gains and losses before finishing modestly higher, led by gold and mining stocks. The benchmark S&P/ASX 200 Index rose 30.90 points, or 0.4 percent, to 7,144.60, while the broader All Ordinaries Index ended up 29.10 points, or 0.4 percent, at 7,237.40.

Retail conglomerate Wesfarmers rallied 2.9 percent as it reported a near 6 percent rise in first-half profit. Fortescue Metals Group rose 0.7 percent after the miner unveiled record half-year revenue and raised its interim dividend.

Gold miners Newcrest Mining and Northern Star Resources climbed over 3 percent each as the precious metal breached the elusive and psychological level of $1,600.

Fast food firm Domino's Pizza Enterprises soared 9.6 percent after it reported a nearly 30 percent increase in first-half profit. Webjet jumped 10.8 percent after the travel agency reported a 24 percent rise in revenue for the first half of 2020.

Meanwhile, lender Commonwealth Bank fell 2.7 percent on going ex-dividend. Westpac Banking Corp declined half a percent after warning that its earnings and growth are under threat amid a rise in costs related to deadly bushfires and a lawsuit brought by financial crime regulator AUSTRAC.

WiseTech Global shares plunged over 27 percent after the logistics software maker downgraded its full-year 2020 earnings guidance.

Seoul stocks ended little changed after the government confirmed 15 new cases of coronavirus, bringing the total number of people infected in the country to 46. The Kospi inched up 1.46 points to 2,210.34.

Europe

European stocks have moved to the upside on Wednesday after the number of new coronavirus cases in China fell for a second day running.

Markets also remain hopeful that China will cut its benchmark loan prime rate Thursday to offset the economic damage caused by the coronavirus outbreak.

In economic news, official data showed that U.K. consumer prices rose an annual 1.8 percent in January, compared with the 1.3 percent increase in December, boosted by higher petrol prices and a smaller than usual drop in airfares.

While the U.K.’s FTSE 100 Index has climbed by 0.8 percent, the French CAC 40 Index and the German DAX Index are up by 0.6 percent and 0.5 percent, respectively.

Shares of Deutsche Telekom AG have jumped after the German telecom giant reported a profit in its fourth quarter compared to last year's loss. The company also projects higher results in fiscal 2020.

Shares of Puma SE have also surged higher. The sportswear firm reported higher earnings and sales in the fourth quarter and projected growth in fiscal 2020.

Hochschild Mining has also shown a significant move to the upside after reporting an increase in its full-year profit.

On the other hand, Moneysupermarket.com Group has fallen after the company announced Mark Lewis plans to step down as Chief Executive.

RPS Group shares have also slumped. Profits at the energy and environmental consultancy firm tumbled 88 percent in 2019.

U.S. Economic Reports

Producer prices in the U.S. increased by much more than anticipated in the month of January, according to a report released by the Labor Department on Wednesday.

The Labor Department said it producer price index for final demand climbed by 0.5 percent in January after rising by 0.2 percent in December. Economists had expected producer prices to inch up by 0.1 percent.

Excluding a pullback in energy prices and a modest increase in food prices, core producer prices still rose by 0.5 percent in January compared to economist estimates for a 0.2 percent uptick.

A separate report released by the Commerce Department showed a pullback in new residential construction in the month of January.

The Commerce Department said housing starts slumped by 3.6 percent to an annual rate of 1.567 million in January after soaring by 17.7 percent to a revised rate of 1.626 million in December.

Economists had expected housing starts to tumble by 11.4 percent to a rate of 1.425 million from the 1.608 million originally reported for the previous month.

Meanwhile, the report said building permits spiked by 9.2 percent to an annual rate of 1.551 million in January after sliding by 3.7 percent to a revised rate of 1.420 million in December.

Building permits, an indicator of future housing demand, had been expected to rise by 2.4 percent to a rate of 1.450 million from the 1.416 million originally reported for the previous month.

At 11:45 am ET, Minneapolis Federal Reserve President Neel Kashkari is scheduled to speak at the "New Tools for New Rules" 12th Annual Ag Symposium in Mankato, Minnesota.

Dallas Federal Reserve President Robert Kaplan is due to speak before the Urban Land Institute of North Texas in Dallas, Texas, at 1:30 pm ET.

At 2 pm ET, the Federal Reserve is scheduled to release the minutes from its most recent monetary policy meeting.

Richmond Federal Reserve President Tom Barkin is due to speak on "New Monetary Policy Frameworks: Why Now?" at Duke University, in Durham, North Carolina, at 4:30 pm ET.

Stocks In Focus

Shares of Garmin (GRMN) are moving sharply higher in pre-market trading after the GPS and fitness device maker reported better than expected fourth quarter results, provided upbeat guidance and raised its dividend.

Satellite TV provider Dish Network (DISH) may also see initial strength after reporting fourth quarter results that beat analyst estimates on both the top and bottom lines.

On the other hand, shares of Groupon (GRPN) are likely to come under pressure after the e-commerce company reported weaker than expected fourth quarter results, proposed a reverse stock split and revealed plans to exit its goods category.
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