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Beyond the Numbers

Jump In New Coronavirus Cases May Weigh On Wall Street
2/21/2020 9:00 AM

The major U.S. index futures are currently pointing to a lower opening on Friday, as traders keep a close eye on the latest developments regarding the coronavirus outbreak.

The downward momentum on Wall Street comes as Chinese officials reported 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.

Stocks have recently shown some volatility in reaction to the daily headlines regarding the number of newly confirmed coronavirus cases.

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.

Selling pressure may be somewhat subdued, however, as traders generally remain optimistic that the outbreak will eventually be contained.

Stocks regained some ground after a late-morning sell-off but still ended Thursday's trading mostly lower. With the drop on the day, the Nasdaq and the S&P 500 pulled back off Wednesday’s record closing highs.

The major averages all finished the day firmly in negative territory. The Dow dropped 128.05 points or 0.4 percent to 29,219.98, the Nasdaq slid 66.21 points or 0.7 percent to 9,750.96 and the S&P 500 fell 12.92 points or 0.4 percent to 3,373.23.

The late-morning pullback was partly attributed to renewed concerns about the coronavirus outbreak, although it was not immediately clear what sparked the sell-off.

Semiconductor and software stocks led the way lower, with the Philadelphia Semiconductor and the Dow Jones U.S. Software Index slumping by 1.5 percent and 1.3 percent, respectively, after ending the previous session at record closing highs.

Significant weakness also emerged among steel stocks, as reflected by the 1.3 percent loss posted by the NYSE Arca Steel Index.

On the other hand, telecom, brokerage and real estate stocks moved to the upside, contributing to the recovery attempt by the broader markets.

Stocks initially moved to the downside as traders continue to keep an eye on developments regarding the coronavirus outbreak, which has contributed to some volatility on Wall Street in recent sessions.

While China reported just 394 new confirmed cases on Wednesday compared to 1,749 cases a day earlier, South Korea reported 31 new cases of the coronavirus.

The jump in confirmed cases in South Korea combined with news of the deaths of two passengers aboard a cruise ship docked in Japan led to renewed concerns about the spread of the disease.

Selling pressure waned shortly after the start of trading, however, as traders also reacted to the People's Bank of China's widely expected move to cut its benchmark one-year loan prime rate by 10 basis points.

The rate cut adds to a slew of fiscal and monetary measures in recent weeks aimed at mitigating the economic damage from the coronavirus outbreak.

In U.S. economic news, a report released by the Labor Department showed a modest increase in first-time claims for U.S. unemployment benefits in the week ended February 15th.

The Labor Department said initial jobless claims crept up to 210,000, an increase of 4,000 from the previous week's revised level of 206,000.

Economists had expected jobless claims to inch up to 210,000 from the 205,000 originally reported for the previous week.

Meanwhile, the Philadelphia Federal Reserve released a report unexpectedly showing another substantial acceleration in the pace of growth in Philadelphia-area manufacturing activity in the month of February.

The Philly Fed said its diffusion index for current general activity skyrocketed to 36.7 in January after spiking to 17.0 in January, with a positive reading indicating growth in regional manufacturing activity.

The continued increase by the Philly Fed Index came as a surprise to economists, who had expected the index to dip to 12.0. With the unexpected jump, the Philly Fed Index reached its highest reading since February of 2017.

Shortly after the start of trading, the Conference Board released a report showing a much bigger than expected increase by its reading on leading economic indicators.

The Conference Board said its leading economic index climbed by 0.8 percent in January after falling by 0.3 percent in December. Economists had expected the index to rise by 0.3 percent.

Commodity, Currency Markets

Crude oil futures are sliding $0.76 to $53.12 a barrel after rising $0.39 to $53.88 a barrel on Thursday. Meanwhile, after climbing $8.70 to $1,620.50 an ounce in the previous session, gold futures are jumping $24.50 to $1,645 an ounce.

On the currency front, the U.S. dollar is trading at 111.88 yen versus the 112.10 yen it fetched at the close of New York trading on Thursday. Against the euro, the dollar is valued at $1.0809 compared to yesterday’s $1.0785.

Asia

Asian stocks ended Friday’s session mostly lower after China reported an uptick in new coronavirus cases, raising concerns the COVID-19 epidemic will eventually expand rapidly beyond its center in China. The new cases are mushrooming beyond China, most notably in Japan and South Korea.

In a note for G20 finance ministers and central bankers, the International Monetary Fund warned that the outbreak was a stark reminder of how unforeseen events could threaten a fragile recovery.

Chinese shares ended off their day's highs after the National Health Commission reported a total of 75,465 confirmed cases and 2,236 deaths on the mainland by the end of Thursday.

The government reported 1,109 new confirmed cases of the disease, up sharply from 349 cases the previous day, reversing three days of decline.

China's Commerce Ministry said January and February exports and imports will be hit by the epidemic that has severely disrupted the world's second-largest economy.

The benchmark Shanghai Composite Index ended the session up 9.51 points, or 0.3 percent, at 3,039.67, while Hong Kong's Hang Seng Index tumbled 300.35 points, or 1.1 percent, to 27,308.81.

Japanese shares ended a choppy session lower as a sudden rise in the number of coronavirus infections outside of China dented sentiment. Twenty-three people were confirmed to be infected with the new coronavirus in Japan on Thursday, bringing the total number of reported infections to 728.

The Nikkei 225 Index ended down 92.41 points, or 0.4 percent, at 23,386.74, as investors adopted a cautious stance ahead of a long weekend. The broader Topix closed marginally lower at 1,674.

Sanrio tumbled 3.3 percent after the character goods company said it would shut its amusement parks. Tokyo Disney Resort operator Oriental Land Corp. declined 2.5 percent.

Meanwhile, Toyota Motor climbed 1.1 percent and Panasonic gained half a percent as the yen headed for its worst week in two-and-a-half years on concerns about the coronavirus' spread.

In economic news, Japanese consumer price index increased 0.7 percent year-on-year in January, slower than the 0.8 percent rise in the preceding month, official data showed. This was in line with economists' expectation. In November, inflation was 0.5 percent.

Australian markets fell from a record high hit in the previous session on fears over the spreading coronavirus in China and other Asian countries.

The benchmark S&P/ASX 200 Index dropped 23.50 points, or 0.3 percent, to 7,139, while the broader All Ordinaries Index ended down 24.80 points, or 0.3 percent, at 7,230.40.

Mining heavyweights BHP and Rio Tinto declined 0.8 percent and half a percent, respectively. In the healthcare sector, biotech firm CSL shed 0.7 percent, while hearing implants maker Cochlear tumbled 4.4 percent.

Energy giant Santos dropped 1.9 percent to extend losses from the previous session after posting a flat annual profit. Origin Energy gave up 1.8 percent. Poultry group Inghams lost 4.4 percent as it reported a 69 percent drop in first-half profit.

On the other hand, gold miner Evolution Mining edged up slightly and Newcrest Mining advanced 1.5 percent after gold prices gained for a sixth straight session overnight.

Seoul stocks tumbled and the won suffered its biggest loss in 4-1/2 years after trade data showed a slump in Chinese demand. The benchmark Kospi gave up 32.66 points, or 1.5 percent, to finish at 2,162.84.

South Korea's exports to China shrank 3.7 percent year-over-year in the first 20 days of February and overall sales per working day tumbled as a virus outbreak disrupted global supply chains, customs data showed.

Meanwhile, the government declared a "special management zone" around a southeastern city as health authorities reported 52 new cases of the fast-spreading disease, raising the national tally to 156.

The mayor of the southeastern city of Daegu urged the city's 2.5 million people to stay home and wear masks even indoors if possible.

Europe

European stocks are turning in a lackluster performance on Friday as a sudden rise in the number of coronavirus infections outside of China dented investors' appetite for riskier assets.

China's Commerce Ministry said January and February exports and imports will be hit by the epidemic that has severely disrupted the world's second-largest economy.

Closer to home, the IHS Markit flash eurozone manufacturing purchasing managers index rose to a 12-month high of 49.1 in February from 47.9 in January, while the services PMI rose to a two-month high of 52.8 from 52.5.

Markit's U.K. manufacturing PMI beat expectations with a score of 51.9, while the services PMI missed expectations with a score of 53.3 points.

While the German DAX Index is just below the unchanged line, the French CAC 40 Index and the U.K.’s FTSE 100 Index are both down by 0.1 percent.

Sika, a Swiss specialty chemicals company, has moved sharply higher higher after reporting a rise in full-year profits and raising its dividend.

German insurance and asset management company Allianz SE has also risen. The company lifted its 2020 operating profit view after fourth-quarter net income attributable to shareholders rose 9.5 percent to 1.86 billion euros from last year's 1.70 billion euros.

Kingspan Group, a provider of high-performance insulation and building envelope solutions, has also rallied after its full-year profit rose to 369.4 million euros from 330.9 million euros last year.

On the other hand, hospital operator Rhoen-Klinikum AG has fallen after the company said its fiscal 2019 net consolidated profit declined, as expected, to 44.5 million euros from 51.2 million euros in the previous year.

Publishing and education firm Pearson has also moved sharply lower on the day as its annual profit more than halved.

U.S. Economic Reports

At 10 am ET, the National Association of Realtors is scheduled to release its report on existing home sales in the month of January. Economists expect existing home sales to slump by 1.8 percent in January after jumping by 3.6 percent in December.

Federal Reserve Governor Lael Brainard and Atlanta Fed President Raphael Bostic are also due to speak at the 2020 US Monetary Policy Forum in New York at 10 am ET.

At 1:30 pm ET, Fed Vice Chairman Richard Clarida and Cleveland Fed President Loretta Mester are also scheduled to speak at the monetary policy forum.

Stocks In Focus

Shares of First Solar (FSLR) are moving sharply lower in pre-market trading after the solar power company reported weaker than expected fourth quarter results and provided disappointing guidance.

Wearable fitness device maker Fitbit (FIT) may also see initial weakness after reporting an unexpected fourth quarter loss on revenues that missed analyst estimates.

On the other hand, shares of Deere (DE) are seeing significant pre-market strength after the heavy equipment maker reported fiscal first quarter results that beat expectations on both the top and bottom lines.

Online file storage company Dropbox (DBX) may also move to the upside after reporting better than expected fourth quarter results, raising its profit margin outlook and announcing a $600 million share buyback program.
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