U.S. stocks down but off session lows in wake of coronavirus impact on Apple sales

U.S. stocks were mostly down, but off session lows, late Tuesday after Apple Inc. said that the viral outbreak in China would hurt its second-quarter results, reigniting fears that the disease may disrupt manufacturing supply chains and have broad implications for the global economy and financial markets.

How are the benchmarks performing?

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The Dow Jones Industrial Average

DJIA, -0.53%

traded about 140 points, 0.5%, lower, near 29,254, while the S&P 500

SPX, -0.25%

lost 7 points or 0.2% to trade near 3,373. The Nasdaq Composite Index

COMP, +0.08%

was trading on either side of unchanged near 9,738, after flipping positive in afternoon trade. Most of the Dow’s decline was attributed to downward pressure in shares of Apple and Dow Inc.

DOW, -1.85%,

according to Automated Insights. U.S. financial markets were closed Monday for the Presidents Day holiday.

The Dow on Friday booked a weekly gain of 1%, the S&P 500 finished the period with a gain 1.5%, while the Nasdaq Composite Index returned 2.2% for the week.

What’s driving the market?

Apple

AAPL, -1.75%

said Monday it won’t meet its second-quarter financial guidance because the coronavirus outbreak that originated in Hubei province in China last year is affecting its suppliers’ production. “The health and well-being of every person who helps make these products possible is our paramount priority, and we are working in close consultation with our suppliers and public health experts as this ramp continues,” the iPhone maker said in a statement.

Apple said revenue in the current quarter won’t reach its target range of between $63 billion and $67 billion due to the impact of the infectious disease.

Read: Apple’s coronavirus warning wasn’t a total surprise, but magnitude rattles Wall Street

The COVID-19 epidemic has sickened more than 73,000 people and claimed nearly 1,900 lives thus far.

U.S. markets, which have been primarily focused on corporate earnings and otherwise healthy economic data, have effectively shaken off worries fueled by the disease, but some strategists warn investors may be too dismissive.

“We haven’t really heard of any peak levels, that’s what’s beginning to sink into investors’ minds,” Peter Cardillo, chief market strategist at Spartan Capital Securities in New York, said referring to the rising number of people infected with the coronavirus.

“Also, we have gold prices soaring today,” he told MarketWatch, adding that precious metal could ascend even higher than $1,600 an ounce. “There are a lot of uncertainties and those uncertainties are weighing on the market.”

Read: Why gold prices topped $1,600 and may soon hit a more than 7-year high

Still, as market technician Mark Newton put it, “for now, Equities haven’t deviated from their uptrend outside of just a minor two-week setback in mid-January.” In the year to date, the Dow is up 2.5%, the S&P 500 has gained 4.3%, and the Nasdaq is 8.5% higher.

“None of the concerns given the coronavirus outbreak, or earnings shortfalls really have seemed to matter all that much to shake the uptrend in stocks,” Newton noted. “Additionally, markets are heading full steam ahead into what appears to be a very divisive political season, and neither economic slowdown concerns nor trade uncertainty or tariffs really have affected U.S. stock performance one bit.”

See: What Apple, Walmart and other U.S. companies are saying about the coronavirus

What’s more, the expected hit to U.S. manufacturing from the coronvirus has not been felt yet: a reading on manufacturing conditions in the New York area surged to a nine-month high in February, the Federal Reserve Bank of New York said Tuesday. The forward-looking new orders component of the index hit its highest in a year.

A closely watched reading about home builder confidence was also strong in February. The National Association of Home Builders’ monthly index hit 74, down one tick from January, but still marking the strongest start to a year on record. The sentiment tracker is considered an early read on the pace of new residential construction.

But the outlook for the embattled energy sector looks tougher. Dallas Federal Reserve President Robert Kaplan said Tuesday he expects this year to see “belt-tightening” and restructurings for companies in the U.S. oil and gas sector as domestic production growth is expected to decline.

Which stocks are in focus?

Bed Bath & Beyond Inc. stock
BBBY, +4.54%

rose 5.6% Tuesday after the home goods retailer announced that it would sell PersonalizationMall.com to 1-800-Flowers.com.

Shares of General Electric Co.
GE, -0.39%

ticked down Tuesday after The Wall Street Journal reported that the Trump administration may stop it from selling jet engines to China.
Walmart
WMT, +1.55%

reported a rise in fourth-quarter net income as the retailing giant issued guidance that didn’t meet analyst estimates. The stock rose 1.6%.
Medtronic’s stock
MDT, -3.62%

fell after profit beat expectations but sales came up shy.
Advance Auto Parts stock
AAP, +6.95%

rallied after profit beat expectations, but same-store sales disappointed.
Fluor Corp.
FLR, -24.54%

said regulators are investigating its accounting and that its filings would be delayed. Shares lost about one-quarter of their value.
Franklin Resources
BEN, +7.61%,

the holding company for Franklin Templeton, said it is buying Legg Mason

LM, +24.23%

for $50 a share. Legg Mason shares were more than 24% higher.
Tesla Inc.
TSLA, +6.81%

shares roared 6.3% higher as Bernstein analysts more than doubled their price target, to $730. The stock was trading more than $100 higher than that.
Macy’s Inc.
M, -3.33%

shares declined 3.2% after S&P Global Ratings cut the department store chain’s credit to “junk” status, following the release of the retailer’s three-year strategic plan.
Shares of Conagra Brands, Inc.
CAG, -5.46%

fell 5.6% after the packaged-food giant cut its financial guidance, citing softness in consumption.