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?
The Dow Jones Industrial Average
traded about 140 points, 0.5%, lower, near 29,254, while the S&P 500
lost 7 points or 0.2% to trade near 3,373. The Nasdaq Composite Index
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.
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?
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.
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.”
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.”
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
- Shares of General Electric Co.
ticked down Tuesday after The Wall Street Journal reported that the Trump administration may stop it from selling jet engines to China.
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
fell after profit beat expectations but sales came up shy.
- Advance Auto Parts stock
rallied after profit beat expectations, but same-store sales disappointed.
- Fluor Corp.
said regulators are investigating its accounting and that its filings would be delayed. Shares lost about one-quarter of their value.
- Franklin Resources
the holding company for Franklin Templeton, said it is buying Legg Mason
for $50 a share. Legg Mason shares were more than 24% higher.
- Tesla Inc.
- Macy’s Inc.
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.
fell 5.6% after the packaged-food giant cut its financial guidance, citing softness in consumption.
How are other assets performing?
The price of a barrel of West Texas Intermediate crude for March delivery
traded 0.3% lower at $51.91 a barrel on the New York Mercantile Exchange, after gaining 3% last week.
Gold for April delivery
rose 1.1% to settle at $1,603.60 an ounce, its highest finish since March 2013, as investors flocked to haven assets.
The U.S. dollar
was 0.4% higher against a basket of rival currencies at 99.40.
The benchmark U.S. 10-year Treasury note
shed 3.5 basis points to 1.552%. The 30-year bond broke below 2%, a key psychological threshold. Bond yields fall when prices rise.
In Europe, the Stoxx Europe 600
slipped 0.4%, while the FTSE 100
finished 0.7% lower.
In Asia overnight, the China CSI 300
ended 0.5% lower to close at 4.057.51, the Shanghai Composite
edged up less than 0.1% at 2,984.97, and the Hang Seng Index
closed 1.5% lower at 27,530.20. The Nikkei 225
lost 1.4% to 23,193.80.