The S&P 500 Enters Correction, Coronavirus Fear Grows, Consumer Data Still Solid

The U.S. Market Is Down In Early Trading

The U.S. index futures are down hard again in Friday trading. This is the 7th day of decline and puts the major indices deep in correction territory. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite are all down more than 10% in that time.  The Dow Jones Industrial Average fell nearly 1200 points in Thursday action, its biggest one-day drop on record. This has been the worst week for equities since 2008 and the pain is not yet over.

The sell-off was sparked by the coronavirus and the market’s realization it will have a profound impact on global GDP this year. Yesterday’s warning from Goldman Sachs, that EPS growth would fall to 0% or lower, is the prime example. In virus news, the spread of the virus is not contained. New Zealand and Nigeria have reported their first cases while China and South Korean totals continue to rise. South Korea is now the center of the spread with 500 new cases. China’s epidemic appears to be slowing with only 327 new cases.

The virus is expected to gain a foothold in the U.S. and may already have done so. California reported its first case of community-based transmission and now has roughly 8,500 hundred people under observation.

 Stocks On The Move

Caterpillar is the worst-performing stock in the Dow. The bellwether of global economic activity was down as much as 3.0% in early pre-market trading but cut the losses to only -2.0% by the open of the session. Shares of Apple were also down about 3.0% in early trading while Chevron and Cisco both posted losses near 2.0%. Hard-hit S&P 500 stocks include Norweigan Cruise Lines and American Airlines are moving lower in today’s session and down more than 20% since the broad-market sell-off began.

Paypal is the latest to issue a warning about the virus. The global payments company says revenue will be impacted by the virus because the cross-border activity is slowing. Paypal says revenue will come in at the lower end of the previously stated range and below consensus.

Consumer Data Remains Strong

The day’s economic calendar is topped by the Personal Income and Spending data. The report shows income rose by a larger than expected 0.6% while spending increased only 0.2%. Analysts had been expecting income to rise by about 0.3% and spending the same. Looking in the rearview mirror, the previous month’s income was revised down by 0.1% while spending was revised higher. On the inflation front, PCE prices rose 0.1% last month and are up 1.7% YOY. At the core level, consumer inflation is up 1.6% from last year.

Major Asia-Pacific Markets Tumble into Correction Territory; Investors Brace for Chinese PMI Reports

Asia-Pacific shares tumbled on Friday with China’s Shenzhen stocks diving nearly 5%, as investors feared the coronavirus might develop into a pandemic and trigger global recession. Investors continued to brace for an impact on economic growth with global shares heading for the worst week since the financial crisis in 2008.

On Friday, Japan’s Nikkei 225 Index settled at 21142.96, down 805.27 or -3.67%. Hong Kong’s Hang Seng Index closed at 26129.93, down 648.69 or -2.42% and South Korea’s KOSPI Index finished at 1987.01, down 67.88 or -3.30.

In China, the Shanghai Index settled at 2880.30, down 111.03 or -3.71% and in Australia, the S&P/ASX 200 Index closed at 6441.20, down 216.70 or -3.25%.

Coronavirus Update

New infections rapidly spread around the world with countries stockpiling medical supplies and preparing emergency responses, shattering hopes that the epidemic would be contained to China and economic activity would return to normal, Reuters said.

China to Release Key Economic Data This Weekend

While the markets are closed over the weekend, China will release reports on February Manufacturing and Non-Manufacturing PMI. The data is expected to show activity in in China’s manufacturing sector in February probably shrank at the fastest pace since the global financial crisis, a Reuters poll showed, as the epidemic took an excruciating economic toll on Chinese factories. Analysts estimate Manufacturing PMI at 45.1, down from 50.0 and Non-Manufacturing PMI at 51.4, down from 54.1.

Steep Losses in China after Stimulus Effect Wears Off

The global stock market rout knocked mainland Chinese shares lower, which have been relatively well supported this month, as new coronavirus cases in the country fell and Beijing doled out measures to shore up economic growth.

The CSI300 Index of Shanghai and Shenzhen shares dropped 2.9%, on track for its first weekly loss in three.

“Economic troubles outside China, especially in the U.S., could hurt the Chinese economy. Foreign investors, who were buying Chinese shares after the Lunar New Year holidays, have become a net seller since late last week,” said Wang Shenshen, senior equity strategist at Mizuho Securities. “Their selling might have intensified today.”

Virus Fears Scuttle Market, EPS Growth In Question, Data Still Holding Up

Equities Fall In Fourth Day Of Viral Rout

The U.S. futures market is indicating another deep decline on Thursday. The move, sparked by a growing fear of the coronavirus, shaved another -1.0% and more off of the major indices. Today’s news includes word of the first community-spread case of coronavirus in the U.S. Health officials in California report the first case in which there is no known trail of contagion. The news raises the stakes in terms of economic impact, if the U.S. shuts down like China and other countries global GDP could contract sharply in 2020.

Elsewhere in the world, China continues to report new cases despite signs its containment efforts are starting to pay off. In South Korea, the second hardest nation, the number of new cases spiked to set a new daily record. The disease is not yet contained in that country. Officials in Japan are taking precautionary efforts and have closed all schools, the number of cases is growing in the EU as well.

Stocks On The Move

Tech is among the days hardest hit. The sector has above-average exposure to China and international markets making it particularly vulnerable to the disease. Apple and Intel are among the days leaders but are not the biggest losers by far. Apple and Intell are both down about -1.5% while chipmakers NVDA and AMD have shed -2.5% and -3.9% respectively.

Microsoft and Goldman Sachs are the latest to issue warnings about the viral impact. Microsoft says it will not meet its Q1 revenue targets because the supply chain is re-ramping slower than expected. Goldman Sachs analysts issued a warning that EPS growth for the entire S&P 500 could come in well below expectations for the year, as low as 0.0% but I think their estimate is generous.

Best Buy issued a Q4 earnings report this morning. The company reports better than expected revenue and earnings that were driven by an increase in comp-store sales. Shares were up sharply following the news but have since given up their gains. Virgin Galactic got a major catalyst from analysts this morning. A double-dose of downgrades from Morgan Stanley and Credit Suisse have shares down more than -13.0%.

The Data Is Good, No Indication Of Weakness

The number of new claims for unemployment insurance climbed 8,000 over the last week but remains low and trending near historic lows. The continuing claims and total claims figures, both indicators of conditions within the broad labor market, were relatively flat over the past week. New orders for durable goods fell -0.20% over the past month. The figure is better than expected and accompanied by a double-digit increase in core capital goods orders. On the GDP front, the final read for 4th quarter GDP is 2.1% and unchanged from the previous estimate.

Asian Shares Mostly Lower; Bank of Korea Leaves Policy Rate Unchanged While Aussie Yields Hit Record Lows

The major Asia Pacific stock indexes traded mostly lower on Thursday as cautious investors digested the latest news over the fast-spreading new coronavirus while assessing the potential global economic impact of the virus that has so far infected more than 81,000 people and killed over 2,700.

Although most of the people infected and killed by the disease to-date are from China, the number of cases outside of the country has surged in recent weeks with countries like South Korea, Italy and Iran at the forefront.

Meanwhile, the U.S. Centers for Disease Control and Prevention on Wednesday confirmed the first potential “community spread” of the coronavirus stateside. Additionally, late Wednesday, President Donald Trump announced that Vice President Mike Pence will be in charge of the U.S. response to the deadly outbreak. Trump also said the risk of the disease to the country remained “very low.”

On Thursday, Japan’s Nikkei 225 Index settled at 21948.23, down 477.96 or -2.13%. South Korea’s KOSPI Index finished at 2054.89, down 21.88 or -1.05% and Hong Kong’s Hang Seng Index closed at 26687.89, down 8.6 or -0.03%.

China’s Shanghai Index settled at 2991.33, up 3.4 or +0.11% and Australia’s S&P/ASX 200 Index closed at 6657.90, down 50.2 or -0.75%.

Early in the session, U.S. futures markets are pointing toward a lower opening on Thursday after the benchmark S&P 500 Index wiped out $1.7 trillion in just two sessions.

Bank of Korea Keeps Policy Rate Unchanged

In an unexpected move, the Bank of Korea kept its benchmark policy rate unchanged. Central bank policymakers surprised the financial markets by holding the benchmark interest rate at 1.25% when analysts polled by Reuters were expecting a rate cut. That was despite a recent spike in the number of coronavirus cases in the country threatening its economy.

Aberdeen Standard Investments’ Leong Lin Jing described the Bank of Korea’s interest rate decision as “a little bit curious.”

“Bank of Korea has had a habit of being a little bit behind the curve … when acknowledging that growth is slowing down,” Leong said.

Australian Shares Fall for Fifth Straight Session

Increased reports of coronavirus cases around the world saw Australian shares tumble of a fifth consecutive session on Thursday, wiping out all the gains achieved earlier in the year, the Brisbane Times reported.

All sectors aside from healthcare and utilities finished in the red, led by steep declines in technology and energy shares. As was the case earlier this week, the weakness was driven by uncertainty on the human and economic toll the coronavirus may bring.

In other news, Australia’s 10-year bond yield fell to a new record low of 0.845 percent after Australia’s Prime Minister Scott Morrison said risk of global pandemic is very much upon us, while urging the need to take action.

Additionally, Australia private capital expenditure dropped -2.8% in Q4, much worse than expectation of 0.5% increase. In seasonally adjusted terms, building and structures dropped -5.9%. Mining dropped -2.7%. Equipment, plant and machinery rose 0.8%. Manufacturing dropped -10.1% and other selected industries fell -1.9%.

Equities Attempt Rebound, Coronavirus Spreading, 2020 Growth In Question

The U.S. Futures Edge Higher

The U.S. futures are edging higher in early Wednesday trading following two days of massive declines. The broad market made its biggest drop in over four years over the course of Monday and Tuesday. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite are all looking at opening gains in the range of 0.10% to 0.15%. Although early action looks bullish, traders are warned not to read too much into the move. The Coronavirus is still spreading and its impact on global economic activity only now being felt.

China reports an additional 406 cases in the overnight session with 52 more dead. South Korea says it has 169 new cases and a rising death toll as does Italy. France now reports its first case proving the virus can spread despite the best efforts of health officials. In the U.S. officials report over 50 cases, they are prepping the public for an epidemic the only questions are when it will start and how long it will last. Regardless, the economic impact of this event will be wide-ranging and long-lasting.

Stocks On The Move

The tech sector is trying to move higher in early trading despite its entering correction territory. Now down 10% from recent highs the sector is on the verge of a full-blown bear market. Shares of Apple are among the leaders, down -12% in the last two days, but up about 0.4% in early action.

Shares of Office Depot are among today’s hottest issues. The company reported better than expected results and positive guidance that lifted shares 5.0%. Shares of TJX, parent of the TJMaxx chains of apparel stores, are up more than 6.15% after it reported better than expected earnings. The company says comps rose 6.0% sparking a similar rise in share prices.

Fast-food retailers Papa John’s and Wendy’s are both moving lower. Both companies reported better than expected results due to strength in the U.S. consumer. the downside is outlook failed to impress and that has investors second-guessing their positions.

Volatility Is On The Rise

The VIX, a so-called “fear gauge”, spiked over the last two days. The index, a measure of options prices relative to the S&P 500, has reached levels above 25 and is fast approaching a two-year high. The index shows a high degree of demand for options, protection against a market downturn, and that spells lower prices for the S&P 500.

On the economic front, New Home Sales are due out later in the session. Sales are expected to rise from the previous month and may top estimates. Warmer than expected weather has had a positive impact on other housing data.

 

Asian Shares Plunge as Investors Seek Safe-Haven Protection Amid Coronavirus Fears

The major Asia Pacific stock indexes plunged on Wednesday in reaction to a U.S. warning to Americans to prepare for the possibility of a coronavirus pandemic. The same warning jolted Wall Street on Tuesday, pushing safe-haven U.S. Treasurys to record lows. The benchmark S&P 500 Index and blue chip Dow Jones Industrial Average both shed more than 3% yesterday in their fourth straight session of losses.

On Wednesday, Japan’s Nikkei 225 Index settled at 22426.19, down 179.22 or -0.79%. Hong Kong’s Hang Seng Index closed at 26683.71, down 209.10 or -0.78% and South Korea’s KOSPI Index finished at 2076.77, down 26.84 or -1.28%.

China’s Shanghai Index settled at 2076.77, down 26.84 or -1.28% and Australia’s S&P/ASX 200 closed at 6708.10, down 158.50 or -2.31%.

Corona Virus Update:  U.S. Health Official Warns of Global Pandemic

Investors continued to monitor the internet for updates on the coronavirus outbreak that is spreading outside of China, with a top U.S. health official warning Tuesday it will likely become a global pandemic. The health official also added that it’s just a matter of time before the outbreak starts to spread to the U.S.

“Current global circumstances suggest it’s likely this virus will cause a pandemic,” Anne Schuchat, principal deputy director of the Centers for Disease Control and Prevention, told reporters at a news briefing.

“It’s not so much a question of it this will happen any more, but rather more a question of when this will happen and how many people in this country will become infected and how many of those will develop severe or more complicated disease,” she added.

Centers for Disease Control and Prevention (CDC) official Dr. Nancy Messonnier also told reporters on a conference call that the American public should prepare in the expectation that the coronavirus situation in the U.S. “could be bad.”

Hong Kong Plans on Spending $15 Billion to Support Economy amid Coronavirus Crisis

The Hong Kong government has announced 120 billion Hong Kong dollars ($15.4 billion) worth of measures to support its economy, which has been dragged down by pro-democracy protests and the new coronavirus outbreak.

The Hong Kong economy entered its first recession in a decade when it posted a 2.8% year-on-year decline in third-quarter gross domestic product. In the fourth quarter, the city’s GDP fell by 2.9%. For the whole of 2019, Hong Kong’s economy contracted by 1.2% – the first annual GDP decline since 2009, said Hong Kong’s Financial Secretary Paul Chan in his budget speech on Wednesday.

Australian Shares Plunge on Coronavirus Fears, Declining Construction Work

In Australia, the benchmark S&P/ASX 200 Index fell after coronavirus fears drove down bond yields, taking the Big Four banks with them. Australia and New Zealand Banking Group dropped 1.96%, Commonwealth Bank of Australia shed 1.67%, Westpac declined 1.67% and National Australia Bank slipped 2.09%.

Stocks also weakened after the Australian Bureau of Statistics said the value of construction work done in the December quarter of 2019 declined. The seasonally adjusted estimate of the value of work done in total construction dropped 3% in the December quarter as compared to the previous period.

S&P 500 Rebounds, A Correction Is Coming

Equities Up In Early Trading

The U.S. futures are trading higher in the pre-market session although earlier gains have been muted. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite are all indicated up about 0.15%. The rebound comes a day after the broad market shed more than -3.0% in one of the deepest sell-offs of the last three years. Although the market tends to close higher following sell-offs of this type, traders are warned this correction is not over. Monday’s decline is only the first wave of selling now that the market accepts the coronavirus will hurt global economic activity this year.

The virus is now spreading in areas outside of China. South Korea reports more than 800 infected while Italy and Iran report 7 and 12 deaths each. The very real risk is that global GDP growth will fall below 0% for the first quarter and throw off estimates for the entire year. There have already been a number of downgrades from key S&P 500 companies, expect this trend to accelerate the longer the virus threat persists. South Carolina’s port system is reporting a sharp drop in deliveries that will hurt the state’s revenue this year. Add in the impact to the business supply chain and the threat of economic spillover becomes very real.

Stocks Making Headlines

United Airlines and MasterCard are the latest to issue warnings due to the virus. Both companies say the economic impact will be a drag on full-year revenue. Although business fundamentals are sound, a slowdown in cross-border travel, consumer and business spending is in process. United Airlines is down about -0.40% while MasterCard fell a more robust -2.0%. Chipmaker Micron is also moving lower, down about -1.0%, after it received a downgrade to underperform.

Home Depot is moving higher in early trading. The home improvement company beat on the top and bottom lines. The company CEO says investments in the company’s future are paying off. Shares are up 3.0%. Shares of Moderna are also on the move, up more than 15%, after the company shipped a coronavirus vaccine for Phase 1 trial. Moderna uses RNA technology to force human bodies to create their own medicines.

Economic Data Is Sparse

Today’s economic calendar is sparse. The only major release for U.S. markets is the Consumer Confidence figures due out later today. With the coronavirus weighing on global outlook this data will be more important than ever. The consumer has long been a driver of the U.S. economy, if cracks begin to appear the market correction could gain momentum.

Asian Markets Stabilize but Move Seen as Temporary Rather Than Structural

The major stock indexes in the Asia Pacific region finished mixed on Tuesday with Japan plunging over 3%, followed closely by Australia’s nearly 2% decline. South Korea surprisingly edged higher. The main driver of the price action remained fears of the economic impact from the coronavirus. Although the markets did stabilize following Monday’s plunge on Wall Street, most analysts see the moves as more temporary than structural.

On Tuesday, Japan’s Nikkei 225 Index settled at 22605.41, down 781.33 or -3.34%. Hong Kong’s Hang Seng Index closed at 26893.23, up 72.35 or +0.27% and South Korea’s KOSPI Index finished at 2103.61, up 24.57 or +1.18%.

In China, the Shanghai Index settled at 3013.05, down 18.18 or -0.60% and in Australia, the S&P/ASX 200 Index closed at 6866.60, down 111.70 or -1.60.

Coronavirus Update

Despite the virus outbreak seemingly stabilizing in China, the new concern for most investors is the spreading of the virus outside the borders of the world’s second largest economy. Just two weeks ago investors were bracing for dismal economic data out of China. Now they are pricing in expected weak performances in South Korea, Japan and Australia with others to follow.

China Economic Update:  ‘Difficult to See Material Growth in Foreseeable Future’

At times, the headlines suggested China’s economy was due to stabilize because of government stimulus, interest rate cuts and the re-opening of factories. This raised hopes that the economic damage would be contained to the first quarter. However, this may not be the case as some factories in China continue to remain shut due to containment measures.

Becky Liu, head of China macro strategy at Standard Chartered Bank, told CNBC’s “Street Signs” on Tuesday that China’s first quarter GDP is expected to deteriorate “very materially” to only 2.8% while the full-year projection was at 5.5%.

“This will be lower than the minimum GDP growth which is required to achieve so-called doubling GDP by 2020 target at 5.7%,” Liu said.

“From what we have seen so far this year, nothing is growing aside (from) something very small…such as online gaming,” she said. “Even if the virus condition start(s) to get contained and we have real activities picking up in March, it’s very difficult to see China having any material growth in the foreseeable future.”

South Korea Economic Update:  Global Technology Sector Vulnerable

With the outbreak spreading to South Korea, technology companies are now facing new challenges due to the country’s importance in the global technology and semiconductor supply chains.

Alex Holmes, Asia economist at Capital Economics said on Tuesday, “If they (Korea) had to shut down factories across the country, then particularly the technology sector across the rest of the region who rely on Korea for things like…liquid crystal displays and semiconducting chips, they would really struggle.”

Equities Plunge, Coronavirus Spreads, A Major Correction Has Begun

The U.S. Futures Are Down Sharply In Early Trading

The U.S. futures market is down sharply in early trading. Market participants have begun to understand the scale of disruption the spreading coronavirus will have on economic activity. The Dow Jones Industrial Average, S&P 500 and NASDAQ Composite are all down -2.5% to -2.75% in early trading.

The cause, news the coronavirus is not only spreading but gaining traction in areas outside of China. South Korea says the number of cases there has jumped to over 750. South Korea’s response was to raise its safety warning to the highest level. Elsewhere, the number of infected is growing in Italy and Iran. China says the number of deaths has topped 2,500 within its own borders. The last estimates for Q1 growth were near 0.0% due to viral impact but the risk is much greater. First-quarter growth is likely to come in below zero and the rebound expected later in the year is highly questionable.

Stocks On The Move

Oil and gold are among today’s biggest movers. Oil prices fell nearly -4.0% because spreading economic impact means declining demand or oil. Today’s move confirms resistance at a key technical level and may point the way to deeper declines later this quarter. Gold prices shot up nearly 2.0% and are headed up to retest the all-time high. Traders around the world are flocking into safe havens and are likely to drive the precious metal to new highs very soon.

Airlines, gaming, and travel stocks are leading equities lower. Shares of Las Vegas Sands, Wynn Resorts, and MGM are down -3 to -7.0%. Delta and American Airlines are both down about -5.25%. Chipmakers are not immune, Nvidia and Intel are both down as well, Nvidia leads with a loss of -6.0%. Apple and its supply chain are also being hit hard with losses in the range of -4.0% to -6.0%.

The U.S. Economy Is Still Strong

Words of encouragement from Warren Buffet did not assuage the market’s anxiety. He says the U.S. economy is still on fine footing and the data supports that view. Today’s economic calendar includes the Chicago National Activity Index which rose in January. The index came in at -0.25 from last month’s -0.51 showing an increase in overall activity and activity in line with long-running trends. Three of the four sub-indices improved but only one turned positive, the new orders. Traders should focus on new orders because it is a leading indicator of future activity.

Asian Markets: South Korea Plunges More than 3%; Airlines, Smartphone Industry at Risk

The major Asia Pacific stock indexes are trading lower on Monday, led by losses in South Korea after government officials raised its coronavirus alert to the “highest level” following a rapid spike in cases over the weekend.

On Monday morning, the Korea Centers for Disease and Control and Prevention reported that seven people have died from COVID-19. The number of cases has risen to 161 new cases, bringing the total to 763 nationwide – the country with the most cases outside the mainland.

In response to the rising death toll and the number of coronavirus cases, South Korea has raised its virus outbreak alert to the “highest level” as confirmed case numbers keep rising.

“The COVID-19 incident faces a grave turning point,” President Moon said following a meeting with ministers and experts.

“The next few days will be crucial. The government will raise the alert level to the highest level of ‘grave’ according to experts’ recommendations and drastically strengthen our response system.”

On Monday at 06:52 GMT, Japan’s Nikkei Index is trading 23386.74, down 92.41 or -0.39%. Hong Kong’s Hang Seng Index is at 26873.86, down 434.95 or -1.59% and South Korea’s KOSPI Index is at 3032.88, down 6.79 or -0.22%.

China’s Shanghai Index is trading 3032.79, down 6.88 or -0.23% and Australia’s S&P/ASX 200 Index closed at 6978.30, down 160.70 or -2.25%.

Asia Pacific Airlines Take another Hit as Travel is Further Restricted

Airline stocks in the Asia Pacific region are down sharply amid contagion fears. In Australia, Qantas Airways plummeted 7.22% while Hong Kong-listed shares of China Eastern Airlines and China Southern Airlines both fell more than 4% each.

According to Reuters, South Korea’s Korean Air Lines and Asiana Airlines said on Monday they are suspending flights to Daegu, the country’s fourth-largest city with the largest number of coronavirus cases, for the time being.

Korean Air has decided to halt all flights to Daegu until March 28, while Asiana will halt all flights to the city until March 9, their representatives said.

South Korea’s Korean Air Lines and Asiana Airlines dropped 5.52% and 5.54% respectively.

Cell Phone Industry at Risk

Samsung Electronics said on Saturday that one coronavirus case had been confirmed at its mobile device factory complex in the southeastern city of Gumi, causing a shutdown of its entire facility there until Monday morning.

Samsung Electronics, the world’s top smartphone maker, said the floor where the infected employee worked would be shut down until the morning of February 25.

Samsung’s factory in Gumi accounts for a small portion of its total smartphone production, and it makes high-end phones, mostly for the domestic market. Samsung produces most of its smart phones in Vietnam and India.

The outbreak of the coronavirus has dented the smartphone industry, with Apple warning that it expected a hit to revenues thanks to factory shutdowns, delays and store closures.

Analysts are saying that Chinese smartphone giant Huawei has been coy on coronavirus impact, with one executive stating there would be no impact on its global supply chain over the next three to six months.

However, they are deeply skeptical and say Huawei will be worse affected than Apple, since it is hugely reliant on Chinese consumers for smartphone business.

Equities In Retreat, GDP Growth In Danger, Fed Downplays Rate-Cut Outlook

The U.S. Futures Are Moving Lower

The U.S. futures are indicating a mildly lower open on Friday. The move comes a day after U.S. equity markets experienced an unexpected and deep intraday pullback. The pullback, most likely caused by a growing fear of the coronavirus, countered a new all-time high in the broad market and threatens to spark a deeper correction. The number of deaths in China has risen in the last 24 hours and signs are emerging the virus is still spreading. China now reports outbreaks within its prison system while South Korea says its confirmed cases are spiking.

Traders are becoming more and more concerned about 1Q GDP and EPS growth. The consensus is the virus will hold GDP growth at 0.0% for the 1st quarter and that will assuredly have an impact on Q1 EPS growth. Looking at the Chinese data, sales of autos fell more than 92% in the first two weeks of February signaling the impact on economic activity could be quite severe. The good news is that, once the epidemic has passed, GDP and EPS growth are expected to rebound.

Wall Street Is Still Bullish On Domestic Equities

In corporate news, earnings and upgrades are the news of the day. On the earnings front, Deere & Co, First Solar, and Dropbox are the big movers of the day. Deere & Co reported better than expected top and bottom-line results that pleased investors. The news was accompanied by a favorable outlook for the U.S. farming market that has shares up 10.5% in premarket action. Shares of Dropbox are also moving higher, up 12.5%, after it reported better than expected results. The file-sharing company also raised guidance and initiated a share buyback program.

Shares of Chewy got a boost this morning when analysts at RBC upped their rating on the stock. According to them, Chewy has highly favorable risk-reward profile based on revenue and margin expansions. At the other end of the spectrum, shares of First Solar are moving lower following its weaker than expected report and unfavorable guidance. In other news, shares of Coca Cola are holding flat after the company warned Q1 EPS could be hurt as much as $0.02 per share due to the coronavirus outbreak.

Flash PMI And Existing Home Sales Due Out Late In The Morning

Flash PMI readings and Existing Home Sales data are due out later in the morning. The PMI, both manufacturing and services, are expected to hold steady if not advance from the last month. Readings on activity in NY and Philadelphia were both much hotter than expected earlier this week. On the housing front, existing home sales are expected to fall slightly from the previous month but remain above 5 million annualized units.

Some Asian Countries on Brink of Recession as Virus Spreads Outside China

The major Asia Pacific stock indexes were mostly lower on Friday as lingering concerns over the economic impact of the ongoing coronavirus epidemic continued to drive global investors out of Asian stocks. While the impact of the virus on China’s economy continues to be the main concern, investors are now reacting to the rapid spread of the coronavirus outside mainland China and its impact on Asia’s economies.

On Friday, Japan’s Nikkei 225 Index settled at 23386.74, down 92.41 or -0.39%. Hong Kong’s Hang Seng Index finished at 27308.81, down 300.35 or -1.09% and South Korea’s KOSPI Index closed at 2162.84, down 32.66 or -1.49%.

China Shanghai Index settled at 3039.67 up 9.52 or +0.31% and Australia’s S&P/ASX 200 Index finished at 7139.00, down 23.50 or -0.33%.

Coronavirus Update

CNBC reported that investors continued to watch for developments on the ongoing coronavirus – also known as COVID-19 – outbreak, with the World Health Organization’s (WHO) Director-General Tedros Adhanom Ghebreyesus telling reporters on Thursday that the low number of cases outside of China “may not stay the same for long.”

WHO said Thursday that the new coronavirus has not yet spread widely around the world, but emphasized that the virus could break out globally at any time. Outside of China, Tedros said there are 1,076 confirmed cases in 26 countries, including seven deaths. The remarks come after health officials confirmed that the virus has spread to Iran and cases surged in South Korea overnight.

“The number of cases in the rest of the world is very small compared to what we have in China, but that may not stay the same for long,” Tedros said. “The window of opportunity we have now may close, so we need to use the window of opportunity we have now by hammering the outbreak in any country,” Tedros added.

“I think the number of cases are really manageable and I hope South Korea will do everything to contain this outbreak at this early stage,” Tedros said about the situation.

Some Asia Countries on Brink of Recession

Japan and Singapore are on the brink of recession and South Korea on Friday said its exports to China slumped in the first 20 days of February as the outbreak upends global supply chains.

Factories in China, Southeast Asia’s largest trading partner, have struggled to return to work as authorities ramp up containment efforts, with officials saying that January and February exports and imports will be hit by the outbreak that has claimed more than 2,200 lives.

“Data suggests that a pickup in activity is still elusive, which could have negative implications on global growth,” DBS Group Research said in a note.

Equities Fall, Risk of Correction Grow, Oil Prices In Reversal

The U.S. Futures Are Down In Early Trading

The U.S. index futures are pointing to a lower open in the Thursday session. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite are all down about -0.15%. Traders are cautious after the S&P 500 hit a new all-time due to the increased risk of a virus-related market correction. China reports the number of confirmed cases has topped 74,500 with 2118 dead on the mainland. South Korea reports that its cases are spiking despite containment efforts across the region.

A number of companies have issued revenue warnings because of the virus impact on global trade. Today’s news includes statements from air-carrier Air France and global shipping giant Maersk. Air France describes the impact as “brutal” while Maersk told its investors volumes and traffic will be significantly lower than expected.

Investment banker Goldman Sachs says the market is underestimating the fallout from the epidemic and I think they are right. At current levels, the S&P is trading nearly 19X forward earnings with consensus estimates in decline. At the current pace of decline, the 1st quarter earnings cycle will most likely result in negative EPS growth for the broad market.

Domino’s Surges On Results, Dividend And Guidance

In earnings news, shares of Domino’s Pizza are up nearly 20% after the delivery company reported earnings. EPS and revenue were well above the consensus estimates, the company issued a favorable outlook for the coming year and raised the dividend. Shares of Stamps.com are also on the move, gaining more than 35% after reporting solid revenue and earnings this morning.

At the other end of the spectrum, ViacomCBS and Aaron’s are both moving lower. ViacomCBS reported merger expenses were dragging on results and that sent shares down by -8.0%. Aaron’s, a rent-to-own furniture and electronics chain, reported mixed results and saw its shares move lower as well.

Economic Data Comes In Strong

The day’s economic data came in strong and suggests the market is wrong about FOMC policy. Initial claims came in at 210,000 and as expected. Initial claims are trending at historical lows and are consistent with healthy labor markets. Continuing claims and total claims also fell in this week’s data.

On the manufacturing front, the Philadelphia Federal Reserve’s MBOS came in much hotter than expected. The headline figure rose 20 points to 36.7 and a three-year high. Data within the report shows new orders, deliveries, backlogs, and employment all rose. The Empire State Manufacturing Survey is equally strong indicating a vigorous rebound in U.S. manufacturing this year.

 

Equities Rebound, Adidas Warns China Business Suffers, Housing Data Is Hot

The U.S. Futures Are Higher In Early Trading

The U.S. futures are moving higher in early Wednesday trading. The NASDAQ Composite advanced 0.50% to lead the market while the Dow Jones and S&P 500 both advanced 0.30%. The moves are driven by a round of better than expected earnings and dubious sign the spread of coronavirus in China is slowing. On the health front, Chinese officials report over 100 new deaths bringing the total to over 2,000. The number of new cases slowed from the previous day but still topped 1,000 infected.

The risk for markets remain despite the slow reopening of China’s industrial centers. In today’s news, shoe-maker Adidas reported its business in China was down more than 85%. Because China is a major manufacturing hub for the world’s shoe suppliers this could impact Adidas revenue in the coming quarters. Shares of the stock, listed on the OTC market board, are flat in the premarket.

Earnings Surprises Lift Market

A round of better than expected earnings is helping to lift sentiment in early trading. Shares of Garmin, Analog Devices, Genuine Parts Company, and Sonic Automotive are all moving higher following the release of their reports. Analog Devices is in the lead with an advance of 5.0%. The company reported a narrow miss on the top line but smashed consensus targets for EPS. Analog Devices also provided better than expected guidance adjusted for the impact of coronavirus.

Shares of technology-maker Garmin are up 4.5% in the premarket. It beat on the bottom line and raised full-year guidance. Sonic Automotive beat on the top and bottom line sending its shares up more than 3.5%. The only negative in this report is the company did not raise its dividend as expected. In other news, shares of Nvidia are also moving higher following Bernstein’s upward revision to its price target.

Economic Data Is Hot

Today’s economic data is hot. The headline Housing Starts number is negative but comes with many caveats for traders to consider. The first is that analysts had expected a decline of -11% so -3.6% is quite a beat. The second is that January’s figure was a blow-out so a little give-back isn’t bad. The third caveat for traders is that January’s figure was revised up to 17.7% leaving the YOY gains firmly in positive territory.

On the inflation front, PPI came in hot at the headline and core levels. Headling PPI rose 0.5% over the last month and is up 2.1% YOY. This is in-line with the FOMC’s view that current policy is appropriate. Traders looking for a dovish sound FOMC in today’s minutes may be disappointed. The FOMC minutes are due out this afternoon at 2 PM.

Apple Guides Lower, Coronavirus Still Spreading, U.S. Equities Fall

The U.S. Futures Are Lower In Early Trading

The U.S. futures are pointing to a lower open on Tuesday following a revenue warning from Apple. Apple says it is going to miss its previously stated guidance of $63 to $67 billion for the 1st quarter. The reason is the coronavirus. The world’s leading manufacturer of consumer electronics says production and sales are taking a hit in China. With production slowing sales will be impacted around the world. Shares of Apple are down about -2.5% in early trading after shedding more than -3.0% in the overnight session.

The Dow Jones Industrial Average is down about -0.55% while the S&P 500 a smaller -0.41%. The tech-heavy NASDAQ Composite with its exposure to China is leading with a loss of -0.60%. This week is a holiday-shortened week, today’s action is the first since the market closed last Friday. On the coronavirus front, China has announced another 1900 new cases and nearly 100 deaths. Among the dead are healthcare workers and the head of a major treatment center. In total, there are 72,350 cases worldwide and the number continues to grow. The full impact on the global economy will not be known for many months so traders should be cautious.

Earnings Season Still In Full Swing

With nearly 80% of the S&P 500 reports in the bag, the earnings season is winding down. Even so, there are still a number of market-moving releases left to come. Today’s news includes reports from Walmart, Advance Auto Parts, and Bloomin Brands. The results for all three are mixed.

Walmart reported a miss on the bottom line along with weaker than expected comps. The stock fell -1.0% on the news and then rebound to advance 1.0% before the open of the day’s session. The consumer giant raised its dividend and provided a stable outlook which was enough for the market. Advance Auto Parts also reported mixed results. The after-market auto parts store missed on the top line but delivered a solid bottom-line beat. Shares are up 2.0%, partially driven by a 300% increase to the dividend.

Economic Data Is Positive

The Empire State Manufacturing Survey came in hotter than expected. The headline reading of 12.9 is 8 points higher than the previous month. An uptick in new orders and shipments are the primary drivers although employment, backlogs, and delivery times all rose too. Later in the session traders will be watching for the homebuilder’s sentiment index due out at 10 AM. The most important read of the week will be tomorrow afternoon when the FOMC releases the minutes from the last meeting.

Asia Pacific Shares Tumble on Apple Guidance Reduction, HSBC Pre-Tax Profit Miss

The major Asia Pacific stocks indexes closed mostly lower on Tuesday after Apple Inc. said it will not meet its revenue guidance for the March quarter as the coronavirus outbreak slowed production and weakened demand in China.

The company said Monday it is “experiencing a slower return to normal conditions than we had anticipated” after the extended Lunar New Year holiday.

“…We do not expect to meet the revenue guidance we provided for the March quarter due to two main factors,” Apple said in a statement. “The first is that worldwide iPhone supply will be temporarily constrained.” “The second is that demand for our products within China has been affected.”

Apple also said, “The situation is evolving, and we will provide more information during our next earnings call in April. Apple is fundamentally strong, and this disruption to our business is only temporary. Our first priority – now and always – is the health and safety of our employees, supply chain partners, customers and the communities in which we operate.”

At 09:00 GMT, Japan’s Nikkei 225 Index settled at 23193.80, down 329.44 or -1.40%. Hong Kong’s Hang Seng Index finished at 27530.20, down 429.40 or -1.54% and South Korea’s KOSPI Index closed at 2208.88, down 33.29 or -1.48%.

China’s Shanghai Index settled at 2984.97, up 1.35 or +0.05% and Australia’s S&P/ASX 200 Index finished at 7113.70, down 11.40 or -0.16%.

HSBC Misses Expectations on 2019 Pre-Tax Profit

Europe’s largest bank, HSBC, reported a 33% fall in 2019 pre-tax profit to $13.35 billion after it took a goodwill impairment of $7.3 billion. The write down was related to its European investment banking and commercial banking businesses, HSBC said.

In terms of HSBC’s business in Asia, where the bank derives the bulk of its earnings, Quinn warned of pressure from the ongoing coronavirus outbreak.

“Since the start of January, the coronavirus outbreak has created significant disruption for our staff, suppliers and customers, particularly in mainland China and Hong Kong,” he said.

“Depending on how the situation develops, there is the potential for any associated economic slowdown to impact our expected credit losses in Hong Kong and mainland China,” he added. “Longer-term, it is also possible that we may see revenue reductions from lower lending and transaction volumes, and further credit losses stemming from disruption to customer supply chains.”

Energy, Tech Sectors Drag Down Australian Shares on Coronavirus Impact

The S&P/ASX 200 Index tumbled on Tuesday, led by losses in the energy and technology sectors, due to worries over the impact of the coronavirus epidemic on China’s economy and its global supply chains.

Apple Inc.’s warning that it will not meet its revenue forecast in the March quarter was the catalyst behind the 1.2 percent decline in Australia’s technology index.

Woodside Petroleum led the losses among energy stocks as oil prices declined due to demand worries put forth by the fears of the spreading virus.

RBA Policymakers Reviewed Further Rate-Cut Case, Worried About Borrowing, Coronavirus

The Reserve Bank of Australia (RBA) reviewed the case for a further interest-rate cut, but decided against it in order to avoid encouraging additional borrowing as house prices climb, minutes of its February 4 meeting in Sydney showed, Bloomberg reported.

The RBA also expects the coronavirus outbreak to “subtract from growth in exports over the first half of 2020,” the minutes released Tuesday showed. It acknowledged it was “difficult to assess potential indirect effects on activity” from the epidemic and devastating wildfires over summer as data were yet to be published.

The RBA also maintained an easing bias and reiterated its expectation rates were likely to stay low for “an extended period,” the bank retained a broadly upbeat view of the economy’s prospects.

Asian Markets: China Shares Rise on Fresh Stimulus Measures; Japan Bracing for Recession

The major Asia Pacific stock indexes finished mixed on Monday as investors continued to assess the potential economic damage from the coronavirus outbreak on China’s economy. Volume was a little light due to a U.S. bank holiday.

Shares in China rose sharply while stocks in Japan fell the most. The price action suggests investors are buying Chinese stocks in anticipation of additional stimulus from the government to offset the damage the virus has reaped on its economy. Shares in Japan declined in reaction to disappointing economic growth data.

On Monday, Japan’s Nikkei 225 Index settled at 23523.24, down 164.35 or -0.69%. South Korea’s KOSPI Index finished at 2242.17, down 1.42 or -0.06% and Hong Kong’s Hang Seng closed at 27975.57, up 159.97 or +0.58%.

In China, the Shanghai Index settled at 2983.62, up 66.61 or +2.28% and in Australia, the S&P/ASX 200 finished at 7125.10, down 5.10 or -0.07%.

Coronavirus Cases Rise Again in China as Recession Looms for Japan, Singapore

The number of reported new cases of coronavirus in China’s Hubei province rose on Monday after two days of falls, as authorities imposed tough new restrictions on movement to prevent the spread of the disease which has now killed more than 1,700 people.

With no end in sight for the outbreak, Japan and Singapore appeared to be on the brink of recession with data Monday pointing to possible contractions in the current quarter.

China

Across China many factories remain closed following the extended Lunar New Year holiday, disrupting supply chains around the world.

The Shanghai Index rose after China’s central bank cut the interest rate on its medium-term lending on Monday, a move expected to pave the way for a reduction in the benchmark loan prime rate on Thursday, to lower borrowing costs for companies hit by the virus.

Beijing also announced plans on Sunday to roll out targeted and phased tax and fee cuts to help relieve difficulties for businesses.

Japan

The Nikkei 225 Index stumbled after official data showed the economy shrank in October-November at the fastest pace since the second quarter of 2014.

Virus-related damage to Japan’s economy is expected to show up in the current quarter, stoking fears of recession in the world’s third-largest economy.

Japan’s Cabinet Office data revealed the Japanese economy shrunk at an annualized pace of 6.3% in the three months that ended in December. Analysts in a Reuters poll were predicting an annual decline of 3.7%. On-quarter, GDP fell 1.6%.

Australia

Australian shares ended lower on Monday as losses in the country’s leading four banks eclipsed strong corporate earnings, while investors weighed the near-term hit on global growth from the coronavirus outbreak.

The so-called ‘big four’ banks, after marking strong gains last week, were all in the red led by Commonwealth Bank of Australia.

New Zealand

New Zealand’s Prime Minister Jacinda Ardern lowered her country’s gross domestic product (GDP) growth forecast range to nearly 2%-2.5% this year due to the economic impact of the coronavirus outbreak.

It came in below the previous prediction of GDP growth of 2.2% to 2.8%. She said the impact will be seen in the first two quarters of the year.

Equities Edge Higher, Strong Earnings Support Market, Coronavirus Spreads

The U.S. Equities Indices Are Higher In Early Trading

The U.S. equities futures are pointing to a slightly higher open on Friday. Trading sentiment is buoyed by a round of better than expected earnings from names like Nvidia, Newell Brands, and Canopy Growth Corp. Despite the earnings, the shadow of China’s coronavirus outbreak remains over the market. China reported 121 new deaths and nearly 5,100 new infections since yesterday’s report. The new deaths include numerous medical workers suggesting the virus is far more contagious than first understood.

The NASDAQ Composite is in the lead in the early premarket session. The tech-heavy index is up nearly 0.30% compared to a 0.18% advance for the S&P 500 and 0.18% increase for the Dow Jones Industrials. Traders should note, while the major indices are pushing to new all-time highs the Dow Jones Transportation Average has yet to break out. If Dow Theory holds true, the transports must confirm the new highs else the broader market is doomed to correction.

Earnings Are Better Than Expected

Nearly 80% of the S&P 500 have reported earnings so far this cycle and the results are better than expected. The broad market is looking at EPS growth in the range of 1.0%, far better than the -2.0% predicted just before the cycle started. Today’s news includes reports from consumer products company Newell Brands among others.

Newell Brands reported better than expected top and bottom-line results. The bad news is net revenue fell on a YOY basis and the guidance for 2020 is weak. Shares are flat in early trading. Nvidia, on the other hand, beat expectations and gave positive outlook sending shares up more than 6.0%. Strength was driven by data center demand that is in turn driven by the growing cloud-computing industry.

Canopy Growth Corp reported better than expected earnings and sent its shares up more than 20%. The Canadian cannabis giant says revenue grew nearly 50% on a YOY basis and smashed the consensus estimate.

Economic Data Good But Not Great

Today’s economic calendar includes Retail Sales and Import/Export Prices. On the inflation front, import and export prices came in better than expected. The import price came in unchanged versus an expected drop while export prices rose 0.7%. The data shows global demand is accelerating and that bodes well for 2020 GDP. In retail news, Retail Sales rose 0.3% as expected and up 0.4% at the core level. Core retail sales are a tenth better than expected. While good, the data offset by revisions to the previous month’s data.

Asian Stocks Mostly Higher; Singapore PM Sees Possible Recession from Coronavirus Impact

The major Asia Pacific stock indexes settled mostly higher on Friday and for the week with Japan’s Nikkei 225 Index fading the trend. Concerns around the ongoing coronavirus outbreak continued to weigh on investor sentiment, however, not enough to drive investors out of the market. Buyers may have been motivated by positive moves from China’s government to stem the negative impact of the virus on the economy.

On Friday, Japan’s Nikkei 225 Index settled at 23687.59, down 140.14 or -0.59%. Hong Kong’s Hang Seng Index finished at 27815.60, up 85.60 or +0.31% and South Korea’s KOSPI Index closed at 2243.59, up 10.63 or +0.38%.

China’s Shanghai Index settled at 2917.01, up 10.93 or +0.38% and Australia’s S&P/ASX 200 finished at 7130.20, up 27.00 or +0.38%.

Coronavirus Update

On Friday, the Hubei province reported an additional 116 deaths and 4,823 new confirmed cases as of the end of February 13. This follows Thursday’s upward spike in deaths and new confirmed cases which was fueled after authorities in the province, where it all started, introduced a new method for tabulating case totals.

While some major bank analysts and economists continued to forecast the effect on economic growth from the epidemic on countries most effected by the virus, especially China, others are already trying to predict what the recovery will look like. This suggests that some still feel the number of new cases has peaked. Still some analysts are saying the recovery is too hard to predict because we still don’t know the extent of the damage.”

“I think markets are looking at the playbook of SARS and what we found there was, it was a big hit … to growth in the countries that were most affected but it was a V-shaped recovery,” Rob Subbaraman, head of global macro research at Nomura, told CNBC’s “Street Signs” on Friday. A V-shaped recovery describes downturns that see a steep fall before recovering sharply.

“What we think markets might be missing is the depth of the V could be worse than people think,” Subbaraman cautioned. “The economic data we start getting for February could be a lot worse than people think.”

Singapore Moves to the Forefront

On Friday, Singapore Prime Minister Lee Hsien Loong said the coronavirus’ economic impact on the island nation’s economy has already exceeded that of SARS in 2003, according to a report by local publication The Straits Times. Singapore has been among the countries worst hit by the disease as it has one of the highest reported number of confirmed cases outside of China. Loong added that a recession could be a possibility.

The impact, particularly over the next few quarters, will be significant as the country battles a “very intense outbreak”, said Prime Minister Lee during a visit to Changi Airport Terminal 3.

“It’s already much more than Sars, and the economies of the region are much more interlinked together. China, particularly, is a much bigger factor in the region,” he said.

“I can’t say whether we will have a recession or not. It’s possible, but definitely our economy will take a hit.”

Equity Futures Plunge, Coronavirus Spread Accelerates, Earnings Still In Focus

The Futures Are Down In Early Trading

The U.S index futures are down in early trading following news out of China. China revealed the number of new cases of coronavirus surged by 15,000 overnight, primarily due to a new clinical test. The number of deaths also surged, up 254 since yesterday, raising the stakes in terms of potential for global economic impact.

With China’s manufacturing hub of Hubei province shut down, it is certain the world’s supply chain will feel the effects of this outbreak for months to come. The tech-heavy NASDAQ Composite, with its heavy exposure to China and Asia, is in the lead with a loss of -0.95% while the Dow Jones and S&P 500 are both down about -0.80%.

Earnings Are Still In Focus

In stock news, a raft of corporate earnings came out this morning including reports from Cisco, Pepsi, AIG and Applied Materials. Cisco is the headline of the day. The company reports another decline in revenue and a shortfall compared to estimates that have the stock down more than -5.0% in early trading. Shares of Pepsi are edging higher in the early morning session. The global supplier of beverages and snacks beat revenue estimates on better than expected organic sales growth.

Shares of AIG are among the days winners. The stock reported a return to underwriting profit growth and sent the stock up more than 2.0%. Shares of consumer staple Kraft are edging lower in the early session after reporting mixed earnings. The company fell short on revenue due to a decline in organic sales but beat on the bottom line. Shares are down about -0.40% on the news. In other stock news, shares of Tesla are moving lower by 4.0% after hitting all-time highs in the last week. The company revealed plans for a $2 billion stock offering that is going to greatly dilute shareholder value.

The Economy Is Still In Good Shape

Today’s economic data confirms the message sent to Congress by Fed Chief Jerome Powell; the economy is still in good shape. On the labor front, the jobless claims figures fell by -2,000 to 205,000 and remain near historic-low, consistent with healthy and tight labor conditions. On the inflation front, CPI came in at 0.1% and a tenth shy of expectations. At the core level CPI rose 0.2% and as expected while the YOY comparisons came in at 2.5% and 2.3%.