Stocks edged higher on Monday as Wall investors took heart in mostly solid U.S. fourth-quarter corporate earnings and looked beyond concerns about the coronavirus outbreak’s potential disruption to global supply chains.
What are major indexes doing?
The Dow Jones Industrial Average DJIA, +0.41% rose 77 points to 29,179, a gain of 0.3%. The S&P 500 index SPX, +0.51% advanced 13 points, or 0.4%, to 3,340. The Nasdaq Composite Index COMP, +0.88% were up 70 points, or 0.7%, to 9,590, after hitting new intraday record.
Both the S&P 500 and Dow Jones Industrial Average are less than a percentage point away from their previous record closes set last Thursday.
What’s driving the market?
Stocks ended lower Friday, but scored large weekly gains after bouncing back from worries about the spread of the coronavirus outbreak as investors focused on strong U.S. corporate earnings. The buoyant mood renewed on Monday even as investors kept an eye on developments surrounding the spread of the illness in China and beyond.
“Earnings seem to be the story,” Sahak Manuelian, managing director of equity trading at Wedbush Securities, told MarketWatch. “They have been fairly strong, with numbers coming in slightly better and guidance is looking OK too. This market is really hanging in there.”
The World Health Organization warned Monday that the spread of the coronavirus to people who have not visited China could be “the spark that becomes a bigger fire,” while urging nations to fight the epidemic together.
Expectations for the Federal Reserve to prop up the economy with easy financial conditions if the coronavirus spills over into the U.S., also helped to support stocks. Investors say a continuation of ultraloose monetary policy could explain the disconnect between depressed long-dated bond yields, a sign that investors are piling into haven assets, and records in major equity benchmarks.
“Coronavirus fears remain at the top of investors’ minds,” wrote Arnim Holzer, macro strategist for EAB Investment Group, underscoring that bonds seem to be confirming those concerns more than equities. “The Fed’s liquidity support can help to support valuations,” Holzer said of stock prices. But added that “ultimately muted Asian GDP growth and earnings expectations” will be important to watch.
The 10-year U.S. Treasury note TMUBMUSD10Y, -2.06% yield traded lower by about 3 basis points to 1.548%. Bond prices move inversely to yields.
Chinese factories started to reopen on Monday, but local government efforts to limit the spread of the virus has led some businesses to stay closed. A prolonged closure could exacerbate the nation’s slowdown and upend global supply chains that rely on Chinese manufacturers to keep retailers stocked.
China’s health ministry on Monday said another 3,062 cases had been reported over the previous 24 hours, raising the mainland’s total to 40,171. The death toll grew by 97 to 910, surpassing the 774 attributed to the severe acute respiratory syndrome, or SARS, a 2003 viral outbreak that originated in China.
“As long as investors don’t perceive a threat to corporate earnings and the U.S. economy from the virus, then the market can continue to trade higher on better economic data and better-than-expected earnings,” Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, told MarketWatch in an email.
Meanwhile, the director-general of the World Health Organization warned Sunday that countries outside of China should be prepared for the spread of the coronavirus to accelerate.
Earnings season also is in the final stretch this week. With nearly two-thirds of S&P 500 companies having reported through Friday, FactSet now expects profits to grow in the fourth quarter.
Which companies are in focus?
- Shares of Restaurant Brands International Inc. QSR, +2.40%, the parent of Burger King and Popeyes, were 2.2% higher after reporting fourth-quarter earnings that topped expectations—boosted by “transformational” growth at Popeyes attributed to the popularity of the chain’s chicken sandwich.
- Shares of Allergan PLC AGN, +1.12% were up 1.1% after reporting fourth-quarter adjusted profit and revenue that topped expectations.
- HP Inc. HPQ, +1.08% shares rose 0.9% after XeroxHoldings Corp. XRX, +1.29% raised its offer price for the computer maker to $24 a share. Xerox shares were also up 1.2%.
- Shares of Simon Property Group Inc. SPG, +1.15% ticked up 0.7% after it said it had entered an agreement to acquire mall REIT Taubman Centers Inc. TCO, +53.24% in a deal valued at around $3.6 billion. Simon will pay $52.59 per Taubman share, for a 51% premium over the stock’s closing price on Friday. Taubman Centers Inc. stock surged around 53.2%.
- Shares of Slack Technologies Inc. WORK, +14.40% advanced 13.5% Monday after a report indicated that International Business Machines Corp., IBM, +0.12% would give some 350,000 of its employees access to the workplace-communications service.
- Tesla Inc. TSLA, +3.84% shares jumped above $800 Monday, then pulled back, after Morgan Stanley said the shift to electric vehicles from internal combustion engines could be worth $25 trillion over the next few decades.
- Shares of ride-hailing service Lyft Inc. LYFT, +6.43% were 7.2% higher after a Northcoast Research analyst upgraded the stock to buy from neutral.
- L Brands Inc. LB, +1.84% shares were higher following a report that the retailer is nearing a deal to shed its troubled Victoria’s Secret brand to a private-equity firm.
How are other markets trading?
Oil prices fell. The price of a barrel of West Texas Intermediate crude for March delivery CLH20, -1.41% fell 75 cents, or 1.5% to $49.57 on the New York Mercantile Exchange, sinking to its lowest settlement in more than a year. In precious metals, gold for April delivery GCJ20, +0.34% rose $6.10 to $1,579.50 an ounce on Comex, its fourth session in a row of gains.
The U.S. dollar DXY, +0.14% rose 0.1% relative to a basket of its six major trading peers.
In Europe, stocks were mixed Monday, with the Stoxx Europe 600 SXXP, +0.07% up less than 0.1%. In Asia overnight, stocks traded mixed. The China CSI 300 000300, +0.41% was up 0.4%, while Japan’s Nikkei 225 lost 0.6%.