U.S. Stocks Close Higher Amid Global Efforts to Contain Virus
January 28 2020 - 4:32PM
Dow Jones News
By Anna Isaac and Paul Vigna
U.S. stocks climbed Tuesday as investors turned their attention
to earnings season and improving economic data, though bond markets
briefly flashed a recession signal for the first time since
October.
The Dow Jones Industrial Average, as of 4 p.m. Eastern time,
rose 189 points, or 0.7%, while the S&P 500 advanced 1%. Both
indexes suffered their steepest losses since October on Monday as
investors reacted to efforts world-wide to contain a deadly virus
outbreak in China.
The technology-heavy Nasdaq Composite gained 1.4%.
Earlier, the Stoxx Europe 600 gauge gained 0.8%, while exchanges
in China and Hong Kong remained closed for the Lunar New Year
holiday.
The coronavirus is obviously serious, but investors are turning
back toward earnings and economics reports, said Ryan Detrick,
senior market strategist at LPL Financial.
"The U.S. economy is in pretty good shape, and should be able to
withstand the fallout from the coronavirus, should it spiral," he
said.
The outbreak of coronavirus, which has killed more than 100
people and infected over 4,500 in China, risks further stunting an
already slowing Chinese economy, which is increasingly important
for global growth. Travelers in recent weeks have carried the
infection to other countries including the U.S., Australia, Germany
and Japan.
Investors were largely expecting a slight uptick in global
growth this year and are now reaching for safer assets like U.S.
government bonds. Rising concern about the potential impact of the
Chinese outbreak has led to a flattening of the yield curve.
"If you take China's growth out the equation, then the basis for
your global growth forecast starts to fall apart," said Seema Shah,
chief strategist at Principal Global Investors.
The yield on the 10-year Treasury briefly slipped below that of
the three-month bill, before paring back declines and rising to
1.650%. The three-month U.S. government debt is currently at about
1.563%.
When longer-dated debt offers smaller returns than bonds with
shorter maturities, it can be an indicator of fixed-income
investors' growing concern about the economy. Still, the yield
curve can invert a number of times before the start of a recession:
last year, markets went on to largely shrug off the event.
Among equities, in afternoon trading, McCormick dropped 3.3%
after the spice company's fourth-quarter revenue missed analysts'
expectations and it issued disappointing guidance for 2020.
Harley-Davidson fell 2.9% after the motorcycle maker reported
earnings and sales that fell short of expectations.
3M slid 5.4% after the maker of everything from Post-it Notes to
molar crowns said it would eliminate 1,500 jobs as part of a broad
restructuring effort.
Later in the day, Apple, Starbucks and eBay are among the major
U.S. companies scheduled to report earnings.
Over in Asia, South Korea's Kospi index ended Tuesday down 3.1%
-- the biggest drop since October 2018 -- after markets in the
country resumed trading following the Lunar New Year holiday. The
retreat was led by declines in tourism and technology stocks.
Major exchanges in Hong Kong are scheduled to open Wednesday,
while bourses on the mainland will be closed until next week after
Chinese authorities extended the holiday in a bid to curtail mass
migration and contain the virus.
On the economic front, the U.S. Commerce Department reported
that durable-goods orders rose 2.4% in December, driven by defense
spending. However, a key measure that excludes aircraft orders and
defense spending fell 0.9%.
--Caitlin Ostroff and Anna Hirtenstein contributed to this
article
Write to Anna Isaac at anna.isaac@wsj.com and Paul Vigna at
paul.vigna@wsj.com
(END) Dow Jones Newswires
January 28, 2020 16:17 ET (21:17 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.