Stocks Climb as China Pledges to Support Businesses
February 19 2020 - 12:06PM
Dow Jones News
By Joe Wallace and Paul Vigna
U.S. stocks rose Wednesday after China launched fresh measures
to support local businesses that are struggling because of the
coronavirus outbreak.
The Dow Jones Industrial Average gained 0.5%, rising after three
consecutive days of declines. The S&P 500 added 0.6% and the
Nasdaq Composite jumped 0.9%.
The recovery came after China's Ministry of Industry and
Information Technology said the government would connect factories
with technology companies to identify weak links in their supply
chains. The assistance is one of several steps that Beijing and
local Chinese authorities have taken to limit the economic fallout
of the coronavirus, which has sickened 75,200 people world-wide and
killed more than 2,000.
"The market doesn't have much of a problem with anything at the
moment," said Paul Ashworth, the chief U.S. economist at Capital
Economics. Buyers are confident the economic impact of the
coronavirus will be limited by government and central-bank efforts,
he said.
Global stocks rose as well. In Europe, shares in clothing and
consumer-goods companies were among the best performers as the
Stoxx Europe 600 rose 0.8%. Japan's Nikkei 225 closed 0.9% higher
amid a broad advance in Asia.
With official Chinese manufacturing data not due to be published
until Feb. 29, investors are relying on other measures to assess
the economic impact of the illness. Some of these gauges point to a
steep decline in activity. Major energy producers have consumed a
third less coal each day in February than normal seasonal patterns
would suggest, economists at Goldman Sachs Group said in a
note.
But in the U.S., the argument for buying stocks is still
straightforward, said Nicholas Colas, the co-founder of research
firm DataTrek Research. While corporate earnings growth is down,
profit margins and cash flows are still high. That, he said, should
lead to better earnings in the second half of the year. On top of
that, interest rates are low are should remain low, he noted, which
on its own makes equities attractive.
"That's why equities haven't sold off," he said.
One stock that did slump Wednesday was Groupon. Shares of the
high-tech coupon clipper plunged 44% after the company reported
weak fourth-quarter earnings, said it planned to shut down the part
of its business that sells merchandise, and detailed plans for a
reverse stock split.
Shares of Garmin rose 8% after the maker of sports devices
reported a key measure of fourth-quarter profit beat analysts'
expectations, with the stock at a 10-year high.
Bed Bath & Beyond rose 3.7% after new chief executive Mark
Tritton laid out a plan for remaking the home-goods retailer.
In the forex market, confidence that Beijing can contain the
economic fallout from the epidemic spilled over into currency
markets. The Japanese yen, seen as a haven, fell 1.1% against the
dollar.
Oil prices rose 2% to $53.31 a barrel after the Trump
administration blacklisted a trading brokerage owned by Russian oil
giant Rosneft, which the U.S. said has helped Venezuela export
crude. The sanctions could reduce Venezuelan oil exports by up to
half a million barrels a day, reducing global supplies, according
to Helge Andre Martinsen, an energy analyst at Norway's DNB
Bank.
Later in the day, investors will have an opportunity to scour
minutes of the Federal Reserve's most recent monetary-policy
meeting for details on policy makers' outlook for interest rates as
well as measures designed to ease strains in money markets.
--Liyan Qi contributed to this article
Write to Joe Wallace at Joe.Wallace@wsj.com and Paul Vigna at
paul.vigna@wsj.com
(END) Dow Jones Newswires
February 19, 2020 11:51 ET (16:51 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.