Stocks Climb as China Pledges to Support Businesses
February 19 2020 - 4:32PM
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 0.4%, rising after three
consecutive days of declines. The S&P 500 added 0.5% and the
Nasdaq Composite advanced 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.
In the afternoon, the Federal Reserve released the minutes of
its January policy meeting. The minutes showed Fed officials
showing optimism about the U.S. economy, though the meeting
occurred before the coronavirus outbreak.
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 and 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 6.7% after the maker of sports devices
reported a key measure of fourth-quarter profit beat analysts'
expectations, with the stock hitting a 10-year high.
Bed Bath & Beyond rose 7.1% after new Chief Executive Mark
Tritton laid out a plan for remaking the home-goods retailer.
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 gained 0.9% amid a
broad advance in Asia.
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 1.5% against the
dollar.
Oil prices rose 2.4% to $53.29 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 as much
as half a million barrels a day, reducing global supplies,
according to Helge Andre Martinsen, an energy analyst at Norway's
DNB Bank.
--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 16:17 ET (21:17 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.