Stocks Climb as China Pledges to Support Businesses
February 19 2020 - 4:54PM
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 115.84 points, or 0.4%,
to 29348.03, rising after three consecutive days of declines. The
S&P 500 rose 15.86 points, or 0.5%, to a fresh record of
3386.15. The Nasdaq Composite jumped 84.44 points, or 0.9%, to
9817.18, also setting a new high.
The recovery in equities 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. Investors 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
expressed optimism about the U.S. economy, though the meeting
occurred before the coronavirus outbreak accelerated.
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 investing in 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 drooped Wednesday was Groupon. Shares of the
high-tech coupon clipper plunged $1.35, or 44%, to $1.70 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 $6.55, or 6.7%, to $103.67 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 83 cents, or 7.1%, to $12.61 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.
Gold futures rose 0.5% to $1,607.50, their highest closing level
since March 2013. The yield on the 10-year U.S. Treasury note rose
to 1.569% from 1.555%, snapping a three-day streak of declines.
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.
U.S. 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 16:39 ET (21:39 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.