By Anna Isaac and Paul Vigna
U.S. stocks stabilized Tuesday as investors monitored efforts to contain a deadly virus outbreak in China, though bond markets briefly flashed a recession signal for the first time since October.
The Dow Jones industrial Average rose 0.3%, after falling 1.6% on Monday, its worst one-day loss since Oct. 2, as investors reacted to efforts world-wide to contain a deadly virus outbreak in China. The S&P 500 rose 0.4% in early trading. The Nasdaq Composite gained 0.7%.
The Stoxx Europe 600 gauge edged up 0.4%, while exchanges in China and Hong Kong remained closed for the Lunar New Year holiday.
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 to 1.612%. The three-month U.S. government debt is currently at about 1.552%.
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, 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 2.7% after the motorcycle maker reported earnings and sales that fell short of expectations.
3M slid 4.9% 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 email@example.com and Paul Vigna at firstname.lastname@example.org
(END) Dow Jones Newswires
January 28, 2020 10:11 ET (15:11 GMT)
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