Stocks Climb as China Pledges to Support Businesses

Date : 02/19/2020 @ 9:54PM
Source : Dow Jones News

Stocks Climb as China Pledges to Support Businesses

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.


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