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US Market
The major U.S. index futures are pointing to a higher open on Wednesday, with stocks poised to attempt another rebound after pulling back sharply from an initial move to the upside in the previous session.
Traders may once again look to go bargain hunting following the failed attempt on Tuesday, which saw stocks experience another sell-off following an early uptick.
Yesterday’s steep drop saw the Dow slump to its lowest closing level in nearly four months, while the Nasdaq and the S&P 500 tumbled to their lowest closing levels in nearly two months and three months, respectively.
The markets seemed due for a correction after continually climbing to new record highs in recent months, but some traders may feel the sell-off in reaction to the coronavirus outbreak has been overdone.
Nonetheless, lingering concerns about the outbreak escalating into a pandemic that substantially slows global economic growth may keep buying interest somewhat subdued.
The Trump administration has sought to downplay concerns about the coronavirus, with President Donald Trump accusing the media of exaggerating the situation in order to panic the markets.
Trump said in a post on Twitter this morning that he will be holding a press conference on the coronavirus with CDC representatives and others at 6 pm ET.
Following the sell-off seen on Monday, stocks showed another substantial move to the downside during trading on Tuesday. With the continued decline, the Dow tumbled to its lowest closing level in nearly four months.
The major averages all finished the day sharply lower. The Dow plunged 879.44 points or 3.2 percent to 27,081.36, the Nasdaq plummeted 255.67 points or 2.8 percent to 8,965.61 and the S&P 500 slumped 97.68 points or 3 percent to 3,128.21.
Stocks initially moved to the upside as some traders went bargain hunting, picking up stocks at reduced levels on the heels of yesterday’s steep drop.
The Dow suffered its biggest point and percentage drop in two years on Monday, as traders worried about the impact of the coronavirus outbreak that has spread far beyond China to Europe and the Middle East.
Buying interest waned shortly after the start of trading, however, as fears about the outbreak escalating into a pandemic continued to hang over the markets.
Adding to the worries, MasterCard (MA) and United Airlines (UAL) joined a growing list of companies that have warned about the potential financial impact of the outbreak.
Meanwhile, traders largely shrugged off a report from the Conference Board showing a slight improvement in U.S. consumer confidence in the month of February.
The Conference Board said its consumer confidence index inched up to 130.7 in February from a downwardly revised 130.4 in January. Economists had expected the index to tick up to 132.5 from the 131.6 originally reported for the previous month.
“Consumers’ short-term expectations improved, and when coupled with solid employment growth, should be enough to continue to support spending and economic growth in the near term,” said Lynn Franco, Director of Economic Indicators at the Conference Board.
Energy stocks extended the sell-off seen in the previous session amid a continued decrease by the price of crude oil.
Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plummeted by 4.8 percent, while the NYSE Arca Natural Gas Index and the NYSE Arca Oil Index slumped by 4.2 percent and 4 percent, respectively.
Substantial weakness was also visible among banking stocks, as reflected by the 4.5 percent nosedive by the KBW Bank Index. The index ended the session at its lowest closing level in four months.
Chemical stocks also showed another significant move to the downside, dragging the S&P Chemical Sector Index down by 4.5 percent to a nearly five-month closing low.
Housing, transportation, and networking stocks also saw considerable weakness on the day, reflecting another broad based sell-off on Wall Street.
U.S. Economic Reports
Dallas Federal Reserve President Robert Kaplan is due to speak about “Economic Conditions and the Key Structural Drivers Impacting the Economic Outlook” at the 2020 Emerging Manager Conference, in Austin, Texas, at 9:35 am ET.
At 10 am ET, the Commerce Department is scheduled to release its report on new home sales in the month of January.
Economists expect new home sales to jump by 2.3 percent to an annual rate of 710,000 in January after slipping by 0.4 percent to a rate of 694,000 in December.
The Energy Information Administration is due to release its report on oil inventories in the week ended February 21st at 10:30 am ET.
Crude oil inventories are expected to rise by 2.5 million barrels after edging up by 400,000 barrels in the previous week.
At 1 pm ET, the Treasury Department is scheduled to announce the results of its auction of $41 billion worth of five-year notes.
Minneapolis Fed President Neel Kashkari is also due to speak at the Minneapolis Downtown Council Business Forum in Minneapolis, Minnesota, at 1 pm ET.
Stocks in Focus
Shares of WW International (WW) are likely to see initial strength after the Weight Watchers parent reported fourth quarter results that exceeded estimates and said 2020 is off to a “terrific start.”
Pizza restaurant franchise Papa John’s (PZZA) may also move to the upside after reporting fourth quarter results that beat analyst estimates on both the top and bottom lines.
On the other hand, shares of Toll Brothers (TOL) are moving sharply lower in pre-market trading after the luxury home builder reported fiscal first quarter results that missed analyst estimates on both the top and bottom lines.
Teledentistry company SmileDirectClub (SDC) is also seeing substantial pre-market weakness after reporting weaker than expected fourth quarter results and providing disappointing guidance.
Europe
European stocks have turned mixed over the course of the trading session on Wednesday after coming under pressure earlier in the day as the threat of a global coronavirus pandemic grew.
Five European countries have reported cases linked to Italy, while new cases soared in South Korea, with an American soldier in the country becoming the first U.S. serviceman to be infected.
A World Health Organization expert has warned that countries outside China are “simply not ready” for a pandemic.
While the U.K.’s FTSE 100 Index is down by 0.2 percent, the German DAX Index is just above the unchanged line and the French CAC 40 Index is up by 0.2 percent.
Biotechnology company Biomerieux has shown a substantial move to the downside on the day after posting disappointing full-year results.
Aareal Bank has also slumped percent after its preliminary 2019 consolidated net income allocated to ordinary shareholders declined 30 percent to 145 million euros from 208 million euros in the prior year.
Deutsche Lufthansa shares have also fallen. The airline said it would freeze new hires and use unpaid leave and additional short-time work to counter the business impact of the coronavirus outbreak.
Alcoholic beverages company Diageo has also moved to the downside after it provided an update on the expected range of the adverse impact in fiscal 2020 due to the evolving COVID-19 situation.
Bookmaker William Hill has also come under pressure after it warned of a possible £10 million hit from an impending credit card ban.
The Restaurant Group has also moved sharply lower. The owner of Wagamama and Frankie & Benny’s has suspended its dividend and said it would close up to 90 restaurant sites by the end of next year.
On the other hand, shares of ASM International have moved sharply higher after KBC Securities upgraded the stock to Buy from Hold.
French technology company Thales has also moved to the upside after it posted double-digit growth in its consolidated profit, Group share, and its sales for the full year.
On the economic front, French consumer confidence remained unchanged in February, monthly survey results from the statistical office Insee showed. The corresponding index came in at 104, unchanged from January.
Asia
Asian stocks fell on Wednesday, extending recent losses amid continued fears that the coronavirus outbreak could escalate into a pandemic.
The number of confirmed new coronavirus cases in South Korea topped 1,100 and outbreaks in Italy and Iran spread to more countries, raising concerns about the impact of the outbreak on global economic growth.
The flu-like virus has now spread to several countries in Europe and the Middle East, with Switzerland, Austria and Romania reporting their first infections on Tuesday.
The U.S. Centers for Disease Control and Prevention warned that Americans should begin to prepare for community spread of the coronavirus in the U.S.
Chinese stocks fell notably as fears over the global coronavirus contagion intensified. Mainland China had 406 new confirmed cases of coronavirus infections on Tuesday, the country’s National Health Commission said, down from 508 cases a day earlier.
The benchmark Shanghai Composite Index fell 25.12 points, or 0.8 percent, to 2,987.93, while Hong Kong’s Hang Seng Index slid 196.74 points, or 0.7 percent, to 26,696.49.
Japanese stocks hit a four-month low as Asia reported hundreds of new coronavirus cases, with Prime Minister Shinzo Abe calling for sports and cultural events to be scrapped or curtailed for two weeks.
The Nikkei 225 Index ended down 179.22 points, or 0.8 percent, at 22,426.19, its lowest closing level since October 15, 2019. The broader Topix closed 0.8 percent lower at 1,606.17.
Mining, real estate and air transportation-linked companies were among the prominent decliners. Exporters also ended mostly lower, with Panasonic falling about 1 percent and Sony losing 1.6 percent. Oil company Inpex Corp. tumbled 2.9 percent and Japan Petroleum declined 1.7 percent.
Australian markets fell for a fourth straight session amid broad-based selling after U.S. health officials admitted that the United States is likely to suffer a coronavirus outbreak.
The benchmark S&P/ASX 200 Index tumbled 158.50 points, or 2.3 percent, to 6,708.10, while the broader All Ordinaries Index plunged 163.10 points, or 2.4 percent, to 6,790.70.
The big four banks fell between 1.7 percent and 2.1 percent, while mining heavyweights BHP and Rio Tinto lost 2.2 percent and 1.8 percent, respectively.
Energy stocks such as Woodside Petroleum, Oil Search, Santos and Beach Energy gave up 3-4 percent after oil prices fell on Tuesday to mark their lowest finish in two weeks.
Woolworths declined 2.7 percent as the supermarket giant reported a more than 7 percent decrease in profit for the first half despite higher revenue.
Meanwhile, Healius soared 15.2 percent after private equity firm Partners Group offered to acquire the medical centre operator for $2.12 billion.
Media company Nine Entertainment surged 6.5 percent as it reported higher first-half revenue following its merger with Fairfax.
Seoul stocks fell again after a brief rally in the previous session. The benchmark Kospi dropped 26.84 points, or 1.3 percent, to 2,076.77 as coronavirus infections spread rapidly in the country.
So far, the country has more than 1,100 confirmed cases of COVID-19 and 12 deaths from the virus. Market heavyweight Samsung Electronics shed 2.4 percent and No. 2 chipmaker SK Hynix tumbled 3.5 percent.
South Korea’s confidence among manufacturers decreased in February, while sentiment among non-manufacturers declined for the second straight month, survey data from Bank of Korea showed today.
Commodities
Crude oil futures are sliding $0.55 to $49.33 a barrel after tumbling $1.53 to $49.90 a barrel on Tuesday. Meanwhile, an ounce of gold is trading at $1,639.60, down $10.40 compared to the previous session’s close of $1,650. On Tuesday, gold plunged $26.60.
On the currency front, the U.S. dollar is trading at 110.48 yen compared to the 110.20 yen it fetched at the close of New York trading on Tuesday. Against the euro, the dollar is trading at $1.0860 compared to yesterday’s $1.0882.
