US open: Stocks dip as corporates warn of virus impact

By Sharecast News

Sharecast News | 07 Feb, 2020

Updated : 16:46

21:29 14/05/24

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Stocks slumped going into the weekend despite a stronger-than-expected reading on the US jobs market for January, amid a flurry of warnings from companies around the world that their activities were being impacted by the Wuhan coronavirus.

The latest such announcement came just before the opening bell on Wall Street, with high-end parka maker Canada Goose joining the likes of Burberry, Toyota Motor or key Apple supplier, Hon Hai Precision.

In the background, overnight, China's National Health Commission reported that the number of cases of the 2019-nCoV Coronavirus had climbed past 31,000 and fatalities to more than 630.

Yet commenting on the likely toll that the 2019 n-COV coronavirus might take, Mark Wall at Deutsche Bank was telling clients: "The spread of the virus is showing signs of peaking but the outbreak is expected to have had a sharp impact on China economic activity already in Q1.

"A lesser economic shock is expected to be transmitted to the broader Asia economy including Japan. A more moderate shock should be felt in the US and Europe. The assumption is that the virus peaks in February and economic activity will recover over the remainder of the year and into 2021."

Against that backdrop, as of 1550 GMT, the Dow Jones Industrial Average was 168.04 points lower to 29,212.56, led by declines in Dow and Caterpillar.

That came alongside a 0.38% drop on the S&P 500 to 3,332.50 and a 0.55% decline for the Nasdaq Composite to 9,518.49.

For the week however, the S&P remained on track for a gain of over 3.0%.

"Risk off [...] No I think you see in Europe today the same thing – we've hit record highs this week so good time for a pause anyway. Yesterday rally for S&P 500 had fewer advancing stocks than declining stocks, so bit lacking in juice," Neil Wilson, chief market analyst at Markets.com told Sharecast.

"Weekend de-risking – with markets closed for two days and the potential for bad news re coronavirus I think traders are happy to pare long equity positions going into the weekend."

US non-farm payrolls jumped by 225,000 in January (consensus: 160,000) and the year-on-year rate of wage growth picked up from 2.9% in December to 3.1%, the Department of Labor reported on Friday.

Despite that, US Treasuries were moving higher again, echoing the slight caution evident in stocks, with the yield on the 10-year note down by six basis points to 1.58%.

Economists put part of the strength in hiring down to January having seen the third mildest temperatures for that month on record.

"The rebound in services employment from December levels sends a strong signal about the health of the domestic economy," said Michael Gapen at Barclays Research.

"Labor market income continues to outpace inflation, supporting our outlook for modest growth in consumption and continued economic expansion."

Shares of Fashion retailer Canada Goose fell 4% as the company lowered its full-year sales outlook on the back of the coronavirus outbreak.

Uber was in the driver's seat after bringing forward its expected date for turning EBITDA positive to the last quarter of 2020. It full-year 2020 outlook for losses before interest, taxes, depreciation and amortisation of $1.25-1.45bn was also better than the $1.73bn of red ink expected on the Street.

"Guidance suggests close to 40% incremental margins on 2020 revenue growth, which is aggressive, but a strong message to the street and employees," said analysts at Bank of America.

Rare disease specialist Abbvie climbed 3% after it posted fourth quarter net income of $2.21 per share (consensus: $2.19).

Pennsylvania-based Avantor skidded 7% lower even after the manufacturer of high-performance materials guided towards an up to 65% jump in free cash flows in 2020.

Stock in Twitter was down 4% despite analysts at Bank of America hiking their target price for the shares from $39.0 to $43.0.

Dow Jones - Risers

United Technologies Corp. (UTX) $157.15 0.61%
Verizon Communications Inc. (VZ) $59.69 0.42%
Microsoft Corp. (MSFT) $184.12 0.27%
Coca-Cola Co. (KO) $59.05 0.10%
Dowdupont Inc. (DWDP) $30.52 0.00%
Walmart Inc. (WMT) $116.22 -0.08%
Walgreens Boots Alliance, Inc. (WBA) $53.43 -0.11%
Travelers Company Inc. (TRV) $136.34 -0.12%
Unitedhealth Group Inc. (UNH) $292.01 -0.15%
Merck & Co. Inc. (MRK) $85.54 -0.17%