Wall Street moves higher a day after big drop
Asian shares sink on mounting worries over China outbreak
NEW YORK, Jan 28, (AP): US stocks are rising in midday trading Tuesday as investors shifted money into technology companies following a broad sell-off a day earlier over fears that the spread of a deadly virus in China could affect the global economy.
Global markets were spooked on Monday by a sharp rise in cases of the coronavirus. China, the world’s second largest economy, is taking increasingly drastic measures to stem the spread of the virus and global health authorities are closely monitoring the situation.
Apple, which reports earnings later Tuesday, climbed 2.3% and was one of the biggest gainers in the tech sector. Chipmakers including Intel also made solid gains. Many of those companies are affected by China’s economy because they rely heavily on that nation for sales and supply chains.
Banks and other financial companies also climbed, along with communications stocks.
Utilities and real estate companies lagged the market as investors turned away from safe-play sectors.
Bond prices fell, sending yields higher following a significant drop a day earlier. The yield on the 10-year Treasury climbed to 1.64% from 1.60% late Monday.
Wall Street is in the midst of a heavy week for corporate earnings and investors have some key companies to assess. Starbucks will report its results later Tuesday. Boeing, McDonald’s, Facebook and Microsoft will all report results on Wednesday. Other big names reporting this week include Coca-Cola, Amazon, Caterpillar and Exxon Mobil.
The S&P 500 index rose 1.1% as of 11:45 a.m. Eastern time. The Dow Jones Industrial Average rose 222 points, or 0.8%, to 28,755. The Nasdaq rose 1.3%. The Russell 2000 index of smaller company stocks rose 0.9%.
More than 4,500 people have been confirmed ill with the virus and 106 have died in the outbreak of a new coronavirus centered in the Chinese city of Wuhan, an industrial hub along the Yangtze river. The virus has now spread to more than a dozen countries.
Hong Kong has joined much of China in seriously restricting travel by cutting all rail links to the mainland. China’s containment efforts began with the suspension of plane, train and bus links to Wuhan and has now expanded to 17 cities with more than 50 million people in the most far-reaching disease-control measures ever imposed.
Pfizer dropped 3.9% after the biggest US drugmaker reported disappointing fourth-quarter earnings. The company’s revenue fell during the quarter as it continues to slim down and focus on developing new drugs. It moved its huge stable of nonprescription medicines into a new joint venture with GlaxoSmithKline last year.
Auto parts supplier BorgWarner sank 7.6% after saying it will buy Delphi Technologies for about $3.3 billion. The deal will help strengthen the company’s power electronic products, but it comes along with a warning to investors about potentially weak sales in 2020, particularly for light and commercial vehicles.
Harley-Davidson lost 3.6% after the storied motorcycle maker reported weak fourth-quarter earnings and revenue. The company had a tough quarter for US sales, which led the overall worldwide drop. Asian shares skidded again Tuesday on deepening worries over the expanding outbreak of a new virus in China.
Markets in Hong Kong and mainland
China were closed Tuesday for Lunar New Year holidays, while South Korea’s benchmark tumbled 3.4% to 2,170.88 as it reopened after its own holidays.
Japan’s Nikkei 225 index lost 0.9% to 23,128.24, while Australia’s S&P ASX/200 slipped 1.4% to 6,988.60. Shares also fell in Taiwan, Jakarta and Singapore. China has extended its national holiday by three days so that offices should reopen on Monday. Shanghai’s holiday was extended until Feb 9.
“How long and how deep the correction lower will last, depends both on the success of China’s efforts to control the viral spread, and the prevalence of its occurrence internationally,” Jeffrey Halley of Oanda said in a commentary.
Airlines, resorts and other companies that rely on travel and tourism suffered steep losses. Gold prices rose as did bonds as traders sought refuge in safer holdings.
“Over the weekend you saw more cases,” said Quincy Krosby, chief market strategist at Prudential Financial. “That got investors and traders worried that this may be a longer event. The next question is, ‘What happens to global growth if this does continue and magnify?’”
The virus has spread to a dozen countries, including the US Besides the threat to people’s lives and health, investors are worried about how much damage the virus will do to profits for companies around the world.
Even if they’re thousands of miles away from Wuhan, the interconnected global economy means US companies have plenty of customers and suppliers in China. It’s the world’s second-largest economy, and it accounts for 6% of all revenue for S&P 500 companies over the last 12 months. That’s nearly double any other country besides the United States, according to FactSet.
“Markets hate uncertainty, and the coronavirus is the ultimate uncertainty in that no one knows how badly it will impact the global economy,” said Alec Young, managing director of global markets research at FTSE Russell.
Resort operators were among the biggest losers in the S&P 500. Wynn Resorts led all company’s in the index lower with an 8.1% tumble, while Las Vegas Sands dropped 6.7%. The companies get most of their revenue from the Chinese gambling haven of Macao. MGM Resorts fell 3.9%.
American Airlines lost 5.5% and Delta dropped 3.4% as part of a broad slide for airlines because of concerns international travel will decline amid the virus’ spread. Booking companies and cruiseline operators also got hurt. Expedia Group fell 2.7% and Carnival slid 4.7%.
Chinese companies that trade shares in the US also declined. Search engine operator Baidu fell 2.9% and e-commerce company JD.com dropped 4.8%.
The technology sector, the biggest in the S&P 500, also saw heavy selling. Apple, which relies on China for supplies and sales, fell 2.9%.
Financial stocks also took steep losses. Citigroup dropped 2.2%.
Energy stocks fell broadly as US oil prices fell 1.9% on worries about reduced demand from China. Schlumberger skidded 5.1%.
Utilities, real estate stocks and household goods makers held up better than the rest of the market, though they still finished in the red. The sectors are viewed as less-risky and are not as affected by international issues and developments. Boeing, McDonald’s, CocaCola and Amazon are also among some of the biggest names reporting earnings throughout the week that includes 147 S&P 500 companies.
Benchmark crude oil lost 28 cents to $52.86 a barrel in electronic trading on the New York Mercantile Exchange Brent crude oil, the international standard, fell 37 cents to $58.21.
The dollar rose to 108.97 Japanese yen from 108.89 yen on Monday. The euro strengthened to $1.1022 from $1.1019.