S&P 500 and Nasdaq close at new highs, virus concerns wane
05-Feb-20 16:15 ET
Dow +483.22 at 29290.76, Nasdaq +40.71 at 9508.70, S&P +37.10 at 3334.69
[BRIEFING.COM] The S&P 500 rose 1.1% on Wednesday to recoup all losses related to the coronavirus and close at a record high. The Dow Jones Industrial Average (+1.7%) and Russell 2000 (+1.5%) outperformed the benchmark index. The Nasdaq Composite (+0.4%) underperformed in a rare outing, although it still closed at a new high.
Ten of the 11 S&P 500 sectors contributed to the advance, especially the energy sector (+3.8%) after weeks of underperformance and a nice rebound in oil prices ($50.85, +1.24, +2.5%). The real estate sector (-0.1%) was the lone holdout today.
The bullish price action was driven mostly by optimism, particularly tied to the prevailing view that the economy is fine and any negative impact resulting from the coronavirus will be minimal. Aiding this sentiment were reports that progress is being made in developing a vaccine and economic data depicting a healthy labor market and services sector.
Specifically, the ISM Non-Manufacturing Index for January increased to 55.5% (Briefing.com consensus 55.0%) from 54.9% in December. The ADP Employment Change report showed an estimated 291,000 jobs were added to private-sector payrolls in January (Briefing.com consensus 160,000).
That's not to say that the coronavirus is behind the market, though. For instance, Walt Disney (DIS 141.37, -3.36, -2.3%), Nike (NKE 100.54, -0.84, -0.8%), and Capri Holdings (CPRI 33.31, +2.55, +8.3%) formally stated that the coronavirus will have a negative impact on financial results. The market is simply viewing the situation through a positive lens.
In earnings news, Merck (MRK 85.83, -2.53, -2.9%) fell despite beating profit estimates. Ford Motor (F 8.31, -0.87, -9.5%) and General Motors (GM 35.03, +0.66, +1.9%) trended in opposite directions following their results
Other story stocks included Tesla (TSLA 734.70, -152.36, -17.2%), which pulled back from its parabolic rise, and Biogen (BIIB 332.87, +49.58, +17.5%), which was awarded a favorable patent decision for a multiple sclerosis drug.
U.S. Treasuries succumbed to selling interest for the second straight session. The 2-yr yield increased four basis points to 1.45%, and the 10-yr yield increased five basis points to 1.65%. The U.S. Dollar Index increased 0.3% to 98.28.
Reviewing Wednesday's economic data:
The ISM Non-Manufacturing Index for January registered a 55.5% reading (Briefing.com consensus 55.0%) versus a downwardly revised 54.9% (from 55.0%) in December. The January reading eclipsed the December reading as the fastest pace of expansion since August 2019.
The key takeaway from the report is that it marked the second straight month of accelerating activity in the services sector, which is an encouraging sign that the U.S. economic expansion is poised to continue.
The Trade Balance report for December showed a widening in the deficit to $48.9 billion (Briefing.com consensus -$48.2 billion) from a downwardly revised -$43.7 billion (from -$43.1 billion). Exports were $1.6 billion more than November exports while imports were $6.8 billion more than November imports.
The key takeaway from the report is that the goods deficit with China decreased by $73.9 billion in 2019 to $345.6 billion, as tariff measures contributed to a $13.5 billion decrease in exports and an $87.4 billion decrease in imports.
The ADP Employment Change report showed an estimated 291,000 jobs were added to private-sector payrolls in January (Briefing.com consensus 160,000), with healthy gains across small, midsized, and large employers. In turn, there was a nice pickup in jobs added on the goods-producing side of the economy (+54,000).
The weekly MBA Mortgage Applications Index rose 5.0% following a 7.2% increase in the prior week.
Looking ahead, investors will receive the weekly Initial and Continuing Claims report and preliminary Q4 readings for Productivity and Unit Labor Costs on Thursday.
Nasdaq Composite +6.0% YTD
S&P 500 +3.2% YTD
Dow Jones Industrial Average +2.6% YTD
Russell 2000 +0.8% YTD
Market Snapshot
Dow 29290.76 +483.22 (1.68%)
Nasdaq 9508.70 +40.71 (0.43%)
SP 500 3334.69 +37.10 (1.13%)
10-yr Note -27/32 1.655
NYSE Adv 2203 Dec 668 Vol 994.3 mln
Nasdaq Adv 2207 Dec 981 Vol 2.4 bln
Industry Watch
Strong: Energy, Health Care, Financials
Weak: Real Estate, Communication Services
Moving the Market
-- S&P 500 and Nasdaq close at new highs
-- Renewed strength in the energy sector and oil prices after weeks of underperformance
-- Upbeat economic data for the labor market and services sector
-- Reports that progress is being made for a coronavirus vaccine
WTI crude rebounds 2.5%
05-Feb-20 15:25 ET
Dow +494.31 at 29301.85, Nasdaq +52.94 at 9520.93, S&P +39.11 at 3336.70
[BRIEFING.COM] The S&P 500 is on pace to close at a record high as it now trades higher by 1.2%.
One last look at the S&P 500 sectors shows ten sectors trading higher. Energy (+3.7%) remains in the lead, while the real estate sector (-0.1%) is the lone holdout amid the rise in Treasury yields. The 10-yr yield is up five basis points to 1.65%.
WTI crude settled up $1.24 (+2.5%) to $50.85/bbl in a strong rebound trade.
