U.S stocks recovered some ground Tuesday, after worries about the impact of China’s coronavirus outbreak on global economic growth sparked the biggest one-day selloff since early October on Monday.
Investors were also wading through a tide of quarterly results from a number of high-profile companies as earnings reporting season picks up steam.
What did the major indexes do?
The Dow Jones Industrial Average DJIA, +0.66% gained 187.05 points, or 0.7%, to end at 28,722.85 while the S&P 500 index SPX, +1.01% rose 32.61 points, or 1%, to close at 3,276.24. The Nasdaq Composite index COMP, +1.43% rose 130.37 points, or 1.4%, finishing at 9,269.68.
The Dow dropped 453.93 points Monday, a decline of 1.6%, to end at 28,535.80, while the S&P 500 shed 51.84 points, or 1.6%, to end at 3,243.63. It was the biggest decline for both indexes since Oct. 2. The Nasdaq Composite ended at 9,139.31, down 175.60 points or 1.9% — its biggest-one day fall since Aug. 23.
What drove the market?
Chinese authorities on Tuesday said deaths from the coronavirus epidemic rose to at least 106, while the number of confirmed cases in China rose to more than 4,500.
China’s already weakening economy is set to take another hit — with businesses across the country remaining shut for an extended public holiday and tourism grinding to a halt — as authorities struggle to contain the pneumonia-like coronavirus that has spread across the nation, the South China Morning Post reported.
“While the coronavirus outbreak is an unexpected risk factor that could move the markets if the situation deteriorates, and comparisons to the 2003 outbreak of severe acute respiratory syndrome (SARS) have been widespread, there are important differences,” J.P. Morgan, chief of global research, Joyce Chang wrote in a note.
“First, the Chinese government has taken serious actions much faster this time. Second, the mortality rate of the current coronavirus outbreak is 2-3% compared to +10% for SARS, and the vast majority of current casualties have been concentrated in elderly people with pre-existing conditions,” Chang said.
See: Three reasons coronavirus won’t derail China’s economy
Investors are also digesting U.S. corporate earnings reports Tuesday. Apple is among the S&P 500 index components set to report after Tuesday’s close. Apple suppliers cautioned coronavirus could impact the phone maker’s planned production hike.
“Companies are beating earnings estimates by 5% thus far, a number in line with the post-crisis median but the best beat rate since 1Q19,” Morgan Stanley equity strategist Michael Wilson wrote.
But “there is a major gap between earnings revisions and year on year performance suggesting continued positive earnings momentum is needed to help support price momentum,” he said.
See: Apple earnings: A year after holiday misfire, Apple is worth twice as much
What was on the economic calendar?
In U.S. economic data, December durable goods orders surged 2.4% in December owing to defence spending, but business investment in the civilian part of the economy declined again to finish the year on a weak note. Excluding defence spending durable goods orders sank 2.5% and the government revised orders for November to show an even bigger 3.1% drop. The weakness in orders and business investment could be a drag on the economy in 2020 unless it turns around.
The U.S. S&P CoreLogic Case-Shiller 20-city house price index increased 2.6% in November versus a year ago. At the national level, home prices were up on an annual basis by 3.5%, representing a faster rate of home-price appreciation than was recorded in October.
Meanwhile, U.S consumer confidence was running high at the start of 2020, hitting its highest level in five months. The Conference Board’s index of consumer confidence climbed to 131.6 in January from a revised 128.2 in the prior month.
Which companies were in focus?
Apple AAPL, +2.83% stock was the best performing Dow constituent, gaining 2.8% ahead of its earnings report after the market close Tuesday.
3M Co. MMM, -5.72% share closed 5.7% lower Tuesday, after the consumer and industrial products company reported fourth-quarter profit that fell short of Wall Street expectations, while revenue matched. 3M also said it was cutting 1,500 jobs as part of a restructuring.
Dow component, United Technologies Corp. UTX, +1.21%, gained 1.2% after it reported profit and sales that beat estimates.
Pfizer Inc. PFE, -5.03% shares lost 5% after the drugmaker reported profit that missed expectations, while revenue rose in line with forecasts.
Xerox Holdings Corp. XRX, +4.94% shares rose 4.9% after delivering a fourth-quarter profit that topped expectations.
What did other markets do?
Government bond yields rose, with the yield on the 10-year U.S. Treasury note TMUBMUSD10Y, +2.99% gained about 4 basis points to 1.64%.
Oil futures edged higher Tuesday, steadying after falling to a three-month low Monday on fears China’s coronavirus outbreak could dent global demand for crude. West Texas Intermediate crude for March delivery CLH20, +1.58% on the New York Mercantile Exchange rose rose 34 cents, or 0.6%, to settle at $53.48 a barrel.
Gold futures fell Tuesday as investor worries over the spread of China’s coronavirus abated somewhat. Gold for February delivery GCG20, -0.73% on Comex fell $7.60, or 0.5%, to settle at $1,569.80 an ounce.
European stocks ended slightly higher after falling to seven-week lows on Monday, as concerns about the spreading coronavirus continue to rattle markets. After ending Monday with the biggest one-day drop in nearly four months, the Stoxx Europe 600 SXXP, +0.84% closed up 0.85% at 417.57.
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 180721, -3.09% benchmark tumbled 3.2% as it reopened after its own holidays. Japan’s Nikkei 225 index NIK, -0.55% lost 0.9%. China has extended its national holiday by three days so that offices should reopen on Monday. Shanghai’s holiday was extended until Feb. 9.