The Tuesday Market Minute
- Global stocks mixed as coronavirus concerns continue to hammer stocks in Asia, while, U.S. and European markets key on earnings — and Apple — as quarterly reporting kicks into high gear.
- China will extend Lunar New Year closures in some cities, including Shanghai, until February 9 as the death toll from the virus rises to 106 and the number of confirmed cases surges to 4,500.
- Hong Kong to suspend high-speed rail service to mainland, travel permits and reduce flights as of January 30.
- Apple will publish its first quarter earnings after the close of trading today, with investors looking for a bottom line of $4.54 per share on revenues that could reach $88.4 billion.
- U.S. equity futures suggest an opening bell rebound on Wall Street ahead of durable goods orders at 8:30 am, consumer confidence data at 10:00 am and earnings from United Technologies, 3M, Lockheed Martin and Harley-Davidson before the start of trading.
U.S equity futures look set to rebound firmly Tuesday as investors prepare for a series of bluechip corporate earnings, highlight by an after-the-bell update from Apple (AAPL) – Get Report, that could temporarily shift the market’s focus from the still-concerning spread of the deadly coronavirus in Asia.
Futures pared some of those early-session gains, however, after Hong Kong leader Carrie Lam said she would suspend high speed rail travel from the China-controlled city to the mainland, while reducing flights and limiting individual travel permits, as part of the territory’s efforts to hold the spread of the virus at bay.
Apple, the world’s most valuable tech sector and perhaps the key directional driver for broader U.S. markets, is expected to post first quarter earnings of $4.54 per share on sales of around $88.4 billion. Investors will also be looking for the iPhone maker’s near-term sales outlook and the impact that 5G network rollouts will have on handset sales in the coming year.
With notable industrial stocks such as Lockheed Martin (LMT) – Get Report, United Technologies (UTX) – Get Report and 3M Co (MMM) – Get Report reporting before the opening bell, Tuesday’s session, and indeed much of this week’s trading, is likely to be dominated by both corporate earnings outlooks and the Federal Reserve’s interest rate decision on Wednesday afternoon.
Thus far, with around 90 S&P 500 companies reporting, 68% have topped earnings expectations, according to Refinitiv data, just above the long-term average of 65%. Overall profits, however, are still expected to fall 0.8% from the same period last year to $333.8 billion, before notching steady improvement between now and the fourth quarter of 2020.
That said, the economic impact of the deadly coronavirus, which has taken the lives of more than 100 people in China as infections have surged past 4,500, continues to linger over markets around the world, capping gains on Wall Street and keeping safe-haven assets firmly bid.
Futures contracts tied to the Dow Jones Industrial Average suggest a 69 point opening bell gain for the 30-stock average, which suffered its biggest single-day decline since October 2 with a 453 point plunge that pulled it into negative territory for the year.
Contracts lined to the S&P 500, meanwhile, are indicating a 6 point bump for the broader benchmark, which is still holding on to a January gain of 0.4% after yesterday”s sharp sell-off.
Asia stocks, however, continue to be hit by the broader coronavirus concerns, especially now that China has extended the Lunar New Year holiday for key cities such as Shanghai until February 9, ten days more than its traditional close.
Japan’s Economy Minister, Yasutoshi Nishimura, told reporters in Tokyo Tuesday that if “the situation takes longer to subside, we’re concerned it could hurt Japanese exports, output and corporate profits via the impact on Chinese consumption and production.”
Japan’s Nikkei 225 extended declines Tuesday, falling another 0.55% to close at 23,215.71 points while the region-wide MSCI ex-Japan index slumped 0.81%. With China’s equity markets close, investors used the yuan as a proxy for risk in the world’s second-largest economy, pushing it to a four-week low of 6.9755 against the U.S. dollar.
European stocks, however, were modestly firmer at the start of trading Tuesday, with the Stoxx 600 rising 0.05% in Frankfurt and Britain’s FTSE 100 gaining 0.21% in London as both the euro and the pound eased against a resurgent U.S. dollar.
Benchmark 10-year U.S. Treasury note yields, which hit an October 10 low of 1.598% yesterday, eased modestly to 1.618% in overnight trading, but the U.S> dollar index remained firmly in favor, rising 0.05% against a basket of six global currency peers to a near two-month hiigh of 98.00.
The dollar’s strength, as well as lingering concerns for energy demand in a China economy that could be shut down for at least another week in an effort to contain the coronavirus, kept oil prices in the red for a sixth consecutive session in overnight trading ahead of weekly inventory data from the American Petroleum Institute later today.
Brent crude futures contracts for March delivery, the global benchmark for pricing, were last see seen 57 cents lower from their Friday close in New York and trading at $58.75 per barrel, while WTI contracts for the same month were marked 31 cents lower at $52.83 per barrel.