Some analysts make the case that fears over the coronavirus could provide investors with a catalyst to sell after a torrid 2019 rally.
“We’re being told the market is selling off because of the coronavirus. I think there is a little bit more to it than that,” Robert Pavlik, chief market strategist at SlateStone Wealth. “I think it’s people looking for a reason to take some short-term profits,” he told MarketWatch. “I think this is going to turn out to be an overreaction.”
Sahak Manuelian, managing director of equity trading at Wedbush Securities, pointed to a “negative risk-off mentality” in equities globally, but also thinks investors will focus on corporate earnings as more businesses report fourth-quarter results.
“A lot of attention is going to be on what kind of full-year 2020 guidance is going to be given,” he told MarketWatch.
Adding to downside pressure was the sluggish start to corporate earnings season with indexes near record levels.
Earnings are now expected to show a decline of 0.5% for the fourth quarter, according to Refinitiv data. Of the 87 companies that have reported though Monday morning, 67.8 have topped expectations, below the 74% rate from the past four quarters.
As global shares sell off, JPMorgan Chase & Co. strategists say this could end up a buying opportunity. They retained a constructive view on world equities, adding that in the past, the more stocks have fallen on similar fears, the more they have rebounded later. Both the S&P 500 and MSCI All-Country World Index surged to records this month as 2020 started on a jubilant note amid optimism over the U.S.-China trade deal.
Nearly half of the 30 Dow components are slated to report results this week from the holiday season, potentially marking the biggest test for the blue-chip index in many years.
Travel stocks Expedia, Carnival and Marriott International all pulled back at least 2.1%. Consumer shares with exposure to China such as Apple, Disney, Nike and Estee Lauder all dropped at least 1.8%.
In economic news, sales of newly constructed homes in the U.S. dropped 0.4% monthly in December to a seasonally adjusted annual rate of 694,000, the government reported Monday.
“Despite the softer than expected report, we expect that pace of new home sales to pick up in early 2020, supported by rises in inventory and strong demand,” wrote a team of economists led by Oxford Economics’ Nancy Vanden Houten, in a client note.
About 8.11 billion shares changed hands in U.S. exchanges, compared with the 7.31 billion daily average over the last 20 sessions.
The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -4.60% tumbled 7.5 basis points to 1.605%, putting the benchmark bond’s rate less than 40 basis points away from its all-time low of 1.32% on June 2016.
West Texas Intermediate crude for March delivery CLH20, -2.51%, slid $1.05, or 1.9%, to settle at $53.14 a barrel on the New York Mercantile Exchange, a more than 3-month low, amid fears that China’s deadly influenza could hurt global energy demand.
Here are some events to watch out for this week:
• Tech giants Apple, SAP, Facebook, Samsung and South Korean chip maker SK Hynix announce earnings, as do Boeing, International Paper, GE, United Technologies, Lockheed Martin, Caterpillar, Unilever, Exxon Mobil, Shell and Chevron.
• Fed policy makers are expected to open 2020 the same way they closed 2019 -- by holding interest rates steady Wednesday.
• Goldman Sachs will hold its first-ever Investor Day on Wednesday.
• The BOE meeting is highly anticipated Thursday after a series of dovish comments raised speculation policy makers could lower interest rates.
• The U.S. reports fourth-quarter GDP Thursday.
• The U.K. is scheduled to leave the European Union Friday.
Currencies
• The Bloomberg Dollar Spot Index rose 0.2%.
• The euro was little changed at $1.102.
• The Japanese yen appreciated 0.4% to 108.88 per dollar.
By: via @AlliesFin Serve T.ME/ALLiESFiN
