Nasdaq ekes out record finish, other stock indexes slump as coronavirus takes toll on Apple sales

The Nasdaq Composite index eked out a record finish Tuesday, even though other major stock benchmarks fell after Apple Inc. said its second-quarter earnings would take a hit from the viral outbreak in China, reigniting fears that the disease may disrupt manufacturing supply chains and have broad implications for the global economy and financial markets.

How did benchmarks perform?

The Dow Jones Industrial Average

DJIA, -0.56%

 shed 165.89 points, or 0.6%, to settle at 29,232.10, while the S&P 500

SPX, -0.29%

 lost 9.87 points or 0.3% to close at 3,370.29.

However, the Nasdaq Composite Index

COMP, +0.02%

 gained 1.57 points, or less than 0.1%, to finish at a record 9,732.74, after flipping positive only in afternoon trade. Most of the Dow’s decline was attributed to downward pressure in shares of Apple and Dow Inc.

DOW, -1.83%,

according to Automated Insights. U.S. financial markets were closed Monday for the Presidents Day holiday.

The Dow on Friday booked a weekly gain of 1%, the S&P 500 finished the period with a gain 1.5%, while the Nasdaq Composite Index returned 2.2% for the week.

What drove the market?


AAPL, -1.83%

said Monday it won’t meet its second-quarter financial guidance because the coronavirus outbreak that originated in Hubei province in China last year is affecting its suppliers’ production. “The health and well-being of every person who helps make these products possible is our paramount priority, and we are working in close consultation with our suppliers and public health experts as this ramp continues,” the iPhone maker said in a statement.

Apple said revenue in the current quarter won’t reach its target range of between $63 billion and $67 billion due to the impact of the infectious disease.

Read: Apple’s coronavirus warning wasn’t a total surprise, but magnitude rattles Wall Street

The COVID-19 epidemic has sickened more than 73,000 people and claimed nearly 1,900 lives thus far.

U.S. markets, which have been primarily focused on corporate earnings and otherwise healthy economic data, had effectively shaken off worries fueled by the disease, but some strategists warn investors may be too dismissive.

“We haven’t really heard of any peak levels, that’s what’s beginning to sink into investors’ minds,” Peter Cardillo, chief market strategist at Spartan Capital Securities in New York, said referring to the rising number of people infected with the coronavirus.

“Also, we have gold prices soaring today,” he told MarketWatch, adding that precious metal could ascend even higher than $1,600 an ounce. “There are a lot of uncertainties and those uncertainties are weighing on the market.”

Read: Why gold prices topped $1,600 and may soon hit a more than 7-year high

“You’re trying to take the information from Apple and extrapolate that to the holdings you actually own,” Robert Pavlik, chief investment strategist at SlateStone Wealth told MarketWatch. “Obviously, there was going to be some impacts,” he said, pointing to disrupted supply chains and weaker demand. “But you just don’t know if the impacts are going to be temporary or if you’re going to lose those orders all together.”

Still, in the year to date, the Dow was up 2.4%, the S&P 500 gained 4.3%, and the Nasdaq ended 8.5% higher for the period.

See: What Apple, Walmart and other U.S. companies are saying about the coronavirus

What’s more, the expected hit to U.S. manufacturing from the coronavirus has not been felt yet: a reading on manufacturing conditions in the New York area surged to a nine-month high in February, the Federal Reserve Bank of New York said Tuesday. The forward-looking new orders component of the index hit its highest in a year.

A closely watched reading about home builder confidence was also strong in February. The National Association of Home Builders’ monthly index hit 74, down one tick from January, but still marking the strongest start to a year on record. The sentiment tracker is considered an early read on the pace of new residential construction.

But the outlook for the embattled energy sector looks tougher. Dallas Federal Reserve President Robert Kaplan said Tuesday he expects this year to see “belt-tightening” and restructurings for companies in the U.S. oil and gas sector as domestic production growth is expected to decline.

Which stocks were in focus?
How did other assets perform?

The price of a barrel of West Texas Intermediate crude for March delivery

CLH20, +0.25%

settled unchanged at $52.05 a barrel on the New York Mercantile Exchange, after gaining 3% last week.

Gold for April delivery

GCJ20, +1.15%

rose 1.1% to settle at $1,603.60 an ounce, its highest finish since March 2013, as investors flocked to haven assets.

The U.S. dollar

DXY, +0.47%

was 0.4% higher against a basket of rival currencies at 99.40.

The benchmark U.S. 10-year Treasury note

TMUBMUSD10Y, -1.72%

shed 3.2 basis points to 1.555%. The 30-year bond was lower at 2.006%, after briefly dipping below the key psychological threshold. Bond yields fall when prices rise.

In Europe, the Stoxx Europe 600

SXXP, -0.38%

slipped 0.4%, while the FTSE 100

UKX, -0.69%

finished 0.7% lower.

In Asia overnight, the China CSI 300

000300, -0.49%

 ended 0.5% lower to close at 4.057.51, the Shanghai Composite

SHCOMP, +0.05%

 edged up less than 0.1% at 2,984.97, and the Hang Seng Index

HSI, -1.54%

closed 1.5% lower at 27,530.20. The Nikkei 225

NIK, -1.40%

lost 1.4% to 23,193.80.

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Oil prices slide as investors fret about

Oil futures traded sharply lower Tuesday as concerns about the coronavirus and its impact on demand resurfaced, fueling a broader aversion to assets considered risky on Wall Street. Growing doubts that a group of global crude producers, particularly Russia, are inclined to reduce output further to stabilize prices also weighed on prices.

West Texas Intermediate crude for March delivery

CLH20, -1.86%

 lost $1.11, or 2.1%, to $50.94 a barrel on the New York Mercantile Exchange, while April Brent crude

BRNJ20, -2.05%

 fell $1.33, or 2.3%, to $56.34 a barrel on ICE Futures Europe.

“The risk-off tone was also driving oil on Tuesday, with WTI and Brent crude prices off by between 1.5%-1.8% amid fading hopes that OPEC and its allies will be able to agree to emergency production cuts to counter the deteriorating demand outlook,” wrote Raffi Boyadjian, senior investment analyst at XM in a Tuesday research note.

The decline comes after both grades last week booked their first weekly gains in six weeks, with WTI notching a 3.4% weekly rise, while Brent, the global benchmark, saw a 5.2% gain over the period, according to Dow Jones Market Data.

Crude oil traders have been waiting for signs that members of the Organization of the Petroleum Exporting Countries and other major producers like Russia — a group known as OPEC+ — will move forward a planned March meeting to sometime this month. However, Reuters, citing unnamed sources, reported that there are no indications that such a gathering will take place, heightening fears that the there isn’t sufficient will to dial back production further, in line with an advisory panel’s recommendation to shrink output by a further 600,000 barrels per day.

Russia, one of the largest exporters of crude, has been reluctant to reduce oil output further. OPEC+, is currently under an agreement to cut oil output by 1.7 million barrels per day, which ends at the end of March.

The slump in oil prices comes as the outbreak of COVID-19, the infection that reportedly originated in Wuhan, China last year, has sickened more than 72,000 people and killed more than 1,800, according to the most recent data out of China.

Commodity investors are concerned about the spread of the disease because it is expected to harm demand from China, the biggest importer of crude in the world. Infections elsewhere in the world could also harm global uptake of fossil fuels, producing a drag on prices.

Indeed, the International Energy Agency slashed its 2020 oil demand-growth forecasts by 365,000 barrels a day, a reduction of 30% to its previous forecast made in January, citing the impact of the outbreak of the novel coronavirus.

In other energy trading, March gasoline

RBH20, -0.20%

 was down 0.4% to $1.578 a gallon, after gaining 3.9% for the week, while March heating oil

HOH20, -2.11%

 lost 2.1% to $1.662 a gallon, following a 3.3% advance last week.

March natural gas

NGH20, +5.72%

 soared 5.9% to $1.945 per million British thermal units. The commodity suffered a loss of 1.1% for the week, and hit its lowest trade since March 2016.

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European chip stocks tumble on Apple warning, while HSBC slumps on profit slide

European stocks came under pressure on Tuesday, with chip makers heading south after Apple warned it will miss its quarterly revenue target due to coronavirus fallout, while shares of HSBC slid as it announced a profit slump and suspension of buybacks.

The Stoxx Europe 600 index

SXXP, -0.43%

 fell 0.5% to 429.64, a day after marking a fresh record close of 431.98, a gain of 0.3%. The German DAX 30 index

DAX, -0.64%

 dropped 0.7%, while the French CAC 40 index

PX1, -0.41%

 fell 0.5% and the FTSE 100 index

UKX, -0.71%

 slipped 0.5%.

U.S. stock futures were under pressure, with S&P 500 futures

ES00, -0.39%

 down 0.5%, while tech-heavy Nasdaq-100 futures

NQ00, -0.77%

 sliding around 0.9%. The Nikkei 225

NIK, -1.40%

 dropped over 1%, while Korea’s KOSPI

180721, -1.48%

 tumbled 1.4%.

In a warning that came while Wall Street was closed for the Presidents Day holiday, Apple

AAPL, +0.02%

 said it was unlikely to meet its revenue target for the quarter ending in March, triggering a more than 3% drop in premarket trading of shares, and losses across global equities. Apple said production among its suppliers in China is ramping up slowly after an extended Lunar New Year break to stem the spread of the virus.

In the chipmaking space, shares of Dialog Semiconductor

DLG, -5.05%

and ASM International NV

ASM, -4.49%

 slid around 5% each, while AMS

AMS, -2.42%

 fell around 4%.

Investors are also waiting for the ZEW economic sentiment index out of Germany for February for economic sentiment in Germany and the eurozone due to the coronavirus outbreak. China reported 1,886 new coronavirus infections and 98 deaths as of Tuesday. However, the Chinese Centers for Disease Control and Prevention published a study Monday showing that 80% of those infected suffered only mild illnesses.

Banks were the biggest losing sector in Europe, led by shares of HSBC

HSBC, -0.71%

HSBA, -6.40%

 dropped over 5% after Europe’s biggest lender said it would cut 35,000 jobs and strip out $100 billion in assets in a move to scale back Europe and U.S. operations as 2019 profit slumped 53%. HSBC also said its dividend would be suspended for this year and 2021 due to the costs of its restructuring.

Italian stocks were bucking a weaker trend, with the FTSEMIB Italy index

I945, +0.44%

 rising 0.1% thanks to a 26% rise in shares of Unione di Banche Italiane SpA. UBI Banca

UBI, +21.77%

 received a surprise offer from larger peer Intesa Sanpaolo SpA on Monday night to buy the Italian lender. Intesa Sanpaolo

ISP, +1.71%

 shares rose 1.4%.

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European stocks close higher as China cuts lending rate

European stocks advanced on Monday, edging higher as China moved to limit the fallout from the coronavirus halting activity in the world’s second-biggest economy.

The Stoxx Europe 600

SXXP, +0.34%

 increased 0.33% to 431.96. U.S. markets are closed in observance of Presidents Day, though U.S. stock futures

ES00, -0.17%

 traded higher in electronic trade.

China took another step to boost its economy, with the People’s Bank of China cutting its one-year lending rate, as the country announced it may postpone its annual congress in March. China’s finance minister also said the country is planning targeted tax cuts. The Shanghai Composite

SHCOMP, +2.28%

surged over 2%.

Analysts at Morgan Stanley say European companies are on track to deliver positive earnings per share growth in the fourth quarter for the first time in a year. “This is an impressive result in our opinion given soft comparisons don’t really come into play for the aggregate index until the first-quarter 2020 earnings season,” the bank’s analysts said, adding that earnings momentum may be dependent on the coronavirus.


EO, +6.53%

 shares rose 6.8% as the French auto parts company said it would outperform global automotive production by 1 to 2 percentage points this year, which is stronger than its previous forecast of 1 to 1.5 percentage point outperformance. Its net profit in 2019 slumped to €590 million from €701 million the previous year, while sales inched up 1.4% to €17.77 billion.

Shares in Bayer

BAYN, -1.01%

 slipped 1.9% and BASF

BAS, -0.93%

fell 1% as the companies were ordered to pay $265 million to a Missouri peach farmer who said the companies’ herbicide drifted from nearby farms onto his property and hurt his orchard. Both companies are appealing.

“We don’t expect this new scandal to cost as much as the glyphosate scandal may, but the timing for Bayer is not the best,” said Jean-Jacques Le Fur, an analyst at brokerage Bryan, Garnier & Co.


ALO, +3.50%

  rose 3.8% as the company reached a tentative pact to buy Bombardier’s train business for more than $7 billion.

Jupiter Fund Management

JUP, +3.66%

jumped 3.7% as the company said it was proposing to buy Merian Global Investors, which manages £22 billion in assets, for £370 million of stock as well as up to £20 million more in deferred payments. Jupiter said the cost synergies from the deal for Merian will lead to low to mid-teen accretion to underlying earnings per share in 2021, as its total assets under management will grow to £65 billion. Analysts at Berenberg estimate Jupiter is paying 11 times earnings for Merian, which is a 23% discount to listed European asset managers.

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Here are vulnerable parts of the U.S. economy that coronavirus may infect

Festering worries about the spread of COVID-19 is a potential peril for the U.S. economy, but ailing manufacturers and tepid investment are already muzzling growth.

Wall Street has been hoping for fresh signs of a rebound in business spending, but the first batch of reports for February is unlikely to deliver any grounds for optimism.

To be sure, the recently signed trade truce with China and a new free-trade agreement with Mexico and Canada have erased much of the uncertainty that companies coped with last year. The hope was that exports would rebound and investment would accelerate.

The spread of a novel coronavirus in China, however, is likely to set back a recovery in the global economy, at least in the first half of the year. Global supply chains have been disrupted and that could keep a lid on imports and exports, especially if the viral outbreak becomes even worse.

The damage is likely to be visible very soon in surveys of manufacturers in the New York and Philadelphia regions conducted by the Federal Reserve each month.

See: MarketWatch Economic Calendar

“The inability to get parts from China has idled plants in Europe and North America,” economists at Northern Trust told clients. “Global manufacturing, which has been struggling amid trade frictions, is likely to remain in retreat for a good portion of 2020.”

Read: Industrial output slumps in January for fourth decline in past five months

Goldman Sachs on Friday said the crisis could be even more costly than it previously forecast, shaving as much as 0.6% off U.S. economic growth in the first quarter. That’s a pretty big chunk for an economy expanding about 2% a year.

The anxiety is evident on Wall Street.

Even though the Dow Jones Industrial Average

DJIA, -0.09%,

S&P 500

SPX, +0.18%

and the Nasdaq Composite Index

COMP, +0.20%

leapt to levels at or near records last week, though moves were more subdued on Friday ground as investors assessed developments in China for signs of an increase spread of the infectious disease that originated in Wuhan, China last year.

The 2020 presidential election, meanwhile, raises the possibility of a far-left Democratic candidate such as Bernie Sanders winning the nomination.Sanders has promised to raise taxes on businesses and wealthy people, increase regulations and redo the U.S. health care system if elected.

The uncertain 2020 outcome might be enough to keep businesses on the sidelines, economists say, until they see who emerges as the Democratic standard-bearer against President Trump. Other Democrats such as Joe Biden and Michael Bloomberg are viewed as more business friendly.

One part of the economy that is better insulated from the health crisis abroad and political uncertainties at home is the U.S. housing market. Tumbling mortgage rates have revived growth in the past six months and should continue to give builders a boost.

Look for a pullback in new construction in January, however, after a housing starts rose in December to the highest level since 2006. Funky weather is probably exaggerating the swings in starts.

Whatever the case, the newfound eagerness of Americans to buy more homes isn’t just the result of lower mortgage rates. Consumers are very confident in the economy owing to ultralow unemployment, rising wages and the strongest labor market in decades.

Read: Consumers feel good about the economy: sentiment returns near 15-year high

While businesses play the part of the tortoise, households have been the hares. Consumer spending is keeping alive a record economic expansion that is almost 11 years old and shows no sign of mortality.

“Bottom-line, lopsided U.S. economic growth driven by consumers, government spending, and housing activity remains in place, but the production and investment side of the economy continues to languish,” said Scott Anderson, chief economist of Bank of the West.

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