USA factory strength helps Wall St rebound from coronavirus fears

Marco Green
February 4, 2020

JPMorgan called this recent pullback a "multi-year buying opportunity".

In corporate news, Tesla shares jumped 16% after analysts at Argus Research and ARK Invest raised their price targets for the electric-car maker.

The Institute for Supply Management (ISM) said its index of US manufacturing rose to 50.9 last month, the highest since July, from an upwardly revised 47.8 in December.

But shares edged higher in Europe on relief the United Kingdom finally exited the European Union, while USA stocks initially surged more than 1% as factory activity unexpectedly rebounded in January after contracting for five straight months amid a surge in new orders.

Shares were mostly lower in Asia after the World Health Organization declared the pandemic a global emergency.

USA stock investors may have seen Friday's selloff as a buying opportunity, said Michael Mullaney, director of global markets research at Boston Partners.

"Once you see a slowdown in the uptick of new cases, historically the market has generally done quite well after that", Mr. Mullaney said.

China revealed on Sunday that the death toll had reached 361, surpassing that of the 2002-2003 SARS outbreak, while a first death from the virus was recorded out of the country in the Philippines. Yields on USA debt came off lows.

The Russell 2000 is down 36.26 points, or 2.2%. The S&P 500 pulled back 1.8%, its biggest one-day drop since October. "We go into this in pretty good shape, it's not like we were slowing", Jim Paulsen, Leuthold Group Inc.'s chief investment strategist, said by phone.

The outbreak is threatening China's economy as much of the nation shuts down. Those periods have led to an average loss of more than 9%.

MSCI's gauge of stocks across the globe gained 0.30% and its emerging market index lost 0.21%. "We don't have the all-clear yet", Lerner said.

Some major companies have closed factories in central China, airlines have cancelled hundreds of flights and economists are cutting growth forecasts for the world's second-largest economy.

US crude prices fell into what is generally considered a bear market on worries that the outbreak will reduce Chinese energy consumption.

Benchmark 10-year notes last fell 2/32 in price to lift their yield to 1.5238%. Taiwan's benchmark picked up 0.6 per cent, while South Korea's Kospi skidded 1.4 per cent to 2,119.01.

Virus concerns certainly have not faded, as confirmed cases and deaths continue to rise and China's Shanghai Composite plunged almost 8% after an extended holiday break, but US investors appear intent on taking advantage of last week's market losses at least in the early going. The Shanghai Composite tanked by 7.7%.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, January 30, 2020.

A reading above 50 indicates expansion in the manufacturing sector, which accounts for 11% of the USA economy.

Other reports by Click Lancashire

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