Monday February 3rd

3-02-2020

Dow futures bounce by 150 points following Friday’s 600-point rout

U.S. stock index futures pointed to a higher open on Monday as Wall Street tried to regain its footing after coronavirus fears sparked a steep sell-off to close out January. Around 8:19 a.m. ET, Dow Jones Industrial Average futures were up 164 points, indicating a gain of 159 points at the open. S&P 500 and Nasdaq 100 futures also pointed to a higher open. The death toll in China from the coronavirus reached 361 on Sunday, surpassing that of the SARS virus which lasted from 2002 to 2003, while a first death outside of China was reported in the Philippines. Worries about how the virus would impact the global economy dented U.S. stocks in their final trading day of January. The Dow dropped 603 points, or more than 2%, on Friday. The S&P 500 pulled back 1.8%, its biggest one-day drop since October. Travel and airline stocks led the way lower for the broader market last week. and are down 8.4% and 3.6%, respectively, over the past week. United has fallen more than 8% in that time while Delta and American are down more than 2.5% each. Those stocks were little changed on Monday. Investors also increased their exposure last week to Treasury yields and loaded up on protection in the options market. The 10-year Treasury yield fell on Friday to 1.505%, pushing the note’s price higher. The benchmark rate climbed back to around 1.54% on Monday. The Cboe Volatility index, widely considered the best fear gauge on Wall Street, jumped to above 18 in January from around 13 to start the month. “The shorter-term uncertainty around the coronavirus is really affecting everything,” said JJ Kinahan, chief market strategist at TD Ameritrade. “You may continue to see sort of reallocation.” Stocks in mainland China plummeted overnight in their first session since closing for the Lunar New Year holiday. The Shanghai Composite tanked by 7.7%. The Shenzhen Index fell by 8.4%. Japanese stocks also declined Monday, with the Nikkei 225 pulling back by 1%. Hong Kong’s Hang Seng index rose 0.35%, as of its final hour of trading.  South Korea’s Kospi closed largely unchanged at 2,118.88. Yet, U.S. investors are seemingly looking to buy the dip after the S&P 500 and Nasdaq recorded their worst start to a trading year since 2016. “We are looking for higher highs in the S&P 500 Index once the Coronavirus fears subside,” said Marc Chaikin, CEO of Chaikin Analytics, in a note. “Buying opportunities abound in strong sectors and industry groups.” On the data front, the final Markit Manufacturing PMI (Purchasing Managers’ Index) reading for January is due at 9:45 a.m. ET, before a range of January ISM manufacturing figures at 10 a.m. Oil prices were little changed in the face of conflicting signals on Monday, with demand concerns resulting from the coronavirus outbreak countered by the possibility of deeper crude output cuts by OPEC and its allies. U.S. West Texas Intermediate fell 10 cents to $51.46, after hitting a session low of $50.42 earlier, the lowest since January last year. Brent crude was down 48 cents, or 0.9%, at $56.14 a barrel, having earlier lost more than $1 to its lowest since January last year at $55.42. Gold fell 1% on Monday, retreating from its highest level in nearly four weeks as China’s steps to protect its economy from the impact of the coronavirus epidemic and a buoyant dollar stemmed some inflows into safe haven assets. Spot gold fell as much as 1% and was down 0.7% at $1,578.26 per ounce. Prices touched the highest since Jan. 8 earlier in the session. U.S. gold futures shed 0.3% to $1,582.90.