Wednesday February 5th

5-02-2020

Stock rally expected to continue as Dow futures jump nearly 300 points

U.S. stock index futures pointed to a higher open on Wednesday as the market continues to bounce back from a steep sell-off that was sparked by worries over the coronavirus. Around 6 a.m. ET, Dow futures indicated an implied open of more than 280 points, while futures in the S&P 500 and Nasdaq also pointed higher. Stock futures turned higher in overnight trading after Reuters said a Chinese TV media outlet had reported that a research team at Zhejiang University had found an effective drug to treat people with the new coronavirus. The news agency, citing traders, suggested this was a reason for the move higher in stocks. Markets remain attuned to the coronavirus outbreak as confirmed cases in China near 25,000, claiming the lives of 490 people. U.S. President Donald Trump said during Tuesday’s State of the Union address that the U.S. is “working closely” with the Chinese government to contain the virus. Stocks rallied on Tuesday as the market recovered from a huge sell-off on Friday, with the Dow closing 407.82 points higher. Corporate earnings remain in focus, with a number of companies weighing the impact of the coronavirus on forecasts. Disney on Tuesday topped first-quarter earnings expectations on both the top and bottom lines, but warned of a $175 million hit to its theme parks as a result of the coronavirus outbreak. Meanwhile, Ford shares slid on Tuesday after the carmaker posted a fourth-quarter loss and disappointing 2020 guidance, warning of virus-related manufacturing shutdowns. Shares of Nike were also under pressure after the company said it has closed half of its stores in China, saying it will have a “material impact” on its operations across the country. General Motors, GlaxoSmithKline, and Merck are among those reporting earnings before the opening bell on Wednesday, while Qualcomm and Fox Corp. are set to report after the close of trade. On the data front, ADP private payrolls numbers for January are due at 8:15 a.m. ET, before December international trade numbers at 8:30 a.m. ET. Final January services PMI (Purchasing Managers’ Index) readings are expected at 9:45 a.m. ET, followed by ISM non-manufacturing data at 10 a.m. Asia Pacific markets mostly traded higher on Wednesday, building on gains from the previous session, after stocks sold off recently due to worries over the new coronavirus outbreaks. Chinese shares led gains in the region, with the Shanghai composite up 1.25% to around 2,818.09. The Shenzhen component index rose 2.14% to 10,305.50 and the Shenzhen composite added 2.48% to about 1,678.63. The Chinext start-up board was up more than 3% to around 2,180.29. Japan’s Nikkei 225 advanced 1.02% to 23,319.56 while the Topix index added 1.04% to 1,701.83. In South Korea, the Kospi index erased some of its near 1% gains to trade up 0.36% at 2,165.63. Hong Kong’s Hang Seng index gave up most of its gains of around 0.83% earlier to trade up 0.27%. Oil prices jumped by more than 3% on Wednesday on reports that scientists have developed an effective drug against the fast-spreading coronavirus that has weighed heavily on global economic activity. News that the Organization of the Petroleum Exporting Countries (OPEC) and its producer allies are considering further output cuts to counter a potential squeeze on global oil demand further supported that had collapsed by more than 20% since early January. Both Brent crude oil futures and U.S. West Texas Intermediate crude jumped by more than 2% in morning trade. Brent was up $1.37, or 2.5%, at $55.33 a barrel and WTI was up $1.20, or 2.4%, at $50.81. Gold prices rose on Wednesday, recovering from a sharp drop in the previous session, as safe-haven demand was boosted by worries over a fast-spreading coronavirus outbreak in China. Spot gold climbed 0.12% to $1,554.1 per ounce, after declining 1.5% on Tuesday - the biggest since early November. U.S. gold futures rose 0.2% to $1,558.60.