Investors will be keeping an eye on US stocks today, after the three major indices nosedived in the previous session. Economic data scheduled for release today is likely to provide some support to the markets.
Context: US stocks extended their losses on Thursday, taking the major indices to their lowest level since October. Equities came under pressure as investors scurried towards safe-haven assets amid mounting concern over the global spread of coronavirus.
Details: Nightmare on Wall Street! The Dow delivered its worst single-day point decline in history on Thursday, after shedding more than 2,000 points during the first three days of the week.
US stocks are on course for their worst weekly performance since the 2008 financial crisis. The S&P 500 recording its worst day since August 2011 on Thursday. All three major indices tumbled into oversold territory, having lost more than 10% from their most-recent peak. The Dow index plummeted 1,191 points, or 4.4%, to settle at 25,766.60. The S&P 500 tumbled 4.4%, closing the session below 3,000 points. The Nasdaq 100 declined 4.6% to finish at 8,566.48.
The recent slide was driven by President Donald Trump failing to reassure investors and reports of a surge in coronavirus cases outside China. California’s governor announced that it is monitoring around 8,400 persons who have recently travelled to China. However, the CDC (Centers for Disease Control and Prevention) announced that a patient in California had tested positive despite not having travelled outside the country. President Donald Trump named Vice President Mike Pence as leading the government’s coronavirus response efforts.
Meanwhile, the WHO indicated that it is unclear how the virus is spreading, while saying that it has “pandemic potential.” Amid the outbreak, most US companies have warned of not being able to meet their first-quarter earnings targets. Many of the biggest American companies have production facilities in China and have been forced to pull their shutters down while the virus threat continues. Also, China represents a large market for many American products. Goldman Sachs projects that US companies on average would generate zero earnings growth in 2020.
On the economic data front, US initial jobless claims climbed more than expected in the latest week, while durable goods orders came in lighter-than-expected in January. The country’s GDP growth matched expectations.
Why it matters: The US markets seem primed for posting further losses today, after having tumbled for the first four days of the week. All eyes are now on the economic reports scheduled for release today, including trade balance, personal income and expenditure, wholesale inventories, Chicago PMI and University of Michigan’s consumer sentiment index.
What to watch: US personal income, which rose 0.2% in December, is expected to increase another 0.3% in January. Personal spending is also expected to increase 0.3%. Preliminary estimates call for a 0.6% decline in January’s wholesale inventories, versus a 0.2% downturn in December. Analysts expect the Chicago PMI to rise to 45.9 in February, versus the previous reading of 42.9. The University of Michigan’s consumer sentiment index is likely to rise to 100.9 in February.
Other Markets: Most European indices closed lower on Thursday, with the UK 100, German 30 and French 40 down 3.49%, 3.19% and 3.32%, respectively.