Investors will be watching US stocks today, with the Dow and S&P 500 index posting declines for the fifth consecutive day on Wednesday.
Context: US stocks closed mostly lower again on Wednesday, even after posting gains at the beginning of the session. Markets started losing the initial momentum on Wednesday afternoon after there were reports of the coronavirus spreading to the Americas and Europe.
Details: After losing around 2,000 points over the first two days of the week, the Dow suffered a loss of over 100 points on Wednesday. Investors scurried out of certain stocks on concerns of the coronavirus impacting the supply chains and financials of those companies.
The Dow declined 0.5% to close at 26,957.50, representing the biggest five-day loss in terms of points for the index. The S&P 500 fell 0.4%, while the Nasdaq 100 snapped its four-day drop by gaining 0.2% to settle at 8,980.77. The Dow and S&P 500 have erased all the gains they had recorded year to date. The five-day decline in the S&P 500 index also marks its largest percentage decline since February 8, 2018. Energy and healthcare were the worst performing sectors in the S&P 500 index.
US markets had rallied during the morning session, driven by hopes of central banks preparing for more stimulus initiatives to counter the coronavirus impact. However, the rise in confirmed cases and deaths outside the Chinese borders weakened the rally and moved the indices back into the red.
There has been a rapid increase in new virus cases from South Korea and Italy. South Korea’s total number of infections surged to 1,595 on Wednesday. China reported 29 new deaths and 433 new confirmed cases. On the other hand, many US companies have warned of a profit hit due to the virus. Microsoft was the latest to issue a warning, saying that it would not be able to meet its third-quarter forecast.
On the economic data front, US home sales climbed 7.9% to an annual rate of 764,000 in January, surging to its highest level in 12 years. The gains were driven by increased mortgage application volumes.
Why it matters: The losses posted by US markets are likely to deepen today, with US futures pointing towards a lower open this morning. After the weak performance of US stocks in the previous sessions, all eyes are on the economic data scheduled for release today.
What to watch: The markets will focus on the major indices, with US stock futures pointing towards a lower start again. The US economy is expected to grow 2.1% in the fourth quarter, unchanged from the previous quarter’s pace. Durable goods orders, which increased 2.4% in December, are likely to decline 1.5% in January. Analysts are projecting initial jobless claims to rise to 212,000 in the latest week. Preliminary estimates call for a 2.2% rise in the pending home sales index for January, compared to a 4.9% drop in the previous month. Analysts expect the Kansas City Fed's manufacturing production index to drop to -5 in February, versus January’s reading of -4.
Other Markets: European indices closed mostly higher on Wednesday, with the UK 100 and French 40 up 0.35% and 0.09%, respectively, and the German 30 closing down 0.12%.