Daily Markets: Coronavirus Jitters and Market Gyrations Continue

Today's Big Picture

US equity futures are set to fall at the open after yesterday's big gains and following a rash of fresh coronavirus reports in the US that included new cases in Washington, California, and New York. Schools are closing in Washington state. California Gov. Gavin Newsom declared a state of emergency. A cruise ship is being held off the California coast following a virus-related death and some passengers showing symptoms. Meanwhile, the first coronavirus cases have been reported in Bosnia, Poland, and Switzerland while Iceland and Spain report a spike in cases. More companies are cutting guidance due to the impact of the virus and as pulling out of conferences. The question for the markets is to what degree will measures such as Congress' $8.3 billion package and the Fed's emergency rate cut prop up the global economy in a medical crisis?

Wednesday, the major US equity indices skyrocketed after the announcement that Congress allocated $8.3 billion to combat the novel coronavirus outbreak, leaving the S&P 500 up 4.2%, the Nasdaq Composite up 3.8% and the Dow up 4.5%. The US 10-year Treasury yield fell to 0.994%, an all-time closing low. It remains below 1% this morning. The 30-year Treasury yield as also fallen to all-time lows around 1.6%.

This morning stocks in Asia rose after the International Monetary Fund announced a $50 billion aid package to help low-income and emerging market nations combat the impact of coronavirus. China's Shanghai Composite and Hong Kong's Hang Seng both rose 2%, and both Australia's ASX 200 and Japan's Nikkei 225 gained 1.1%.

European equities were not as impressed with the IMF package - unsurprising as it isn't going directly to developed nations. By midday trading, the pan-European Stoxx600 was down 1.5%, Germany's DAX was down 1.6%, the UK's FTSE down 1.7%, and Italy's FTSE MIB down 1.5%.

Data Download

OPEC agreed to cut oil production by 1.5 million barrels a day to offset the considerable demand hit from the coronavirus epidemic, but as yet, there is some question as to whether Russia is on board with the production cut.

Australia's imports and exports declined 3% MoM in January compared to an increase of 2.2% and 1.2% respectively in December.

Germany's Construction PMI for February rose to 55.8 from 54.9.

UK's new car sales fell 2.9% YoY in February after a 7.3% decline in January.

Consumer Confidence in Spain fell to 85.7 in February from January's 87.2 with the expectations sub-index slipping to 95.4 from 97.7 while the current situation component dipped to 75.9 in February from 76.6 the prior month.

On the US data front today, we have the usual weekly Thursday reports including, Jobless Claims and EIA Natural Gas Inventories this morning. We will also get the latest January Factory Order data in which investors will be scrutinizing non-defense capital goods orders, a proxy for business investment. Also, due out this morning are revisions for the December 2019 quarter's Nonfarm Productivity and Unit Labor Cost figures that both initially clocked in at 1.4%. on a QoQ basis.

Stocks to Watch

In a move that will likely shock few people, the Board of HP (HPQ) has rejected the unsolicited offer from Xerox (XRX), citing it "is not in the best interests of HP shareholders." Now to see how Xerox responds...

Over the last several days, we've written about conference and flight cancellations as well as corporate travel restrictions. Now the International Air Transport Association (IATA) is putting some figures for what all of that could mean and estimates airlines will lose $63 billion- $113 billion in passenger traffic-related revenue in 2020 depending on how the coronavirus spreads. On Feb. 20., the IATA estimated the impact to be around $20 billion. And for context, in 2019, global airline industry revenue was $838 billion, according to IATA.

This updated IATA forecast follows United Airlines (UAL) announcement yesterday it was slashing its international flights by 20% and its domestic US flights by 10% as air travel demand sags. Also yesterday Apple, (AAPL) and Netflix (NFLX) announced they join Amazon (AMZN), Facebook (FB), Intel (INTC), Twitter (TWTR), and others in not attending the South by Southwest festival given concerns about the coronavirus. We suspect we will hear similar announcements similar to the one from United from the likes of American Airlines (AAL), Delta Airlines (DAL), and others before too long. We think other hotel companies will follow the move Hyatt Hotels (H) made earlier this week and either update their 2020 guidance or pull it all together, given the uncertainty resulting from the virus.

An employee in HSBC's (HSBC) research department in London tested positive for coronavirus. Deep cleaning is taking place in affected areas. That is one large building with the potential to have exposed an awful lot of Londoners, ugh.

Nokia (NOK) and Intel (INTC) have announced a new partnership surrounding silicon technology for 5G radios and cloud infrastructure. The jointly developed custom silicon solutions are included in Nokia's AirScale radio access products being shipped worldwide as part of its 5G "Powered by ReefShark" portfolio. This follows yesterday's announcement that Nokia and Marvell (MRVL) entered a relationship in which the two will be working together on 5G multi-Radio Access Technology silicon applications that will include building out the range of ReefShark chipsets for 5G solutions.

Shares of semiconductor company Marvell jumped in aftermarket trading last night after the company reported better than expected quarterly results and lifted its guidance above consensus estimates. Tucked inside the company's guidance is the revelation it sees "the reduction of approximately 5 percent of revenue to account for coronavirus impacts we are aware of so far…" and the US government's export restriction to "certain Chinese customers" better known as Huawei. In a nod of confirmation for the 5G market, Marvell shared that during the quarter, it started ramping its first-generation 5G baseband processor for smartphones with Samsung (SSNLF).

Shares of specialty retailer Abercrombie & Fitch (ANF) also moved higher last night after the company's January quarter results topped expectations on both the top and bottom line. Comparable sales for the quarter rose 1%, and the company's cost reduction efforts that included reducing its gross square footage by 6% appear to be bearing fruit. The company issued downside guidance relative to consensus expectations for the coming year with revenue in the range of $3.59-$3.66 billion vs. the $3.66 billion expected with comparable sales down in the mid-single digits as it contends with lost sales associated with the impact of the coronavirus in Asia, Europe, and North America.

Secure access platform company Ping Identity (PING) reported better than expected December quarter results and issued upside guidance for the current quarter of $60.5-$62.25 vs. the $53.3 million consensus. We see the company's growing revenue and customer base a confirming sign that identity and digital privacy are a key theme to watch in 2020.

Following a recent FDA warning of medical devices vulnerable to hacking, Forescout Technologies (FSCT) announced a strategic partnership with Medigate, a dedicated medical device security, and asset management solution company, to help healthcare organizations continuously discover, identify, assess and secure all Internet of Medical Things, IoT, operational technology and IT network-connected devices.

Yesterday Twitter (TWTR) announced that it will offer a Snapchat-like (SNAP) feature that will allow its users to publish tweets that will disappear after 24 hours. The option will launch in Brazil. This comes shortly after it became known that Elliot Management Co has taken a sizeable stake in Twitter and plans to alter the board makeup as well as oust CEO Jack Dorsey.

A court in France recently ruled that an Uber (UBER) driver is an employee, which may mean the company will face higher taxes and labor costs if it needs to provide its drivers with more benefits. This follows California's passage of a law intended to force companies like Uber to treat contractors as employees.

ViacomCBS (VIAC) is looking to sell its Simon & Schuster book publishing unit in one of its first moves to reduce its debt load since the merger of Viacom and CBS at the end of last year.

Exxon Mobil (XOM), Advanced Micro Devices (AMD), and Teladoc (TDOC) are holding investor days today.

After US equity markets close today, investors will be digging through a number of earnings reports including those from ADT (ADT), Chuy's (CHUY), Costco Wholesale (COST), El Pollo Loco (LOCO), Immersion (IMMR), and National Beverage (FIZZ). For more details on those and other upcoming earnings reports, we suggest visiting Nasdaq's earnings calendar page.

On the Horizon

• Upcoming IPOs:
  • Environmental services company GFL Environmental (GFL) targets 73.2 million shares in the range of $20-$21.
  • Clinical-stage biopharmaceutical company IMARA Inc. (IMRA) is looking to price 4.5 million shares in the range of $16-$18.
  • For a complete list of upcoming IPOs by month, please visit the Nasdaq IPO Calendar.
• Dates to mark:
  • March 5-6: OPEC meeting
  • March 12: European Central Bank rate decision
  • March 17-18: Federal Reserve FOMC meeting
  • April 28-29: Federal Reserve FOMC meeting
  • April 30: European Central Bank rate decision
  • May 12-14: Google I/O Developer Conference
  • May 25: US stock market closed for Memorial Day

Thoughts for the Day

"Just wanted to add that you should also consider washing your hands when there's not a global virus panic." ~ Tim Murphy

Disclosures

• National Beverage (FIZZ) is a constituent in Tematica Research's Cleaner Living Index.
• Forescout Technologies (FSCT) and Ping Identity (PING) are constituents in the Foxberry Tematica Research Cybersecurity & Data Privacy Index.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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