Stocks rise on Wall Street, but virus worries remain

NEW YORK  — Stocks rose in much of the world Monday and recovered some of their losses from earlier weeks, but markets are still far from giving the all-clear on the virus that has spread to more than 20 countries and infected more than 17,000 people.

FILE – The front of the New York Stock Exchange is shown in this Jan. 31, 2020, file photo. Stocks are opening solidly higher on Wall Street as the market finds its footing after two weeks of losses amid uncertainty over the virus outbreak that began in China. (AP Photo/Mark Lennihan, File)

Chinese stocks tumbled nearly 8% after investors there got a chance to catch up to losses that already swept through other markets.

Monday was the first day of trading in more than a week in Shanghai, and the losses would likely have been bigger if not for moves by Chinese authorities, including the pumping of $173 billion into the financial system.

In the United States, meanwhile, a warning signal of recession in the bond market continued to flash red.

The price of crude oil also kept sliding on worries that a global economy weakened by the virus will burn less fuel, and prices fell for copper and other building blocks of the economy.

The S&P 500 rose 23.40 points, or 0.7%, to 3,248.92 and clawed back some of its losses following its first back-to-back weekly drops of 1% since August.

The Dow Jones Industrial Average gained 143.78, or 0.5%, to 28,399.81, and the Nasdaq composite climbed 122.47, or 1.3%, to 9,273.40. Each of the three indexes remains 1.4% to 3.2% below their records set last month.

All the unsettled trading is a sharp departure from 2019, which saw stocks and bonds make powerful moves higher, and it’s the result of growing uncertainty.

Nobody knows how much the virus will ultimately hurt economies and corporate profits, let alone human lives, around the world. Past disease outbreaks have seen stocks hit bottom when the number of new cases peaked.

This new virus that first spread from China has already shut factories there, halted some global air traffic and caused economists to cut their 2020 growth forecasts for China, the world’s second-largest economy.

The most immediate threat seems to be for travel and tourism companies. But with supply chains running around the world and China providing more revenue to S&P 500 companies than any country besides the United States, CEOs from a wide range of industries have said they expect some kind of hit to their businesses.

The fears have also struck just as investors believed economic growth would re-accelerate around the world, thanks in large part to interest-rate cuts and bold actions by the Federal Reserve and other central banks around the world.

A report on Monday said U.S. manufacturing returned to growth in January for the first time in six months, but many investors discounted it because it doesn’t fully reflect all the virus concerns.

“Think about what global central bankers are thinking about now,” said Emily Roland, co-chief investment strategist at John Hancock Investment Management. She imagined them saying: “Are you kidding me? We pumped so much liquidity into the economy last year, and now the yield curve is inverting again?”

The yield curve is a tool inside the bond market which investors see as a rather reliable predictor of recessions, though it doesn’t have a perfect track record.

It triggers when it becomes “inverted,” or when short-term Treasurys offer higher yields than longer-term Treasurys.

On Monday, the three-month yield was at 1.56%, above the 1.52% yield of the 10-year, which itself rose from 1.51% late Friday.
“Sentiment builds on sentiment, and there’s so much uncertainty right now,” Roland said.

“We’re not ready to call the all-clear until we see a sustained re-acceleration not only in earnings estimates but also in the economic data.”

In the U.S. stock market, gains were relatively widespread on Monday with close to two stocks rising for every one falling. Tesla surged 19.9% for its biggest gain since 2013, bringing its one-year return to nearly 150%, following optimistic research reports by analysts.

Nike jumped 3.1% to help drive Dow Jones Industrial Average higher as investors try to handicap how much its earnings will be hurt by the virus.

Like other companies that do lots of business with China, it had dropped sharply in earlier weeks. Nearly 18% of its revenue last quarter came from China.

Toy companies that ship summer products like pool toys need to have factories in China ramp up production by March 1, according to Steve Pasierb, CEO of the Toy Industry Association.

He said he hears nervousness from executives across the industry about possible delays in production.

“There’s complete uncertainty,” he said. “This could be huge if it goes on for months.”

Jay Foreman, CEO of Basic Fun, said that he’s on “eggshells” right now, hoping that the factories in China will resume production by early April, which he considers the best-case scenario.

European stock markets were higher on Monday. France’s CAC 40 rose 0.5%, Germany’s DAX returned 0.5% and the FTSE 100 in London was up 0.6%.

The 7.7% loss for stocks in Shanghai was the headliner in Asia, but other markets were mixed. The Hang Seng in Hong Kong rose 0.2%, the Nikkei 225 in Japan lost 1% and the Kospi in South Korea was virtually flat.

Benchmark U.S. crude tumbled another $1.45, or 2.8%, to settle at $50.11 per barrel on worries about demand. It had been above $63 toward the start of the year, before the virus worries exploded. Brent crude, the international standard, fell $2.17, or 3.8%, to settle at $54.45 per barrel.

In other commodities trading, wholesale gasoline fell 3 cents to $1.47 per gallon. Heating oil declined 5 cents to $1.58 per gallon. Natural gas fell 2 cents to $1.82 per 1,000 cubic feet. Gold fell $5.70 to $1,577.20 per ounce, silver fell 33 cents to $17.64 per ounce and copper fell 1 cent to $2.51 per pound.

The dollar rose to 108.67 Japanese yen from 108.37 yen on Friday. The euro weakened to $1.1063 from $1.1089.

GSG