An earlier version of this article stated incorrect record closing levels. The article has been corrected.
The Nasdaq Composite and S&P 500 clinched closing records on Monday as investors took heart in mostly solid U.S. fourth-quarter corporate earnings and looked beyond concerns about the coronavirus outbreak’s potential disruption to global supply chains.
How did the major indexes fare?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.10% rose 174.31 points to end at 29,276.82, a gain of 0.6%. The S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.34% advanced 24.38 points, or 0.7%, ending at 3,352.09. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.37% added 107.88 points, or 1.1%, to finish at 9,628.39.
What drove the market?
“Earnings seem to be the story,” Sahak Manuelian, managing director of equity trading at Wedbush Securities, told MarketWatch. “They have been fairly strong, with numbers coming in slightly better and guidance is looking OK too. This market is really hanging in there.”
The World Health Organization warned Monday that the spread of the coronavirus to people who have not visited China could be “the spark that becomes a bigger fire,” while urging nations to fight the epidemic together.
Expectations for the Federal Reserve to prop up the economy with easy financial conditions if the coronavirus spills over into the U.S., also helped to support stocks. Investors say a continuation of ultraloose monetary policy could explain the disconnect between depressed long-dated bond yields, a sign that investors are piling into haven assets, and records in major equity benchmarks.
“Coronavirus fears remain at the top of investors’ minds,” wrote Arnim Holzer, macro strategist for EAB Investment Group, underscoring that bonds seem to be confirming those concerns more than equities. “The Fed’s liquidity support can help to support valuations,” Holzer said of stock prices. But added that “ultimately muted Asian GDP growth and earnings expectations” will be important to watch.
Chinese factories started to reopen on Monday, but local government efforts to limit the spread of the virus has led some businesses to stay closed. A prolonged closure could exacerbate the nation’s slowdown and upend global supply chains that rely on Chinese manufacturers to keep retailers stocked.
China’s health ministry on Monday said another 3,062 cases had been reported over the previous 24 hours, raising the mainland’s total to 40,171. The death toll grew by 97 to 910, surpassing the 774 attributed to the severe acute respiratory syndrome, or SARS, a 2003 viral outbreak that originated in China.
“As long as investors don’t perceive a threat to corporate earnings and the U.S. economy from the virus, then the market can continue to trade higher on better economic data and better-than-expected earnings,” Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, told MarketWatch in an email.
Meanwhile, the director-general of the World Health Organization warned Sunday that countries outside of China should be prepared for the spread of the coronavirus to accelerate.