The S&P 500 and Nasdaq notched record closes on Tuesday, but the Dow finished virtually unchanged. Investors attributed optimism surrounding equities to signs of a slowdown of new cases of COVID-19 in China, while the top Federal Reserve chief said the central bank is monitoring the economic impact of the viral outbreak.
What did the major indexes do?
The Dow Jones Industrial Average (DOW:DJIA) edged 0.48 point lower to close at 29,276.34 after setting an intraday record of 29,415.39 earlier in the session. The S&P 500 (S&P:SPX) advanced 5.66 points, or 0.2%, to 3,357.75, and the Nasdaq Composite Index (AMERICAN:COMP) rose 10.55 points, or 0.1%, to finish at 9,638.94, with both indexes notching all-time closing highs.
What drove the market?
Federal Reserve Chairman Jerome Powell said the central bank is monitoring the impact of the novel virus, the disease caused by a new strain of coronavirus that emerged in Wuhan, China, in late 2019, on global economic growth. However, he added that the U.S. economy appeared resilient to overseas headwinds.
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Investors have attributed the bullish trading in stocks to hopes that the Fed would ease policy if a global economic shock from the coronavirus made its way to U.S. shores.
“With fundamentals strong, a robust employment situation, and inflation on track, Powell’s cautiously optimistic stance isn’t too surprising, especially since coronavirus fears and trade tensions are at bay,” wrote Mike Loewengart, vice president of investment strategy at E-Trade, in an email. “What remains to be seen is the lasting effect of the coronavirus on global growth, which is already tepid.”
China’s National Health Commission on Tuesday said in its daily update that 108 deaths were reported in the previous 24 hours, bringing the total to 1,016 deaths in mainland China since the disease emerged in December. The number of new, confirmed cases fell to 2,478 from 3,062 a day earlier, bringing the total to 42,638 on the mainland, including some of whom have since recovered and been released from treatment.
With some businesses in China going back to work after an extended Lunar New Year holiday aimed at containing the virus, investors “are starting to question the initial reaction to the health crisis. Those brave enough are stepping back into the market as they feel the selloff was overdone at the start of the situation,” he said.
On the data front, the National Federation of Independent Business said its index of small-business optimism rebounded from a dip at the end of 2019, rising to 104.3 points in January from a December reading of 102.7. Meanwhile, the number of job openings in the U.S. fell to a two-year low of 6.42 million in December from 6.79 million.
Other Fed speakers Tuesday included James Bullard, a nonvoting member of the Fed’s rate-setting committee, who said while trade uncertainty has lessened in recent weeks, it remains to be seen whether a revised Nafta, or North American Free Trade Agreement, and a phase-one U.S.-China trade deal will lead to greater business investment.
Minneapolis Fed President Neel Kashkari, who is a voter, called for further interest-rate cuts during a town-hall discussion in Kalispell, Mont, according to Reuters .
Which companies were in focus?
Shares of T-Mobile US and Sprint surged after The Wall Street Journal said a federal judge approved their merger. Sprint’s stock closed 77.5% higher Tuesday, while T-Mobile shares gained 12%
Shares of Under Armour Inc. ’s Class A shares (NYS:UA) dropped 19% after the maker of athletic apparel reported fourth-quarter earnings and revenue that missed expectations and provided downbeat guidance.
Ho me Depot Inc. (NYS:HD) said Tuesday it would hire 80,000 people for its spring season, the same number as last year. Shares gained 0.4% Tuesday.
Shares of Slack Technologies Inc. (NYS:WORK) fell 2.1%, after the company poured cold water on a news report that said International Business Machines Corp . (NYS:IBM) would bring the service to its employees world-wide. Slack said IBM had already been its largest customer for several years and wouldn’t update its financial guidance. Shares of Slack were halted late Monday when they gained 15%.
Goodyear Tire & Rubber Co. shares (NAS:GT) slumped 12.4% after it reported revenues and earnings below analyst expectations. It also said that its China operations had been disrupted by the coronavirus outbreak.
How did other markets trade?
In bonds, the 10-year Treasury note yield (XTUP:BX:TMUBMUSD10Y) rose 4.2 basis points to 1.589%. Bond prices move in the opposite direction of yields.
The ICE U.S. Dollar index (IFUS:DXY) was down less than 0.1%, but has gained against its major rivals by around 2.5% year-to-date.
West Texas Intermediate crude futures for March delivery rose 37 cents, or nearly 0.8%, to settle at $49.94 a barrel on the New York Mercantile Exchange. In precious metals, gold for April delivery fell $9.40, or 0.6%, to settle at $1,570.10 an ounce on Comex.
In Europe, stocks traded sharply higher, with the Stoxx Europe 600 index (STOXX:XX:SXXP) closing up 0.9%. In Asia, the CSI 300 (CHINA:XX:000300) , the benchmark for mainland China listed stocks, gained 0.9%.