◊ Stock Market News This Week ◊
Coronavirus headlines could hang over the market in the coming week, as China reported an additional 89 deaths on Sunday, bringing the total number of deaths in the mainland to 811.
The global death toll from the new coronavirus is now at 813, higher than that of SARS.
There will also be important testimony from Federal Reserve Chair Jerome Powell, who appears Tuesday and Wednesday before congressional panels on the economy and monetary policy.
Meanwhile, on the data front, market players will pay attention to this week’s U.S. consumer price data, which should give clearer signs on the pace of inflation.
There are also U.S. retail sales figures for January, which investors will be eyeing for further signs on the strength of the American consumer.
In earnings, there are 68 S&P 500 companies reporting results in the week ahead, as the earnings season on Wall Street starts to wind down.
1. Coronavirus Headlines
China reported an additional 89 deaths on Sunday, bringing the total number of people killed by the fast-spreading coronavirus to 811 in the mainland. The global death toll for the new coronavirus currently stands at 813, including one death in the Philippines and another in Hong Kong.
That number exceeds the global number of deaths from SARS, which killed at least 774 people and infected 8,096 people worldwide in 2002 and 2003, according to data from the World Health Organization.
The National Health Commission said on its website that 2,656 new cases were confirmed as of end Saturday. This brings the total number to 37,198 in mainland China.
Hubei province, the epicenter of the outbreak, accounts for most of the deaths and cases around the world.
The cumulative number of deaths in the province reached 780 after an additional 81 deaths were recorded as of end Saturday. The Hubei Provincial Health Committee said there was an additional 2,147 new cases, bringing the total of confirmed cases to 27,100.
The Chinese economy will sputter towards normal on Monday after the coronavirus outbreak forced an extended holiday, although numerous stores and factories will remain shut and many white-collar employees will continue working from home.
The toll on China’s already-slowing economy has been heavy, with Goldman Sachs (NYSE:GS) cutting its first quarter GDP target to 4% from 5.6% previously and saying an even deeper hit is possible.
2. Fed Chair Powell Testifies
Federal Reserve Chair Jerome Powell is set to deliver his semi-annual monetary policy testimony on the economy before Senate and House committees in Washington DC.
Powell is scheduled to testify before the House Financial Services Committee at 10:00AM ET (1500GMT) Tuesday. On Wednesday, he will appear in front the Senate Banking Committee, also at 10AM ET.
Text of the testimony will be released 90 minutes before he starts speaking.
The Fed chair is expected to reinforce the signal that policy is on hold given the labor market continues to tighten and private consumption growth remains solid.
3. U.S. Inflation
The Commerce Department will publish January inflation figures at 8:30AM ET (1330GMT) Thursday.
Consumer prices are expected to have risen 0.2% last month, according to estimates, matching the increase seen for December. On a yearly base, CPI is projected to climb 2.5%, up from 2.3% a month earlier.
Excluding the cost of food and fuel, core inflation prices are forecast to have gained 0.2% last month and 2.2% over the prior year.
Rising inflation would be a catalyst to push the Fed toward raising interest rates at a faster pace than currently expected. Weakening inflation will likely add to expectations that the U.S. central bank will need to slow its pace of rate hikes.
4. U.S. Retail Sales
The Commerce Department will release data on retail sales for January at 8:30AM ET (1330GMT) Friday.
The consensus forecast is that the report will show retail sales rose 0.3% last month, after rising at the same pace in December. Excluding the automobile sector, sales are also expected to increase 0.3%.
Rising retail sales over time correlate with stronger economic growth, while weaker sales signal a declining economy. Consumer spending accounts for as much as 70% of U.S. economic growth.
5. Earnings Season Starts to Wind Down
Earnings season on Wall Street moves into its final stretch.
Results from Restaurant Brands International, Allergan (NYSE:AGN), and Loews (NYSE:L) will capture the market’s attention on Monday.
Lyft (NASDAQ:LYFT), UnderArmour, AutoNation (NYSE:AN), Hilton, Hasbro (NASDAQ:HAS), Dominion Energy, and Lattice Semiconductor are on the agenda for Tuesday.
CVS Health (NYSE:CVS), Shopify, Cisco (NASDAQ:CSCO), Applied Materials (NASDAQ:AMAT), CyberArk, CME Group (NASDAQ:CME), Barrick Gold, Teva Pharma, and MGM Resorts report results on Wednesday.
Thursday sees Alibaba (NYSE:BABA), Nvidia, Pepsico (NASDAQ:PEP), Kraft Heinz (NASDAQ:KHC), Roku, AIG (NYSE:AIG), Expedia (NASDAQ:EXPE), Mattel (NASDAQ:MAT), Wyndham Hotels, and post earnings.
Finally, Canopy Growth, and Newell Brands are among the few reporting on Friday.
Day Trading: 3 Things Under The Radar This Week
◊ Day Trading News ◊
Although closing Friday on a down note, stocks rallied sharply this week as the coronavirus, earnings and employment data took most of investors’ attention (along with the wild swings in Tesla). But among things that may have gone overlooked, two U.K. companies that could be surfing the sustainability wave came into view.
The Trump administration kept coal as a talking point. And the Fed indicated that while the sidelines is still where it feels most comfortable, the impact of the coronavirus isn’t being ignored.
Here are three things that flew under the radar this week.
1. Will the Plastic Purge Create a Cardboard Boon?
With environmental and sustainability considerations playing an ever-greater role in the decisions of big institutional investors, it’s worth taking a moment to think how all those big passive bucks could move a stock that checks the right boxes.
Boxes being the operative word. Cardboard boxes, to be precise.
Two London-listed stocks offer interesting exposure to one of the great megatrends of the coming years: the shift away from plastic packaging.
Irish-based Smurfit Kappa (LON:SKG) and U.K.-based DS Smith (LON:SMDS), which is also Europe’s largest recycler of paper, both stand to benefit.
Smurfit stock rose more than 8% this week on the back of results that showed margins widening and debt (a perennial concern, given the cyclicality of the business) falling to the middle of its target range. While the breadth of its operations throws up a fair amount of problems – in the last two years it was expropriated in Venezuela and was fined $136 million for anti-competitive behavior in Italy – its core operations in Europe, the U.S. and emerging markets are solid.
DS Smith is arguably the more stable business by virtue of its concentration on fast-moving consumer goods, less prone to downturns than discretionary packages delivered by Amazon (NASDAQ:AMZN). It’s also less exposed to exotic places like Venezuela. It stands to be a big beneficiary of initiatives like that announced by U.K. supermarket chain Sainsbury’s, which promised last week to throw 1 billion pounds at getting plastic out of its supply chain, initiatives that are likely to become ever more common as the revolt against plastic spreads.
2. U.S. Sends $64 Million Canary Into Coal Mines
It sounded just like the kind of thing that would have gotten green groups all up in arms — a coal-first energy policy that conjures images of more carbon emissions in a world that needs exactly less.
Yet the U.S. Coal-FIRST — yes, in caps — initiative floated by Energy Secretary Dan Brouillette was clever enough in language that it got the attention it wanted without the bad press.
What Brouillette really announced was a $64 million “Flexible, Innovative, Resilient, Small, Transformative” initiative to develop the coal plant of the future needed to provide secure and reliable power to the U.S. grid.
“Coal is a critical resource for grid stability that will be used in developing countries around the world well into the future as they build their economies,” Brouillette said in a statement issued by the Department of Energy.
While from the text we could see where the energy secretary was going, those hearing the policy the first time — an announcement Brouillette chose to make during a speech at the Atlantic Council in Washington Friday morning — would be forgiven for thinking that President Donald Trump was trying to throw coal miners yet another lifeline ahead of his November reelection bid.
As Keith Johnson at foreignpolicy.com observed in an October post, “Trump came into the White House vowing to end the Obama administration’s so-called war on coal and Make Anthracite Great Again.”
“Instead, Trump is overseeing a cascading collapse of America’s coal industry, a trend that could have political consequences for him in the 2020 U.S. presidential election,” Johnson wrote, noting that there were eight bankruptcies filed by coal mining companies last year alone.
To be sure his words weren’t taken out of context, Brouillette said soon after announcing his Coal-FIRST policy that “the efforts we’re undertaking is not to subsidize the industry and preserve their status, if you will, as a large electricity generator.”
“It is simply to make the product cleaner and to look for alternative uses for this product or this commodity,” he said. “No one is going to deny the fact or argue with the point that coal as a percentage of U.S. electricity generation is declining and will probably continue to decline.”
“The evolving U.S. energy mix requires cleaner, more reliable, and highly efficient plants,” Steven Winberg, the DOE assistant secretary for fossil, added in the statement. “Technologies developed for the Coal FIRST initiative will lead to just that — reliable, highly efficient plants with zero or near-zero emissions.”
3. Fed Factoring in Coronavirus
For months, traders have been eager to find out what additional factors, apart from the pace of inflation, will drive a material risk to the Federal Reserve’s outlook and force it off the sidelines. But Fed Chairman Jerome Powell has given little away.
That all changed early this week when the Fed chief identified a new risk to the central bank’s outlook on the economy: the coronavirus.
“More recently, possible spillovers from the effects of the coronavirus in China have presented a new risk to the outlook,” Powell said in the latest monetary policy report, submitted to Congress on Friday
“The recent emergence of the coronavirus, however, could lead to disruptions in China that spill over to the rest of the global economy. Amid weak economic activity and dormant inflation pressures, foreign central banks generally adopted a more accommodative policy stance,” the Fed chairman added.
The Fed’s worries about the risk to its outlook are not without merit, with analysts predicting that the virus will do most of its damage in the first quarter of this year.
Goldman Sachs said the impact of the disease would lower global GDP by up to 2% in the first quarter, 1% directly from China and about 1% from spillover effects.
Whether the impact of the virus will represent a material risk to the U.S. central bank’s outlook remains a hot topic of debate.
“The near-term impact is quite large,” Goldman Sachs said. “What happens to 2020 as a whole really depends on how quickly the episode is brought under control.”
The Federal Reserve fingerprints are all over the more-than-decade-long bull run in stocks. Its efforts to steady the repo market, which began in October, have coincided with a sharp upswing in stocks. But those hoping for the Fed to act sooner rather than later could be left disappointed.
“The new coronavirus outbreak abroad has created some new risks to the near-term external growth backdrop, but there is little apparent reason for monetary policymakers to consider rate cuts at the moment, and we continue to expect the Fed to sit on the sidelines through 2020,” RBC said in a note.
Tesla Resume Production In Shanghai
◊ Tesla Production In Shanghai ◊
U.S. electric carmaker Tesla‘s factory in China’s financial hub of Shanghai will resume production on Feb. 10 with assistance to help it cope with a spreading epidemic of coronavirus, a Shanghai government official said on Saturday.
Many factories across China shut in late January for the Lunar New Year holiday that was originally due to end on Jan. 30 but which was extended in a bid to contain the spread of the new flu-like virus that has killed more than 700 people.
Tesla warned on Jan. 30 that it would see a 1-1.5 week delay in the ramp-up of Shanghai-built Model 3 cars as a result of the epidemic, which has severely disrupted communications and supply chains across China.
Tesla Vice President Tao Lin said this week that production would restart on Feb. 10.
“In view of the practical difficulties key manufacturing firms including Tesla have faced in resuming production, we will coordinate to make all efforts to help companies resume production as soon as possible,” Shanghai municipal government spokesman Xu Wei said.
The $2 billion Shanghai factory is Tesla’s first outside the United States and was built with support from local authorities. It started production in October and began deliveries last month.
The Shanghai government also said on Saturday it would ask banks to extend loans with preferential rates to small companies and exempt firms in hard-hit sectors like hospitality from value-added tax, among other measures to prop up businesses during the epidemic.
Such assistance would also apply to foreign companies, it added.