Daily Markets: As Coronavirus Expands, So Do Investors' Worries

Today’s Big Picture

Investors are starting the week off with itchy fingers as they look to assess the growing impact of the coronavirus. As we write today’s Daily Markets note, roughly 2,800 people in China have been infected and 80 killed by the disease, and infections also reported in Europe and the US.  In response, Hong Kong has shut its schools until Feb. 17 to help prevent the virus from spreading further and China has locked down 17 cities. Yesterday the US’s Centers for Disease Control and Prevention (CDC) announced another case in the US bringing the total to 5 but per the CDC there are more than 60 patients under investigation for possible infection in over 20 US states. One of the main concerns is how the outbreak will impact China’s Lunar New Year holiday season that spans Jan. 25- Feb. 8, but as the virus spreads so too are investor concerns over what the potential impact could be in other parts of the world and on the global economy.  Also stoking investor worries, five Katyusha rockets were fired at the Green Zone in Baghdad last night, one directly hitting the U.S. Embassy building. 

All of the above has given rise to a risk-off mood in equity markets today. In Asia, most markets are closed for the Lunar New Year, but Japan’s Nikkei fell 2.0%. European equities are down across the board and US futures point to equities starting the day off in the red. In Stocks to Watch, we review which sectors are under pressure and which ones are moving higher in pre-market trading in response to the virus. 

And while investor minds are rightfully focused on assessing the economic as well as stock specific impact of the coronavirus, we'd remind readers that we have a big week of corporate earnings ahead of us. In the next five days, roughly half of the 30 Dow components will report their quarterly results as will 141 constituents of the S&P 500. Those reports, in addition to the ones we've already received, mean that as we exit this week investors should have a solid feel for how December quarter earnings are stacking up against expectations.

Data Download

We have a rather light economic calendar today with data that includes:

The January Ifo Business Climate Index for Germany, which came in at 95.9 vs. 96.3 in December and the expected reading of 97. Breaking the index into its components, January Current Conditions reached 99.1, up from December's 98.8, but a tad below the expected 99.2 mark. Meanwhile, the Expectations component slowed to 92.9 from 93.9 in December, missing the expected 95 reading for the month.

November Retail Sales in Mexico rose 2.1% YoY, matching a similar gain in October. The MoM view showed a sequential increase of 1.7%, rebounding from the 2.3% drop in October, and beating the consensus forecast of -0.1% for November.

Later today, we’ll receive US December New Home Sales which are expected to rise 1.5% MoM to 0.73 million. Soon after that data is published, the Dallas Fed will publish its January Manufacturing Index, which is expected to clock in at -3.1 vs. December’s -3.2.

Stocks to Watch

In response to the expanding coronavirus, we are seeing hotel, gaming, airline and other travel-related stocks under pressure including Wynn Resorts (WYNN), MGM Resorts International (MGM), Las Vegas Sands (LVS), American Airlines (AAL), United Airlines (UAL), Jet Blue (JBLU), Southwest Airlines (LUV), Royal Caribbean Cruises (RCL), Norwegian Cruise Line (NCLH), Hilton Worldwide (HLT), and Marriot International (MAR).

Meanwhile shares in companies that are thought to see demand benefit from the spreading virus — safety garment company Lakeland Industries (LAKE), Alpha Pro Tech (APT), NanoViricides (NNV) and others - are moving higher in pre-market trading.

Flow control company Gardner Denver (GDI) issued upside guidance 2019 with revenue of $2.5 billion vs. the consensus of $2.44 billion. 

Shares of clean air and performance ride products Tenneco (TEN) are up in pre-market trading as the company confirms it has been reviewing strategic alternatives, including a plan to spin off its aftermarket and ride performance business.

Homebuilder D.R. Horton (DHI) reported better than expected December quarter EPS of $1.16, $0.25 ahead of the $0.91 consensus as quarterly revenue rose 14.3% YoY to $4.02 billion, topping the $3.76 billion consensus. Horton issued in-line guidance for 2020, with revenue of $18.5-$19.1 billion vs. the $18.82 billion consensus forecast. 

Outlet center operator Tanger Factory Outlet (SKT) reported December quarter results that topped expectations for funds from operations (FFO) and revenue, but the company issued downside guidance for 2020. Tanger forecasts its 2020 FFO per share in the range of $1.96-$2.04 vs. the $2.16 consensus. 

After today's US equity markets close, we have many companies reporting their quarterly results include:

• F5 Networks (FFIV), which is expected to deliver EPS of $2.43 on $565.7 million in revenue;
• The consensus has Graco (GGG) reporting EPS of $0.39 on revenue of $392.6 million
• Juniper Networks (JNPR) is expected to deliver revenue of $1.2 billion with EPS of 0.57;
• PerkinElmer (PKI) will be matched up consensus expectations calling for EPS of $1.33 and $801 million in revenue;
• Rambus (RMBS), which is expected to deliver EPS of $0.25 on revenue of $98 million; 
• For a more detailed look at upcoming earnings reports, we recommend checking in with Nasdaq’s earnings calendar page. 

On the Horizon

• • Upcoming IPOs:
    • • Health and wellness company Avadim Health (AHI) is looking to price 5 million shares within a price range of $14-$16;
      • Arcutis Biotherapeutics (ARQT) aims to price $7.8 million shares between $15-$17;
      • Black Diamond Therapeutics (BDTX) targets its IPO with 8.9 million shares with a target price range of $16-$18;
      • Membership-based primary care platform 1Life Healthcare (ONEM) is looking to price 17.5 million shares in the range of $14-$16;
      • Consumer products company Reynolds Consumer (REYN) targets offering 47.2 million shares between $25-$28;

• For a complete list of upcoming IPOs by month, please visit the Nasdaq IPO Calendar.

• • Dates to mark:
    • • Jan 28: Before the opening of trading Paycom (PAYC) will replace WellCare (WCG) in the S&P 500
      • Jan 28-29: Federal Reserve FOMC Meeting
      • Jan 31: Brexit deadline
      • Feb. 24-27: Mobile World Congress
      • May 12-14: Google I/O Developer Conference

Thoughts for the Day

“None are so empty as those who are full of themselves.” ~ Benjamin Whichcote

Disclosures

• Tenneco (TEN) is a constituent in Tematica Research’s Cleaner Living 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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