Closing Market Summary: Health Care Paces Midweek BounceThe stock market rallied on Wednesday with the Dow (+4.5%), Nasdaq (+3.9%), and S&P 500 (+4.2%) erasing their losses from Tuesday.
Equities benefited from a general improvement in sentiment, which was reflected by a mixed stock session in Asia and gains in European markets. That provided significant encouragement for U.S. equities even though there was no improvement on the coronavirus front. On the contrary, Italy's Prime Minister, Giuseppe Conte, warned that Italy's health care system, which is among the best in the world, is on the verge of being overwhelmed while sporting events will be conducted without fans through April 3.
Once again, the Treasury market did not share the optimism of the stock market, though midday action saw Treasuries back down from their highs as equities rallied to best levels of the day. The long bond recorded a slight loss, lifting its yield by a basis point to 1.64%, while the 10-yr note and shorter tenors finished in the green. The 10-yr yield slipped another two basis points to 0.99% while the 2-yr yield fell nine basis points to 0.63%.
All eleven sectors finished with gains of 2.0% or more while six groups added more than 4.0%. While the rally produced big gains, there was a defensive quality to it. The health care sector (+5.8%) held the lead throughout the day thanks to big gains in insurer stocks after Joe Biden won the bulk of yesterday's primaries, seizing the delegate count lead from Bernie Sanders, who favors nationalizing the health insurance industry.
Health care was followed by higher yielding groups like utilities (+5.7%) and consumer staples (+4.9%) while the top-weighted technology sector (+4.3%) finished just ahead of the broader market. Chipmakers had a particularly strong showing, as the PHLX Semiconductor Index jumped 4.9% with all 30 components ending in the green.
Stocks extended their rally in the afternoon, which helped battered airline shares climb out of the red after American Airlines (AAL 18.52, +0.67, +3.8%), JetBlue Airways (JBLU 15.54, +0.53, +3.5%), and United Airlines (UAL 59.47, +1.18, +2.0%) hit fresh multi-year lows. Falling demand for travel prompted United Airlines to reduce its domestic routes for April by 10% while international service will be reduced by 20%.
The energy sector (+2.2%) was the weakest performer as crude oil slid $0.46, or 1.0%, to $46.77/bbl.
Congress is expected to approve $7.80 bln in emergency spending on efforts to counter the outbreak of the coronavirus.
Reviewing today's economic data:
- The ISM Non-Manufacturing Index for February registered a 57.3% reading (consensus 54.8%) versus 55.5% in January. The February reading is the highest reading for the index since February 2019
- The key takeaway from the report is that the February number is encouraging in its own right, but with the coronavirus caseload rising in the U.S. and the public's attention to containing it increasing, doubts are festering that the strength can be sustained
- The ADP Employment Change report pointed to the addition of 183,000 nonfarm payrolls in February (consensus 165,000) while the January reading was revised down to 209,000 from 291,000
- The weekly MBA Mortgage Index spiked 15.1% to follow last week's 1.5% increase. The Refinance Index spiked 26.0% while the Purchase Index fell 2.7%
- The Federal Reserve's March Beige Book noted that activity expanded at a modest to moderate pace during the survey period, though St. Louis and Kansas City reported no growth. Consumer spending increased, but in uneven fashion. There was no significant growth in tourism with early indications of reduced activity due to the coronavirus
Weekly Initial Claims (Briefing.com consensus 215,000; prior 219,000), Continuing Claims (prior 1.724 mln), revised Q4 Productivity (consensus 1.3%; prior 1.4%), and revised Q4 Unit Labor Costs (consensus 1.4%; prior 1.4%) will be reported at 8:30 ET tomorrow, followed by January Factor Orders (Briefing.com consensus -0.1%; prior 1.8%) at 10:00 ET.
- Nasdaq Composite +0.5% YTD
- S&P 500 -3.1% YTD
- Dow Jones Industrial Average -5.1% YTD
- Russell 2000 -8.2% YTD
Coronavirus Spreads in California, New York State as U.S. Death Toll Rises to 11
U.S. deaths from the coronavirus grew with California announcing its first fatality linked to the viral infection.
The U.S. death toll from the new coronavirus grew to 11 Wednesday, with California announcing its first fatality linked to the viral infection.
An elderly California patient with underlying health conditions died, Placer County health officials said. The patient was likely exposed to the virus while aboard a cruise ship last month where an outbreak took place.
Also Wednesday, officials in Washington state said a 10th person died there from the virus. All but one of the U.S. deaths linked to the outbreak have occurred in the state. Washington now has at least 39 confirmed infections, including at least 12 new cases Wednesday, according to its health department.
Meantime, authorities announced nine new cases in California and four in New York state.
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Los Angeles County announced six new cases Wednesday, as local officials enacted emergency declarations and warned residents to prepare for social and business disruptions.
Barbara Ferrar, director of the Los Angeles County Department of Public Health, said up to 3,000 people have been monitored to date and fewer than a dozen have developed symptoms. In the six new cases reported Wednesday, health officials said they know how the people came in contact with the virus and it didn’t involve community transmission.
Elsewhere in California, Orange County announced two new cases and Contra Costa County announced its first. The two people in Orange County had a history of travel to affected countries, while the Contra Costa County patient didn’t.
Now equipped with testing capabilities, officials in Orange County said they expect to find more cases. “The more you look for something, the more likely you are to find it,” said Nichole Quick, Orange County’s health officer.
The cities of Pasadena, northeast of Los Angeles, and Long Beach also said they would declare local emergencies, though neither has a confirmed case of the virus.
New York, meanwhile, reported four additional cases Wednesday, all linked to an earlier case in Westchester County north of New York City, said Gov. Andrew Cuomo. The new cases include the man’s wife, children and the neighbor who drove him to a hospital.
Overall, the U.S. has 138 cases of the virus, according to figures from Johns Hopkins University.
Italy orders school closures in bid to contain coronavirus
Move marks escalation of efforts to halt spread of Europe’s worst outbreak
The Italian government has ordered the closure of all schools and universities as Rome stepped up its effort to contain the largest coronavirus outbreak in Europe.
Italy is struggling to halt the spread of a virus that has killed 107 people in the country and infected more than 2,700. Eleven towns in Italy’s wealthy north — and their 50,000 residents — are under lockdown while public gatherings and sporting events have been banned in the most affected regions.
Schools and universities are already closed in several of the northern regions at the centre of the outbreak, including Lombardy, Veneto and Emilia Romagna. But the decision to extend the closure across the entire country underlines the seriousness of the situation. Japan last month shut all of its schools until April 8.
Lucia Azzolina, education minister, confirmed all schools and universities would be closed from Thursday until March 15.
“It was not an easy decision,” Mr Azzolina said. “We are waiting for the opinion of the scientific committee and we decided as a precautionary measure to suspend the teaching activities.”
Giancarlo Caiazzo, a student representative at Rome’s La Sapienza University, said the timing of the closures would have a big impact on the tens of thousands of young people who were due to take exams.
“The priority must be to guarantee the health of the population . . . but I hope students will not be forgotten. A balance has to be found between protecting the right to education and caution towards the virus,” he said.
Italy has already announced a €3.6bn package to mitigate the impact of the virus on the eurozone’s third-largest economy, which was already on the brink of recession. Rome is also seeking authorisation from Brussels to increase the budget deficit for this year.
As the consequences of the deadly outbreak continued to ripple out across society, Silvio Brusaferro, president of the country’s National Health Institute, urged Italians to wash their hands frequently, stay at least one metre apart and avoid crowded places, and to stop the traditional Italian greeting of kissing on the cheek.
“We have to work for the country by staying within the rules and adopting lifestyles that help us interrupt transmission channels,” Mr Brusaferro said.
After a high concentration of people tested positive for the virus near the city of Bergamo, near Milan, authorities are also considering a new quarantined red zone. Angelo Borrelli, Italy’s coronavirus commissioner, said: “No one can be sure how the disease will evolve. This week is very important to understanding what will happen.”
Vincenzo Spadafora, Italy’s minister for sport and youth, told parliament that the government would order all football matches and other big sporting events to take place behind closed doors. “We are heading towards this decision,” he said. Ten top division games have already been postponed, including league leader Lazio’s visit to Atalanta.
Ten top-division games have already been postponed, including league leader Lazio’s visit to Atalanta.