NASDAQ Composite (.IXIC) – US stocks close lower amid jitters over virus outbreak
Banks led a slide in U.S. stocks Tuesday as a virus outbreak in China rattled global markets, prompting investors to shift assets into bonds and defensive sector companies.
The sell-off snapped a three-day winning streak by the S&P 500. The benchmark index ended last week at an all-time high.
The selling in U.S. stocks followed losses in Asian and European markets as investors worried that the new coronavirus spreading in the world’s second-largest economy could hurt tourism and ultimately economic growth and corporate profits.
Six people have died, and 291 have been infected in China, just as people in the country were preparing to make billions of trips for the Lunar New Year travel season. And a U.S. citizen who recently returned from China was diagnosed with the new virus in the Seattle area, making the United States the fifth country to report a case, following China, Thailand, Japan and South Korea.
Within the S&P 500, stocks of U.S. companies that cater to Chinese tourists had some of the biggest losses, along with general travel companies, such as casinos and airlines. Along with banks, industrial and energy stocks accounted for a big share of the selling. Those losses outweighed gains in real estate stocks, utilities and household goods makers. Traders also shifted money into U.S. government bonds, sending yields lower.
“From an investment standpoint, the risk with any virus is in the scope of its economic impact, and the mere fact that this has spread from China overnight to the U.S. so quickly reinforces the idea that the negative fallout could be global rather than local,” said Alec Young, managing director of Global Markets Research for FTSE Russell.
The S&P 500 fell 8.83 points, or 0.3%, to 3,320.79. It had been down as much as 0.4% earlier in the day.
The Dow Jones Industrial Average lost 152.06 points, or 0.5%, to 29,196.04. The Nasdaq composite slid 18.14 points, or 0.2%, to 9,370.81.
Smaller-company stocks took the brunt of the selling. The Russell 2000 index lost 13.74 points, or 0.8%, to 1,685.90.
The selling began early in the first trading day of a holiday shortened week and followed sell-offs overnight in Asian markets and downbeat trading in Europe. China confirmed many people’s fears late Monday when a government expert said that the new type of coronavirus affecting the country can transmit from human to human, increasing its potential spread.
The outbreak “is developing into a major potential economic risk to the Asia-Pacific region,” said Rajiv Biswas of IHS Markit in a report.
Biswas pointed to the example of the 2003 outbreak of severe acute respiratory syndrome, whose economic impact was felt as far away as Canada and Australia.
To cope, investors were looking at playbooks for past outbreaks, such as SARS in 2002-2003, where airlines, railways and other transportation companies saw their stocks slide the most, followed by retailers and hospitality companies, according to strategists at Jefferies.
Las Vegas Sands fell 5.4% and Wynn Resorts tumbled 6.1% for two of the largest losses in the S&P 500. Both casino companies get most of their revenue from Macau on China’s southern coast.
Other travel companies also slumped on worries that customers may stay away due to virus fears. Royal Caribbean Cruises fell 4%, United Airlines lost 4.4%, and Booking Holdings dropped 3.1%.
Investors sought the safety of bonds, driving yields sharply lower. The yield on the 10-year Treasury note fell to 1.77% from 1.83% late Friday. That helped lift shares in homebuilders broadly higher, as a decline in the 10-year Treasury yield tends to pull mortgage rates lower. D.R. Horton climbed 2.3%.
Real estate investment trusts and utilities stocks rose as the decline in bond yields made dividend-paying stocks more attractive to income investors. American Tower rose 1.4%, while Edison International gained 1.6%.
Headlines about the spreading coronavirus gave investors an excuse to take profits following the market’s recent record-setting run. The benchmark S&P 500 hasn’t had a single-day drop of more than 1% since October.
“Investors have shown a lot of optimism, and that might make some a little bit skittish,” said Willie Delwiche, investment strategist at Baird. “Valuations are elevated. In this sort of environment, I don’t think it takes much of a headline to trigger a reaction.”
Tuesday’s drop for the S&P 500 index follows a strong run for the market. Fears of a possible recession have faded, and investors expect the Federal Reserve to keep interest rates low, and the S&P 500 has risen in 13 of the last 15 weeks.
U.S. companies are in the midst of reporting their earnings results for the last three months of 2019, and early indications are encouraging. Less than a tenth of S&P 500 companies have reported their results so far, but of them, 72% topped analysts’ forecasts for profits. Those forecasts were low, to be sure, with analysts saying S&P 500 profits fell last quarter for the fourth consecutive time, according to FactSet.
Boeing shares slid 3.3% after the aircraft manufacturer said that it doesn’t expect federal regulators to approve changes to the grounded 737 Max until this summer — several months longer than the company was saying just a few weeks ago.
Benchmark U.S. crude fell 20 cents to settle at $58.34 a barrel. Brent crude, the international standard, dropped 61 cents to close at $64.59 a barrel.
Wholesale gasoline was unchanged at $1.64 per gallon, while heating oil declined 2 cents to $1.83 per gallon.
Natural gas slumped 10 cents, or 5.4%, to $1.90 per 1,000 cubic feet. The sharp drop weighed on energy sector stocks. Cabot Oil & Gas, which gets most of its revenue from gas, led the slide, losing 7.8%. It was also the biggest decliner in the S&P 500.
Gold fell $2.40 to $1,556.40 per ounce, silver fell 26 cents to $17.75 per ounce and copper fell 5 cents to $2.80 per pound.
The dollar fell to 109.81 Japanese yen from 110.17 yen on Monday. The euro strengthened to $1.1095 from $1.1092.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 8,894.30.
The projected upper bound is: 9,531.36.
The projected lower bound is: 9,248.66.
The projected closing price is: 9,390.01.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 94.3156. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 9 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 77.22. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 11 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 111.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 11 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 24 period(s) ago.
Rex Takasugi – TD Profile
NASDAQ COMPOSITE closed down -18.138 at 9,370.807. Volume was 25% above average (neutral) and Bollinger Bands were 27% wider than normal.
Open High Low Close Volume___
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 9,248.09 8,814.05 8,205.76
Volatility: 10 10 18
Volume: 606,681,472 576,143,552 551,618,112
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
NASDAQ COMPOSITE is currently 14.2% above its 200-period moving average and is in an upward trend. Volatility is Our volume indicators reflect very strong flows of volume into .IXIC (bullish). Our trend forecasting oscillators are currently bullish on .IXIC and have had this outlook for the last 64 periods. Our momentum oscillator is currently indicating that .IXIC is currently in an overbought condition.