Stocks Rebound, Earnings In Focus
Stocks rebounded strongly yesterday. While they didn't fully make up for Monday's loss, they came a long way.
Concerns over the coronavirus, however, continue to worry the public.
Although, the U.S. Health and Human Services agency said "at this point, Americans should not worry for their own safety."
Nonetheless, the virus is an ongoing problem in China with over 4,500 reported cases and over 100 deaths. The virus has spread to other countries. But to a much lesser extent.
Travel is being restricted to and from China's hardest hit areas in hopes of containing the situation.
From a financial standpoint, nobody knows what the long-term financial impact will be since much of that depends on the length of the outbreak and the ability to contain it. But past outbreaks, like SARS back in 2003, had only a mild impact on U.S. stocks. And markets here, and abroad for that matter, recovered quickly.
In other news, our economy continues to impress. That was underscored by yesterday's Richmond Fed Manufacturing Index which surged to a reading of 20 vs. estimates for a print of 5.
Retail sales via the Redbook report showed y/y same store sales rose to a 5.5% growth rate vs. last month's snapshot of 5.3%.
Durable Goods Orders showed an outsized 2.4% gain vs. the 0.5% expected. But excluding the volatile transportation component, it actually declined by -0.1%. And core capital goods declined by -0.9%. (But business investment is expected to pick up with the U.S.-China trade deal in the books, and when the USMCA trade deal becomes the law of the land when President Trump signs it later today.)
Consumer confidence soared to 131.6, up sharply from last month's 126.5 and views for 128.2. That's a strong barometer for the economy given that 70% of our GDP comes from consumer spending.
Earnings are also being watched closely with plenty of high profile companies reporting this week. That includes Microsoft, Facebook, and Tesla today. And Amazon, Verizon, and Amgen tomorrow.
Not to mention another 754 companies next week. And another 751 the week after.
And since stocks typically go up during earnings season, that could mean some big opportunities for gains.
See you tomorrow,
Kevin Matras
Executive Vice President, Zacks Investment Research
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