Stocks Down Modestly, Well Off Their Intraday Lows

Stocks closed down modestly yesterday, bouncing well off of their intraday lows.

Coronavirus concerns continue to persist. And even though the health risk is low in the U.S., traders are trying to assess the financial impact on U.S. companies.

While it's true that analysts are still only estimating that the virus will shave just two tenths of one percent off of Q1 GDP (and maybe another two tenths later in the year), it became a little more real after Apple warned on Q2 revenue earlier in the week due to global supply constraints and weaker Chinese demand due to the outbreak.

Apple's warning was not inconsistent with the aforementioned estimates regarding the economic impact on our economy. And that could rightly be considered minimal. Especially since S&P companies only get about 6% of their revenue from China. But nobody knows when travel restrictions, which affects both people and goods, will be lifted.

Of course, once removed, and the worst of the outbreak is truly behind us, stocks are expected to soar as pent-up demand is unleashed.

In other news, some cited comments by Fed Vice Chairman Richard Clarida, who said the market was too aggressive in pricing in a rate cut later in the year, as weighing on stocks as well. Although, since the Fed previously said that rates were essentially on hold this year, I doubt Mr. Clarida's comments had much of an impact at all.

On the bullish side, however, remains the fact that our economy is strong, unemployment is at a 50-year low, household income is at a 20-year high, consumer sentiment is near record highs, and corporate earnings continue to impress.

Could we see a bit more back and forth? Possibly. But we could just as easily see stocks continue to power higher.

I mean, these truly are historic times for our economy and the market.

And that means historic opportunity for record gains.

That's why I would be a buyer on any dip. And a buyer on strength.

Because it looks like there's a lot more upside to go.

And I'm expecting another 25-30% gain in stocks again this year. And if you get into the right ones, your gains can be even bigger.

Best,

Kevin Matras

Executive Vice President, Zacks Investment Research

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