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After The Close - The futures market started in the red last night, as news broke that cases of the coronavirus and related deaths have accelerated in China. The stock market therefore, started lower in the first portion of the session, as traders' sentiment for global growth weakened. Additionally, the markets were dragged down by a worse-than-expected performance out of Cisco Systems (CSCO Free Cisco Stock Report), which issued unimpressive quarterly results and guidance after the close yesterday. The Dow Jones Industrial Average fell as many as 205 points, while the other indices were down in tandem. However, the market started to rebound, and the indices generally headed toward break-even, with the NASDAQ and S&P 500 reaching all-time highs in the afternoon. Still, the markets tapered off in the final portion of the session and gave these gains. Overall, the Dow closed lower by 128 points; the S&P 500 was down six points; and the NASDAQ was off 14 points.

Moreover, market breadth was somewhat directionless, as advancers and decliners were about even on the day. Utility stocks were among the best performers, aided by a decline in interest rates. On the other hand, industrial equities were among the weakest.

In commodity news, oil prices rose today as traders thought that OPEC was making good progress on balancing supply and demand. Meantime, U.S. Treasury bond yields were lower, as demand for the safe-haven asset rose. Too, the yield curve flattened a bit, which usually is negative for financial earnings. The VIX Volatility Index was marginally higher, meantime, as demand for option protection rose. 

Looking ahead, tomorrow will have plenty of economic data, including the preliminary University of Michigan consumer sentiment index for February. Additionally, January retail sales and capacity utilization are on the docket.

Meantime, several large companies will report quarterly results, both after the bell today and before the open tomorrow. Overall, we think earnings results, along with any developments in the coronavirus outbreak, will drive trading tomorrow.  - John E. Seibert III

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

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Before The Bell - The stock market, on a merry march higher for weeks, in a seeming effort by the Dow Jones Industrial Average to hit the 30,000 mark, began the latest session yesterday morning suitably to the upside, quickly gaining some 200 points. The S&P 500 Index and the NASDAQ also pressed higher at the outset in a combined quest for additional all-time highs. It seemed as if investors were again trying to shake off concerns about how the fast-spreading coronavirus would impact corporate profitability and the international economy.

As for the flu-like disease, which now has claimed more than one thousand lives since its appearance nearly two months ago, the latest day saw the reporting of almost 100 new cases, with the number of confirmed illnesses passing 44,000. True, the pace of the disease appears to be slowing and China has taken steps to avert a possible downturn. Still, projections now call for little, if any growth in GDP in that country during the current three-month span. As such projections often are, the outlook could be even worse.

The toll on the market on our shores has been very minor, as the leading averages have continued to press to all-time highs in rapid sequence. Still, individual pockets of weakness have been noted, most notable the resort and casino stocks, several of which have core operations in China. The cruise liners also are suffering as the virus spreads. At the same time, Federal Reserve Chair Jerome Powell has again testified before Congress, and once more vouched for the strength of the domestic business upturn. That seemed to mollify investors.

Meanwhile, it is still earnings season, although the vast majority of the major U.S. companies already have issued their metrics/ For the most part, this has been a good reporting season, with some 70% of all U.S. companies topping net targets for the latest period. Finally, on overall influences yesterday, Philadelphia Federal Reserve President Patrick Harker said that interest rates should stay where they are for a while, and that the FOMC should watch how the data unfolds before taking any more action.

Regarding the market, after the initial buying burst, the market retained its solid gains, with no serious letup in the buying. In all, the Dow's advance generally held north of 200 points, while the NASDAQ saw a similar percentage uptick. Like upticks also were seen by the small- and mid-cap composites, while Treasury note yields likewise strengthened, with the 10-year instrument seeing its yield run up to 1.63%. Only the VIX volatility index reversed somewhat.

After this strong morning and early afternoon performances, stocks showed no hesitation as the homestretch approached, and most groups held the high ground into the close. When all the numbers were in, the Dow had registered a 275-point advance; the S&P 500 was better by 22 points; and the NASDAQ was 87 points to the good. There also were many more gaining stocks than declining issues, on a day in which news economic news was rather limited. Meantime, there was rare strength in the basic materials issues, but slippage in health care.

Looking ahead to a new day now, we see that after yesterday's record-setting performance that the major indexes are poised to open the current session to the downside on growing fears about the spreading coronavirus. – Harvey S. Katz, CFA

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.