Yesterday the news from China was that new cases of coronavirus were diminishing and the market soared.  Today, using new methodologies, it seems that actually the opposite is true – new cases are soaring and the last 24 hours has seen the greatest # of deaths yet.  And the market tanked.  But the WHO offers hope with the statement, “we are not seeing dramatic increases in cases outside of China.”  Investor consensus:  the uncertainties are likely to wane.  Regarding Q4, 378 companies have reported, 71.2% beating expectations, and the earnings growth forecast is now at 2.5 percent.  Volume is below average at 6.8 billion. 

Thu  FEBRUARY 12, 2020 / 6:14 pm 

Wall Street slips as coronavirus fears mount

Stephen Culp

DJ:  29,551.42  +275.08       NAS:  9,725.96  +87.02        S&P:  3,379.45  +21.70     2/12

DJ:  29,423.31  -128.11        NAS:  9,711.97  -13.99          S&P: 3,373.94  -5.51        2/13

(Reuters) - Wall Street lost ground on Thursday, backing away from record highs as investors digested new coronavirus developments and mixed corporate earnings.  Technology shares led all three major U.S. stock averages lower, with the blue-chip Dow suffering the largest percentage loss.  Hopes that the coronavirus epidemic could be on the wane were soured by a spike in fatalities, with an additional 242 bringing China’s coronavirus death toll to 1,367. Additionally, thousands more were diagnosed due to a new testing methodology.

Still, there were glimmers of optimism as the director of the World Health Organization (WHO) told a news briefing that “we are not seeing dramatic increases in cases outside China.”  “On a day like today investors just have to take it in stride,” said Charlie Ripley, senior market strategist for Allianz Investment Management in Minneapolis.  Still, the late session sell-off was relatively muted.   “There’s headlines going back and forth ... but investors are realizing this is a first quarter event and the uncertainties are likely to wane,” Ripley added.

Indeed, in his economic report to Congress earlier this week, U.S. Federal Reserve Chair Jerome Powell said the central bank was assessing the risk of the coronavirus and other potential threats, indicating any change to its accommodative policy was unlikely this year.

The Dow Jones Industrial Average .DJI fell 128.11 points, or 0.43%, to 29,423.31, the S&P 500 .SPX lost 5.51 points, or 0.16%, to 3,373.94 and the Nasdaq Composite .IXIC dropped 13.99 points, or 0.14%, to 9,711.97.  Of the 11 major sectors in the S&P 500, seven closed in the red, led by industrials .SPLRCI.  Defensive utilities .SPLRCU and consumer staples .SPLRCS sectors enjoyed the largest percentage gains. 

The fourth-quarter reporting season is nearing its final approach, with 378 companies in the S&P 500 having posted results. Of those, 71.2% have surprised consensus estimates to the upside, according to Refinitiv data.  Analysts now see aggregate fourth-quarter earnings increasing at a 2.5% annual rate, a stark reversal from the 0.3% decline seen at the beginning of the year.

Cisco Systems Inc (CSCO.O) dropped 5.2% after providing lackluster forward revenue and profit guidance on its quarterly earnings call.  Tesla Inc (TSLA.O) rose 4.8% following its announcement that it intends to raise $2 billion in a stock offering.  Alibaba Group (BABA.N) warned that the coronavirus sweeping China would hurt its revenue. The e-commerce company’s shares fell 1.8%.  American International Group Inc (AIG.N) slipped 6.2% despite reporting better-than-expected quarterly profit on stronger underwriting in its general insurance unit.  Shares of Kraft Heinz Co (KHC.O) plunged 7.6% after the packaged food company missed quarterly sales expectations and took a $666 million charge.  NetApp Inc (NTAP.O) dropped 9.3% following the data storage equipment maker’s current-quarter profit forecast miss. 

Declining issues outnumbered advancing ones on the NYSE by a 1.04-to-1 ratio; on Nasdaq, a 1.01-to-1 ratio favored decliners.  The S&P 500 posted 67 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 150 new highs and 58 new lows.

Volume on U.S. exchanges was 6.86 billion shares, compared with the 7.64 billion average over the last 20 trading days.