U.S. stocks: Dow soars 200 points to a record despite coronavirus outbreak concerns
U.S. stocks surged on Wednesday as investors attempted to shake off worries over how the coronavirus would impact corporate profits and the global economy.
The Dow Jones Industrial Average inched 200 points higher, or 0.7 percent, and hit a record. The S&P 500 added 0.5 percent to an all-time high while the Nasdaq Composite rose 0.6 percent.
As of Tuesday night, China’s National Health Commission had reported 97 additional deaths with total confirmed cases exceeding 44,000. Yet, the pace of new reported coronavirus cases appears to be slowing down.
“Investors showed resilience by pushing stocks back to all-time highs, especially in the US, anticipating a strong V-shaped recovery when this is over,” Eylem Senyuz, global macro strategist at SunTrust Advisory, said in a note sent to CNBC. Yet, “as the coronavirus continues to spread across China and the globe, much of its impact remains unknown.”
Wynn Resorts and Las Vegas Sands, two stocks tied to coronavirus concerns because of their exposure to the Chinese market, each surged more than 1 percent. Delta and American Airlines grew 1.6 percent and 2 percent, respectively.
U.S. Federal Reserve Chairman Jerome Powell on Tuesday testified in front of the House Financial Services Committee that the American economy is in a good place, but that the central bank is “closely monitoring” the potential global economic fallout from the virus.
Powell is set to testify again in front of the Senate Banking Committee starting at 9:30 a.m.
Corporate earnings remained in focus after Lyft reported more than $1 billion in quarterly revenue, but forecast slower growth in 2020. Lyft shares fell 6.9 percent.
CVS Health, Molson Coors, Teva Pharmaceutical, and Shopify all reported quarterly results, which beat analyst expectations. Around 70 percent of S&P 500 companies have registered calendar fourth-quarter results. Of those companies, 71.1 percent have beaten analyst expectations, according to FactSet data.
“We have been saying that future stock gains would require P/E multiple expansion,” Nick Raich, CEO of The Earnings Scout, stated. “That is exactly what is happening.”
“Taking into account the Fed’s accommodative policies and the elevated valuation levels for the S&P 500, we want you to participate in the stock rally. However, we do not want you to be greedy,” Raich said.