The latest strain of the coronavirus, a deadly respiratory illness believed to have originated in central China, has spread around that country, forcing Beijing to halt travel for more than 35 million Chinese citizens. Plaguing stocks Friday wasn’t just news of the virus’s spread in China, but reports of a second U.S. case, this time in Chicago.
- The S&P 500 slumped 0.90%.
- The Dow Jones finished lower by 0.58%.
- The Nasdaq Composite tumbled 0.93%.
- On a day when winners were in short supply, Intel (NASDAQ:INTC) was easily the best-performing Dow stock following a strong fourth-quarter earnings report and exciting first-quarter guidance.
Getting back to the coronavirus fears for a moment, there were reports Thursday that a case may have emerged in Texas and that was followed by news that the Centers for Disease Control and Prevention confirmed at least two cases in Illinois. The CDC said the situation is “rapidly evolving.”
While health officials have stopped short of comparing this viral outbreak to the SARS epidemic of 2003 that killed about 800 people around the world, these type of headlines do have a way of plaguing riskier assets.
However, history indicates that the negative market reaction surrounding these type of events is usually confined to a short time frame. When fears abate, stocks often rally. Let’s hope that’s the case, because in late trading only six of the 30 Dow stocks were in the green.
Thank Goodness for Intel
As noted above, Intel was the lead of the Dow pack today and it wasn’t a close competition. For the fourth quarter, Intel reported earnings of $1.52 on revenue of $20.21 billion, easily topping Wall Street estimates of $1.25 per share and revenue of $19.23 billion.
But those numbers are in the past. What really sparked the really in Intel stock today was the company’s 2020 forecast of earnings of $5.00 on revenue of about $73.50 billion, ahead of consensus projections of $4.68 per share and revenue of $72.25 billion.
The company also offered up strong commentary on data center chip demand, a theme that could also benefit rivals Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD).
“However, we believe Intel has been ably navigating the headwinds, via concerted efforts to rein in non-essential spending while investing in critical process and design technologies (10- and 7-nm, 5G, Artificial Intelligence, and automotive),” said Morningstar in a note out earlier today. “We are raising our fair value estimate for wide-moat Intel to $70 per share from $65, as we incorporate the stronger near-term performance and outlook. Shares were up during after-hours trading and look fairly valued at current levels.”
American Express Charges Higher
Intel reported Thursday after the close, leaving American Express (NYSE:AXP) as the lone Dow component delivering earnings today and investors cheered the report, sending the stock higher by 2.81%. That was good enough to make AXP the second-best Dow name today after Intel.
American Express said it earned $2.03 a share on revenue of $11.37 billion in the last three months of 2019, slightly ahead of Wall Street estimates calling for earnings of $2.01 on revenue of $11.36 billion.
Like Intel, AXP offered strong full year guidance of $8.85 to $9.25 of earnings compared with the consensus estimate of $8.98 per share.
It Looked Like a Trade War Day
While there wasn’t wrangling on the trade front today, the group of Dow Jones losers read as though President Trump sent one of his notorious pre-Phase I tweets vilifying China. In other words, the coronavirus plagued a slew of China-sensitive stocks today.
That scenario had Caterpillar (NYSE:CAT), materials name Dow Inc. (NYSE:DOW) and Nike (NYSE:NKE) were among the Dow’s worst performers today.
Boeing: The Believe It or Not Sequel
On another day of challenging headlines, Boeing (NYSE:BA) was tussling with AXP to be the second-best Dow stock today. That’s surprising when considering at least one ratings agency sees Boeing’s credit rating as vulnerable in the face of ongoing 737 Max delays.
“[The delay] will result in a longer period of cash outflows than we expected for 2020, as well as less debt reduction in the latter half of the year because Boeing will deliver fewer aircraft,” said S&P in a note.
Bottom Line on the Dow Jones Today
Hopefully, China and the other countries affected by the coronavirus are able to limit deaths and a handle on the virus over the near-term because that would be a win for humanity.
For the capitalists out there, the virus is clearly affecting markets and markets have other things to contend with, including another earnings avalanche next week. That includes 10 — a third of the Dow Jones Industrial Average — stepping into the earnings confessional.
As of this writing, Todd Shriber did not own any of the aforementioned securities.
