Are investors finally waking up to the threat of the coronavirus? I don’t write that from a position of fear mongering. However, there will very clearly be economic consequences to the coronavirus. As we see a decline in the stock market today, investors may finally be starting to see it.
The S&P 500 and Nasdaq sank on Friday, down about 1.1% and 1.8%, respectively. Unlike Thursday, the Russell 2000 couldn’t hold up in the stock market today, falling 1%.
Apple (NASDAQ:AAPL), Yum! Brands (NYSE:YUM), Procter & Gamble (NYSE:PG) and others warned of an impact earlier this week. Universal Display (NASDAQ:OLED) and to a smaller extent, Coca-Cola (NYSE:KO) made negatively commentary too.
There are now more than 77,000 cases, as the virus continues to trickle into other parts of the world. That’s not to say this is the end-of-the-world type stuff. But only that it’s an unfortunate disease that’s now claimed more than 2,200 lives and will have an impact on the top and bottom lines for many companies.
That means the market will either need to pay a higher valuation for the reduced financials or correct lower to account for the impact. That doesn’t mean we need a 10%-plus fall. But it’s just something to keep in mind.
Movers in the Stock Market Today
Wells Fargo (NYSE:WFC) just settled with the Justice Department and the U.S. Securities and Exchange Commission over its bogus-account scandal from 2016. At this time, Wells Fargo will pay $3 billion in criminal and civil settlements.
Thanks to the coronavirus essentially stopping auto deliveries for the first week of February, China’s auto deliveries are expected to drop 70% this month along with a 40% fall the first two months of the year. While it’s taking a huge hit now, Cui Dongshu, China Passenger Car Association Secretary, thinks that the third week of February will show improvement.
It’s altered production for a number of companies, including Ford (NYSE:F), General Motors (NYSE:GM), Toyota (NYSE:TM) and the red-hot Tesla (NASDAQ:TSLA).
Shares of Slack (NYSE:WORK) have had solid momentum lately. On a strong open to new 2020 highs, WORK gapped higher in morning trade on reports that Uber (NYSE:UBER) will move all of its 38,000 employees onto Slack’s platform. If so, it will continue to show that Slack has solid momentum against its peer in Microsoft (NASDAQ:MSFT) Team.
There’s clearly an appetite for risk-on investments with the way Virgin Galactic (NYSE:SPCE) and Tesla have traded lately. Thus it only makes sense that Elon Musk’s other company goes for new capital. SpaceX is reportedly looking to raise $250 million at a $36 billion valuation.
Earnings Roundup
Deere (NYSE:DE) stock is racing higher on Friday, up 7% on better-than-expected earnings. Earnings of $1.63 per share cruised by estimates by 37 cents. Revenue of $6.5 billion beat expectations by $360 million despite slipping almost 6% year-over-year. Reaffirming their prior outlook, management settled worries about business going forward.
The rally in Deere is solid, but nothing like the one in Dropbox (NASDAQ:DBX). The stock was up more than 20% at one point, following a top- and bottom-line beat, a $600 million buyback program and a notable boost to margins. There are a few $30 price targets out from analysts as a result of the quarter. That implies 33% upside even after DBX’s rally in the stock market today.
Deere and Dropbox were among our Top Stock Trades from Friday.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long AAPL.
