Why do stocks continue to rise in the face of anxiety about the coronavirus? Ongoing support from the Federal Reserve, a stable outlook for corporate earnings and fear of missing out may have something to do with it.
The latest: The Dow finished the week up 1%, while the S&P 500 closed 1.6% higher. Both indexes hit all-time highs mid-week. The STOXX Europe 600 index rose nearly 1.5% after climbing to a fresh midday record on Friday. Even the Shanghai Composite managed to lodge a 1.4% increase for the week.
Peter Boockvar, chief investment officer at Bleakley Advisory Group, thinks the explanation is simple: It’s about overconfidence in the Fed.
“I think the stock market is just under this belief that no matter what comes our way the Fed is going to save us,” he told me. “I honestly believe it’s as simplistic as that.”
It also helps that guidance for first quarter earnings has not been worse than usual, even as companies express concern about the coronavirus outbreak.
Earnings update: 77% of S&P 500 companies have reported earnings for the last three months of 2019, and 71% have beat profit expectations, according to FactSet’s John Butters. More importantly, fewer companies than average have lowered their expectations for the first quarter, feeding the sense among investors that the business impact may be short-lived after all.
But by and large, bullish investors who like stocks can find plenty of reasons to stick around. Boockvar, however, warned that investors should be more circumspect. “There’s just a lot of nonchalance with this virus,” he said. “Maybe it’s nothing, maybe it’s something.”
He pointed to the more cautious attitude reflected in bond markets, where yields remain depressed as more conservative investors pile in. Last week saw the biggest weekly inflow ever into bond funds, according to Bank of America.
Walmart will cap a tough earnings season for retail
That’s the big question for investors, who will look to America’s largest retailer on Tuesday for signs that consumer spending stayed strong heading into 2020. They’ll also want evidence that foot traffic is holding up as coronavirus concerns take hold.
Analysts have been moderating their predictions, which means Walmart could deliver a positive surprise.
What they’re saying: “The 2019 holiday season could come in a bit short of expectations, based on results from other retailers, and the early start to 2020 could be impacted by the coronavirus,” analysts at Telsey Advisory Group said in a note to clients. “However, we view these issues as transitory and continue to expect Walmart to be a leader and market share gainer in the industry.”
Up next
Monday: US markets closed; Japan GDP
Source : Nbcnewyork