U.S. stocks tumbled Friday afternoon, bringing an otherwise mixed, holiday shortened week to a softer close. While many cited the spreading coronavirus as the main force behind the sell-off, others believed investors were simply taking profits from recent gains. For the week, the Dow Jones Industrial Average and the S&P 500 each declined around 1% and the Nasdaq fell about 0.8%. With stocks easing, U.S. Treasury prices rose, bringing the two-year yield down 4 bps to 1.48% and the 10-year yield lower by 6 bps to 1.68%.
With 17% of S&P 500 companies reporting third-quarter results, 68.2% have exceeded earnings per share expectations, while 64.7% have beaten revenue expectations. As of January 24, 2019, Refinitiv estimated the S&P 500 index’s fourth-quarter earnings growth rate at -0.5% and its 12-month forward P/E ratio at 18.8. IBM, Intel and American impressed, whereas Netflix, Raymond James and Synchrony Financial disappointed.
On Friday, the U.S. Centers for Disease Control and Prevention confirmed a second U.S. case of the new coronavirus from Wuhan, China, and said as many as 63 potential cases in 22 different states were being monitored.
The European Central Bank left monetary policy and guidance unchanged. The ECB said interest rates will remain at present levels or lower until inflation aims are met and QE will run as long as necessary but end shortly before a first rate hike. It also announced the launch of a strategic review.
The Markit flash January manufacturing PMI of 51.7 was lower than the 52.6 consensus and December’s 52.4, marking the softest reading since October. However, flash December services PMI of 53.2 beat the consensus of 52.7 and was a touch better than November’s 52.8, logging highest reading since last March.
Weekly initial jobless claims of 211,000 for the week ending January 18 beat consensus of 212,000 and were up slightly from a revised 205,000 the prior week. The four-week average moved down to 213,000 from 216,000.
December existing home sales were up 3.6% from November to a 5.54 million, ahead of the 5.434 million consensus and logging the fastest resale pace since February 2018.