Late Comeback. After spending most of Thursday in the red, U.S. stocks finished with minor gains. The U.S. identified the first coronavirus case of human-to-human transmission earlier in the day. The World Health Organization declared the coronavirus a global public-health emergency. As worries rise over the epidemic’s potential economic impact, oil futures dropped to settle at a six-month low, down by around 17% from their recent peaks, while gold prices climbed to the highest levels in nearly seven years. Following the steps of the Federal Reserve, the Bank of England left its key interest rate unchanged at 0.75%. In today’s After the Bell, we...
- watch the WHO praise Beijing’s effort to contain the virus outbreak;
- wonder how the organization might help in the coming months;
- and explain why the U.S. economy might not be as strong as the fourth-quarter GDP number suggests.
Emergency State
All three indexes recovered from earlier losses to finish the day in the black. The Dow Jones Industrial Average rose 124.99 points, or 0.43%, to close at 28,859.44. The S&P 500 added 10.26 points, or 0.31%, to end at 3283.66, and the Nasdaq Composite is up 23.77 points, or 0.26%, to close at 9298.93.
The World Health Organization declared the coronavirus a global health emergency. Still, market reaction was positive after officials praised the Chinese government for its swift response to contain the virus. Despite Beijing’s efforts, the WHO said, the virus could still spread to areas with weaker health systems and less infrastructure to combat the disease. The WHO said it would help coordinate efforts to contain the outbreak in global regions, but there was no need yet to take measures that would unnecessarily interfere with international business and trade.
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Stocks had been in the red earlier in the day after the Centers for Disease Control and Prevention identified the first case of coronavirus human-to-human transmission in the U.S. At the same time, more than 7,700 cases have been confirmed in China, while 170 have died from the virus. By comparison, SARS infected 8,098 people in 2003 and killed 774.
Elsewhere, the U.S. economy grew at a 2.1% rate in the fourth quarter, slightly better than the 1.9% economists were expecting. Full-year growth came at 2.3% for 2019, also beating consensus expectations. Still, underneath the upbeat headline number, there are areas of concern in the data.
In the fourth quarter, imports dropped sharply by 8.7% from a year ago due to the U.S.-China trade war. As a result, net exports—the gap between imports and exports—widened significantly to contribute nearly 70% of the quarter’s total growth—or 1.5 percentage points. Such a boost, however, should be short-lived as the trade war has since de-escalated and an interim deal was signed.
Looking at other segments, the U.S. economic growth was actually more subdued in the fourth quarter. Consumer spending, which makes up about two-thirds of the U.S. economy, rose 1.8% in the last quarter, much weaker than the 3.2% increase in the third quarter. Although consumer confidence remains elevated, Americans nonetheless are spending more cautiously. Business investment, meanwhile, tumbled 6.1%, marking a third straight quarterly contraction, and the worst rate of decline since 2009.
Write to Evie Liu at evie.liu@barrons.com
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Dow Jones Industrial Average Rose Because WHO Likes China’s Coronavirus Moves - Barron's
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