Stocks turn higher as deal activity offsets worsening coronavirus death toll

U.S. stocks pushed higher mid-morning Thursday, reversing early morning losses, after the S&P 500 index and the Nasdaq booked all-time closing highs Wednesday.

Although markets have been heartened by daily reports of a slowing rate of the spread of COVID-19, the infectious disease that originated in Wuhan last year, deaths and cases of the disease outside of China may be sparking some anxiety.

The Dow Jones Industrial AverageDJIA, +0.01%  traded near 29,357, up 9 points, less than 0.1%, while the S&P SPX, +0.03%  rose about 3 points to trade 0.1% higher, near 3,389. The Nasdaq CompositeCOMP, -0.05%  was up about 2 points, less than 0.1%, near 9,819.

On Wednesday, the Dow advanced 115.84 points, or 0.4%, to 29,348.03. The S&P 500 rose 15.86 points, or 0.5%, to end at 3,386.15, marking a record finish. The Nasdaq Composite added 84.44 points, or 0.9%, to end the session at a record at 9,817.18, its second all-time closing high in a row.

Investors may be willing to continue pushing stocks to new heights on hope for easy-money policies from the Federal Reserve and central banks globally to combat the hit to economic growth from China’s corornavirus, while a burst of corporate deal activity also improved sentiment.

“We think today’s pre- market softness is technical and is not likely to derail another mixed to positive session,” said Peter Cardillo, chief market economist at Spartan Capital Securities in a Thursday research note.

Morgan Stanley MS, -3.31% announced it will buy E-TRADE Financial Corp ETFC, +25.04% in an all-stock deal valued at $13 billion, according to the Wall Street Journal. Shares of E-Trade surged 25%, while those for Morgan Stanley fell about 3.4%.

U.S. corporate earnings for the fourth quarter of last year have also supported valuations.

“We now have Q4 results from 411 S&P 500 members that combined account for 88.6% of the index’s total market capitalization. Total earnings for these 411 index members are up +1.1% from the same period last year on +4.6% higher revenues,” Zacks research director, Sheraz Mian, wrote

However, news of deaths outside China from the coronavirus epidemic remains a worry. A report from South Korea’s Yonhap News Agency said COVID-19 had claimed its first life and the mayor of the South Korean city of Daegu urged its 2.5 million people to refrain from going outside, according to the Associated Press. Reports indicate that cases of COVID-19 in South Korea have more than doubled to 104 in a day, with 35 additional cases cropping up in Daegu on Thursday.

China’s central bank cut its benchmark lending rate on Thursday, as widely expected, in a move to lower financing costs for businesses. The corona virus epidemic has disrupted global supply chains and factory activity in China. The benchmark one-year loan prime rate was cut by 10 basis points, and the five-year loan prime rate by 5 basis points. The disease from coronavirus has infected nearly 75,000, and claimed more than 2,100 lives in China, according to the country’s National Health Commission.

Goldman Sachs’ chief global equity strategist Peter Oppenheimer said that the chances for a correction or pullback in U.S. stocks were rising due to the spread of the contagion out of Asia. “In the nearer term…we believe the greater risk is that the impact of the coronavirus on earnings may well be underestimated in current stock prices, suggesting that the risks of a correction are high,” the strategist said.

A pair of early-morning reports showed resilience in the U.S. economy though. The number of Americans filing for unemployment benefits ticked up marginally in the most recent week but still hovered near multi-year lows. A gauge of manufacturing activity in the mid-Atlantic area surged to a two-year high in February. The new orders component of the Philadelphia Fed’s survey was at its highest since May 2018.

Morgan Stanley MS, -3.31% is set to buy E-TRADE Financial Corp. ETFC, +25.04% in an all-stock deal valued at $13 billion, according to the Wall Street Journal. Shares of E-Trade surged 25%, while those for Morgan Stanley fell about 3.4%.

Shares of L Brands Inc. LB, +0.47% were down fractionally, paring early losses, after announcing it is sellingVictoria’s Secret to private equity.

Virgin Galactic Holdings Inc.SPCE, +10.90%  shares rocketed higher, extending its 8-day win streak.

Shares of Zillow Group Inc.Z, +20.38%  jumped 16% after a set of upgrades following a fourth-quarter earnings call late Wednesday.

Procter & Gamble Co. PG, +0.29%  shares traded slightly higher even after the company warned that the coronavirus would have a material impact on winter earnings.

ViaconCBS Inc. VIAC, -15.18%  shares tumbled after the company’s fourth-quarter results missed analyst expectations.

Six Flags Entertainment Corp. SIX, -16.68% shares lost about 17% after the opening bell after the theme-park operator cuts its dividend.

The price of a barrel of West Texas Intermediate crude for March delivery CLH20, +1.58% rose 1.3% to $53.99 a barrel on the New York Mercantile Exchange.

Gold for April delivery GCJ20, +0.69% was on pace for a sixth straight gain, rising 0.6% to trade at $1,621.70 an ounce, extending its climb above the psychologically important level at $1,600.

The U.S. dollar DXY, +0.00% was flat against a basket of rival currencies at 99.73.

The benchmark U.S. 10-year Treasury note TMUBMUSD10Y, -2.45% was down 2.8 basis points at 1.54% even as 30-year bonds fell closer to an all-time low. Bond yields fall when prices rise.

In Europe, the Stoxx Europe 600 SXXP, -0.32% traded 0.4% lower, while the FTSE 100 UKX, +0.21% lost 1.1%.

Trade was mixed in Asia overnight. The China CSI 300 000300, +2.30% rose 2.3%, Hong Kong’s Hang Seng Index HSI, -0.17% fell 0.2%, while the Shanghai Composite SHCOMP, +1.84% advanced 1.8%. Japan’s Nikkei NIK, +0.34% advanced 0.3%, while South Korea’s Kospi 180721, -0.67% sank 0.7%.

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