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Wall Street gains ground after virus-driven selloff

(Reuters) – Wall Street’s main indexes rose about 1% on Wednesday after suffering their worst four-day percentage fall in more than a year on fears of the economic damage from the global spread of the coronavirus.

Investors were cautious as the U.S. Centers for Disease Control and Prevention urged Americans to prepare for the virus to spread in the United States. President Donald Trump said he will hold a news conference on the coronavirus at 6 p.m. ET (2300 GMT).

As of Wednesday, death toll in Italy had crossed 19 and new cases in South Korea rose above 1,260, while Greece and Brazil reported their first cases of the virus.

“It’s unclear if it’s something that will be resolved in weeks or months or a longer time,” said Chester Spatt, professor of finance at Carnegie Mellon University.

“There is potential for shock to both supply and demand sides of the economy. The magnitude of the shock is uncertain right now.”

All major S&P sectors were trading higher, with technology leading the charge on a 1.6% gain. Defensive utilities, real estate and consumer staples were the laggards.

At 09:46 a.m. ET, the Dow Jones Industrial Average was up 291.27 points, or 1.08%, at 27,372.63 and the S&P 500 was up 39.01 points, or 1.25%, at 3,167.22. The Nasdaq Composite was up 138.33 points, or 1.54%, at 9,103.94.

The Dow has lost more than 1,900 points in the past two days alone, while the Nasdaq has slid 8.9% from its record peak hit last Wednesday.

The S&P 500, which is down 7.8% from its all-time high, has lost about $1.74 trillion in market capitalization in the last two sessions, according to S&P Dow Jones Indices senior analyst Howard Silverblatt.

Among stocks, TJX Cos Inc jumped 7.8% as the offprice retailer beat quarterly same-store sales estimates.

Beyond Meat Inc rose 6.1% as Starbucks Corp said its Canadian stores would start selling the company’s plant-based breakfast sandwich next week.

Walt Disney Co slipped 0.6% on news Robert Iger will step down as chief executive officer, handing the reins to Disney Parks head Bob Chapek.

Advancing issues outnumbered decliners by a 3.63-to-1 ratio on the NYSE and by a 2.91-to-1 ratio on the Nasdaq.

The S&P index recorded one new 52-week highs and 12 new lows, while the Nasdaq recorded 10 new highs and 56 new lows.

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World shares slump for fifth day, bets grow on rate cuts to counter damage

LONDON (Reuters) – World stocks tumbled for the fifth straight day on Wednesday, while safe-haven gold rose back towards seven-year highs after health authorities warned of a possible coronavirus pandemic and markets stepped up bets on interest rate cuts.

U.S. Treasury yields nevertheless rose off record lows hit the previous day as equity futures turned around to signal a firmer Wall Street open following Tuesday’s 3%-plus slide on news the coronavirus had spread to dozens of countries.

Adding to alarm, the World Health Organization said the epidemic had peaked in China, but urged other countries to prepare for virus outbreaks.

In a change of tone, the U.S. Centers for Disease Control and Prevention also advised Americans to be ready for community spread of the virus.

(Graphic: Coronavirus spreads outside of China – here)

Drastic travel restrictions in China, where coronavirus has claimed almost 3,000 lives, have slammed the brakes on mainland manufacturing and consumer spending, and there are worries other countries will face similar disruptions.

“China’s template to contain the virus was to restrict economic activity and that’s hitting home,” Lombard Odier’s chief strategist Salman Ahmed said.

“Markets are fearing there will be sequential shutdowns of economic systems to stop the spread.”

Those fears of severe economic damage, even a recession, have sent MSCI’s All-Country equity index to 2-1/2-month lows, wiping almost $3 trillion off its value this week alone.

(GRAPHIC – Global stocks’ performance vs. reported coronavirus cases: here)

Asian shares excluding Japan fell 1%. Tokyo lost 0.8% on concerns the virus could force the cancellation of the Olympics scheduled for July. That weighed on shares in firms such as Dentsu that are involved in the Games.

A pan-European equity index lost 1%, shrugging off slight gains on futures for the S&P 500, Dow Jones and Nasdaq.

Economic growth worries are reflected in steep drop in bond yields — 10-year U.S. yields are down 60 basis points since the start of 2020. Moreover, U.S. three-month T-bill yields remained some 18 basis points above 10-year rates — the curve inversion that’s considered a classic signal of recession.

Ten- and 30-year U.S. Treasury yields teetered just off record lows and another safe-haven, German bonds, also saw 10-year yields tumble to four-month lows below -0.5%.

(Graphic: U.S. 3-month, 10-year yield curve – here)

Analysts note growing market bets on interest rate cuts — expectations that monetary policy will be deployed yet again to head off any downturn.

Money markets are now pricing in roughly two 25-basis-point rate cuts by the U.S. Federal Reserve and expect a 10 bps cut by the European Central Bank by December. A Bank of England rate cut is also fully priced for September.

“Part of this selloff is a cry for help,” Ahmed said, adding that Fed cuts were unlikely in the early part of the year unless “we get an Italy-like situation in the United States”.

An outbreak of coronavirus in northern Italy has raised additional fears for its perpetually sluggish economy.

The rate cut expectations weighed on the dollar which is now well off three-year highs reached against the euro on Feb. 20. Against the yen too, it has retreated from recent 10-month highs of 112.23 yen. and stood around 110 yen.

It traded just off 12-day lows against a basket of currencies.

Some reckon the greenback slump may not last, given the Fed’s wariness of rushing into rate cuts.

“The significant dovish tilt being priced in by markets from the Fed may not materialize and that might cause the next leg of the dollar rally,” said Peter Chatwell, head of multi-asset strategy at Mizuho.

The dash for safety also boosted gold XAU=> 0.5% to around $1,640 per ounce, heading back towards seven-year highs of 1,688.66 hit on Monday.

Oil prices fell, with U.S. futures at the lowest since January 2019, below $50 per barrel.

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Pandemic fears jolt stock markets, bonds rally

TOKYO (Reuters) – Asian shares fell on Wednesday as a U.S. warning to Americans to prepare for the possibility of a coronavirus pandemic jolted Wall Street yet again and pushed yields on safe-haven Treasuries to record lows.

The S&P 500 and the Dow Jones Industrial Average both shed more than 3% on Tuesday in their fourth straight session of losses.

That led MSCI’s broadest index of Asia-Pacific shares outside Japan down 1.1%. Japan was among the worst-performing market in the region, weighed by growing concerns the virus could force the cancellation of the Tokyo Olympics.

Euro Stoxx 50 futures were down 0.36%, German DAX futures fell 0.53%, while FTSE futures were off 0.4%.

Yields on 10-year and 30-year U.S. Treasuries teetered near record lows and gold rose as worries about the economic impact of the virus outbreak boosted safe-haven assets.

The World Health Organization says the epidemic has peaked in China, but concern that its spread is accelerating in other countries is likely to keep investors on edge.

“What we are seeing is share markets are playing catch up,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

“Other asset markets have been flashing warning signs for weeks. A corrective bounce in equities is possible, but we still have a lot of downward momentum.”

Chinese shares fell 0.21%. Shares in South Korea, which has been rattled by a sudden rise in virus infections, briefly hit a two-month low.

While the stock rout has been global, the recent pace of selling in Asia has not been as severe as it has on Wall Street, which has been hit hard by the escalation of virus cases outside of Asia.

MSCI World, a market cap weighted stock market index of 1,644 stocks from companies throughout the world, has seen its total value fall by $3 trillion to $42.98 trillion over the past four trading sessions, Reuters calculations show.

(GRAPHIC – Global stocks’ performance vs. reported coronavirus cases: here)

U.S. stock futures rose 0.57% in Asia on Wednesday, but that did little to brighten the mood.

Adding to recent fears was an alert from the U.S. Centers for Disease Control and Prevention on Tuesday warning Americans to prepare for the spread of coronavirus in the United States, signaling a change in tone for the Atlanta-based U.S. health agency.

The virus has claimed almost 3,000 lives in mainland China but has spread to dozens of other countries. Of increasing concern to investors, however, in the rising death toll in other countries.

Drastic travel restrictions slammed the brakes on China’s manufacturing and consumer spending, and there are worries other countries will face similar disruptions.

The virus has also hit Japan’s stocks hard on rising worries it could lead to cancellation of the 2020 Summer Olympics scheduled to start in Tokyo in July.

Japan’s Nikkei stock index slid 0.92%, while shares of Japan’s Dentsu Group Inc, an advertising agency deeply involved in the planning and operation of the games, fell to a seven-year low on Wednesday.

Shares of sportswear makers and other companies related to the Olympics have also fallen recently.

The yield on benchmark 10-year Treasury notes traded at 1.3621% on Wednesday in Asia, close to a record low of 1.3070% The 30-year yield stood at 1.8420%, above a record low of 1.7860%.

The decline in yields weighed on the dollar. The greenback was last quoted at 110.40 yen, continuing a pullback from a 10-month high of 112.23 yen.

The dollar traded at $1.0876 per euro, off an almost three-year high of $1.0778 reached on Feb. 20.

Spot gold rose 0.57% to $1,644.38 per ounce as investors sought safe havens. [GOL/]

Oil prices recovered some recent losses in Asia, but there are lingering concerns that expected output cuts by major oil producers will not be enough to offset a decline in global energy demand caused by the virus.

U.S. crude ticked up 0.72% to $50.26 a barrel. Brent crude rose 0.56% to $55.26 per barrel. The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group known as OPEC+, have been sending signals that they will cut output further.

However, oil could come under more pressure as weekly U.S. supply reports due later on Wednesday are expected to show a rise in inventories, according to a Reuters poll. [EIA/S]

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Mattel receives SEC subpoena on whistleblower letter

(Reuters) – Mattel Inc (MAT.O) had received a subpoena in December from the U.S. Securities and Exchange Commission seeking documents related to a whistleblower letter and subsequent investigation, the U.S. toymaker said in a filing on Tuesday.

In connection with the letter, an independent investigation by Mattel’s audit committee and a separate probe by the company’s external auditor found that the lead audit partner of the external auditor violated SEC rules. (bit.ly/2VyctQ7)

Mattel had disclosed in August that it received the anonymous letter.

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Economic contagion spreads beyond China to other Asian economies: Reuters poll

(Reuters) – The effects of the coronavirus outbreak are likely to reverberate beyond China as most major economies in the region are expected to either slow down significantly, halt or shrink outright in the current quarter, Reuters polls found.

Many Asian economies, which were just limping back to growth from the spillover effects of the 18-month long U.S.-China trade dispute, were again dealt a blow by the outbreak, which has shut down businesses and cities.

With the contagion interrupting global supply chains that most countries depend on for trade and commerce, economic activity is likely to slow, but at varying degrees.

Forecasts from economists collected Feb 19-25 showed that Australia, South Korea, Taiwan, Singapore and Thailand are all expected to put in their worst performance in years in the first quarter. Only Indonesia was expected to remain relatively unscathed.

That comes on the heels of a similar Reuters poll published a little over a week ago, which found the Chinese economy will grow at its slowest pace in the current quarter since the financial crisis, with a worst-case scenario showing it at 3.5%, nearly half of the 6.0% reported in the fourth quarter of 2019. [ECILT/CN]

“The base case is rapidly shifting from ‘Bad’, meaning only China is impacted, to ‘Ugly’, where both emerging Asia and developed economies see soaring infection rates and deaths,” said Michael Every, head of financial markets research for Asia-Pacific at Rabobank in Hong Kong.

“Its effects will likely resemble the global financial crisis of 2008-2009 more than the SARS outbreak in 2003,” he said, referring to the economic impact.

That fear in financial markets was clear on Monday, when world stocks took a nosedive to a two-year low as a surge in virus infections outside mainland China fuelled fears of a global pandemic.

Proximity to the region’s economic powerhouse and trade relations mean any impact from a slowdown in the world’s second-largest economy is likely to be felt across the region.

While a bounce back in the next quarter is expected for most major Asian economies polled, growth for this year is likely to be lower than predicted just last month, suggesting some activity would be permanently lost.

More than three-quarters of economists, 57 of 77, who answered an additional question also expect growth across these other Asian economies to pick up in the second quarter.

While South Korea was the hardest hit by the virus outside of China, its impact on the economy so far seems modest, according to forecasters who expect it to grow 2.1% in the first quarter, down only 0.4 percentage point from a January Reuters poll.

Singapore, a port city and a major trade partner with China, is expected to contract 0.6% in the present quarter, a first since the 2009 recession after the global financial crisis.

“The impact of the coronavirus on economies in Asia is potentially huge, as tourism in the region takes a beating. From deserted hotels to empty airports, the impact of this little scrap of protein and lipid on economies in the region is potentially enormous,” said Robert Carnell, chief economist and head of research for Asia-Pacific at ING in Singapore.

“If this doesn’t sound sufficiently scary, bear in mind that tourism is just one of the channels through which the coronavirus can weaken the GDP growth of Asian countries grappling with this epidemic.”

Thailand’s and Taiwan’s economies are forecast to expand at a paltry 0.2% and 1.3% in the current quarter, the lowest in nearly half a decade.

Australia’s economy, a proxy for Chinese economic growth, is forecast to grind to a halt in the current quarter, ending the country’s near three-decade growth streak which started in 1991.

“This (the virus outbreak) can be hurtful to growth in several countries beyond just the negative spillovers from China. A sharp rise in infections reported by several countries raises concerns of a deeper hit to these countries and also global growth,” said Johanna Chua, emerging markets Asia economist at Citi in Hong Kong.

But if the grim outlook doesn’t improve, under a worst-case scenario, economists expect growth in all countries polled to drop further by 0.5 percentage point to one full percentage point.

Singapore is forecast to be the worst affected from the fallout, with growth dropping by more than 1 percentage point for 2020. The least impact would be on Indonesia, which is expected to grow 4.7% this year.

(For other stories from the Reuters global long-term economic outlook polls package)

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JPMorgan gets busy in repo lending after regulatory nod: CFO

NEW YORK (Reuters) – JPMorgan Chase & Co (JPM.N) is putting more cash into overnight lending markets and holding less for a rainy day, after discussing the matter with regulators, the bank’s finance chief said on Tuesday.

It is also headed to the “discount window” – the Federal Reserve’s funding-source-of-last-resort – in an effort to help diminish the reputational stain attached to its use and promote alternative funding options in the wake of last year’s frightening bout of volatility in money markets.

JPMorgan executives had complained that liquidity and capital requirements prevented the bank from financing overnight loans, but discussions with regulators made the bank believe it has more flexibility, Chief Financial Officer Jennifer Piepszak said.

As a result, JPMorgan has decided it can hold less cash for its resolution plan, and instead, factor in the possibility that it would use the Fed’s emergency lending facility, the discount window.

“We think that this is an important step for us to take to help break the stigma here, and it’s also consistent with the public comments from the Fed,” Piepszak told attendees at JPMorgan’s investor day conference in New York.

Fed officials, including Vice Chair Randal Quarles, have indicated support for changes that would make it easier for banks to be more involved in overnight lending, also known as repo markets.

CEO Jamie Dimon told the conference that the bank had been keeping about $150 billion of extra cash in its account at the Fed and is reducing that number by $50 billion to $60 billion, freeing up the money for repo lending.

“We are going to hit the discount window” to test the facility for borrowing cash from the Fed against a range of securities and loans, Dimon said.

“We have spoken to all of the regulators,” he said.

Bill Nelson, chief economist at the Bank Policy Institute, a trade group, said JPMorgan’s plan is “an important first step” toward making the discount window an acceptable tool for financial stability.

The stigma attached to using the discount window has existed for more than 70 years and was exacerbated by the financial crisis, Nelson said.

JPMorgan, the biggest U.S. bank by assets, is a major player in repo. Its decision to become a more active lender there should help liquidity more broadly, Piepszak said.

At the event, JPMorgan also reiterated its profit targets and pledged more financial support for clean-energy initiatives.

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JPMorgan executives say bank is big enough to weather any storm

(Reuters) – JPMorgan Chase & Co (JPM.N) executives tried to reassure investors on Tuesday that the bank can thrive during times of market and economic stress, due to the sheer size and breadth of its global operations.

At its annual investor day in New York, management offered updates on JPMorgan’s four main business lines but did not upgrade profit targets – signaling an expectation of slow, steady growth over the medium term.

JPMorgan has spent much of the last decade capitalizing on healthy markets and strong customer demand to prepare for hard times, Chief Executive Jamie Dimon said. That means the bank’s balance sheet is strong enough not only to get through a downturn but make investments in the future, he said.

“Downturns present great opportunities,” Dimon said.

As executives spoke, major stock indexes were falling on concerns about the coronavirus epidemic. The illness, which has now spread from China and neighboring countries to Europe, the Middle East and North America, is the latest in a string of problems that have whipsawed markets recently.

JPMorgan is the largest U.S. bank by assets, with operations spanning the globe and a leading market share in many of its businesses. That poses natural obstacles for growth, but it also gives JPMorgan the flexibility to invest where weaker rivals pull back, and to fund experiments in the future of financial services.

For instance, JPMorgan has opened dozens of new locations in targeted markets and installed sleek, new ATMs across its branch network, each one costing about $30,000.

The bank is chasing 40,000 prospective small-business customers it found at new branches across the East Coast and Midwest, said Doug Petno, head of commercial banking.

Thasunda Duckett, who runs JPMorgan’s consumer bank, highlighted efforts to attract younger customers. Roughly 25% of the bank’s new checking accounts come from college students in targeted cities like Durham, North Carolina, she said.

JPMorgan’s new digital wealth-management tool was another initiative highlighted by Mary Callahan Erdoes, head of asset and wealth management.

The product, called You Invest, is offered through a smartphone app and targets customers with relatively little wealth. In addition, JPMorgan handles investments for just 5% of U.S. households with $1 million to $10 million in assets but hopes to expand that in the coming years, Erdoes said.

JPMorgan developed You Invest to compete with tools offered by rivals, as well as standalone “roboadvisors” like Betterment and Wealthfront.

In his typically blunt style, Dimon noted that JPMorgan is big enough to invest in novel products to one-up the competition.

“We earn $47 billion; we can burn a billion in order to do something better, rather than be disrupted,” Dimon said. HO-HUM TARGETS

Though executives sprinkled their presentations with new details, JPMorgan kept stable the forward-looking benchmarks that investors and analysts focus on the most.

Chief Financial Officer Jennifer Piepszak said the bank continues to aim for a return-on-tangible-common-equity (ROTCE) of 17%. That metric determines how much profit a bank can wring from shareholder funds. Last year, JPMorgan produced an ROTCE of 19%.

JPMorgan cut its outlook for net interest income to $57 billion for 2020 from $57.8 billion in 2019, blaming lower interest rates. It forecast $60 billion or more in net interest income for 2021, which was above analysts’ estimates.

The bank also forecast higher expenses of $67 billion, compared with $65.3 billion last year, despite a “reduction in structural expenses.”

Management’s outlook for the bank’s returns on equity in each of its four units – Consumer & Community Banking, the Corporate & Investment Bank, Commercial Banking, and Asset & Wealth Management – remained unchanged.

The one target JPMorgan did raise relates to financing of environmentally friendly, socially responsible or economic development initiatives.

JPMorgan pledged to put $200 billion toward such projects by 2025 as a lender, underwriter or intermediary, up from a prior $175 billion goal it had set in 2017.

The update came after years of criticism from environmental activists. Some stood outside JPMorgan’s investor day, partially blocking some entrances and demanding that the bank get rid of fossil-fuel clients.

Although JPMorgan’s financial targets did not change, analysts said they were generally in line with expectations. The bank’s shares were down 2.7% at $128.56 in afternoon trading, tracking lower than the broader market.

Evercore ISI analyst Glenn Schorr noted that the bank has posted better revenue growth, profits, returns on equity and overhead expenses than major rivals, which he characterized as “amazing given their size.”

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Trump administration in talks about Chevron's operations in Venezuela: envoy

WASHINGTON (Reuters) – The Trump administration is in discussions about whether to renew a license for Chevron Corp’s operations in Venezuela as Washington looks to increase pressure on its socialist leader, the U.S. special envoy to the South American country said.

U.S. Special Representative for Venezuela Elliott Abrams said in an interview on Monday that he would not talk about specific future activities on Chevron.

“But there are conversations taking place and at the appropriate moment OFAC will say whatever it needs to say,” Abrams said about the Treasury Department’s Office of Foreign Assets Control, which makes announcements on sanctions.

The Trump administration has been divided on whether to revoke California-based Chevron’s ability to continue operations in Venezuela, home to the world’s largest oil reserves and where the company has been active for about 100 years. It has renewed the license for Chevron and four other U.S.-based companies several times and the current one expires on April 22.

State Department officials, including Secretary of State Mike Pompeo, have wanted to keep Chevron operating in Venezuela to have a U.S. beachhead there and source of stability should President Nicolas Maduro be forced to step down.

White House officials on the National Security Council have been more aggressive, arguing that Chevron’s presence in Venezuela is not helping in the push to remove Maduro. The United States supports opposition leader Juan Guaido.

Abrams found it unlikely that there could be other ways for Washington to halt Chevron’s activities in Venezuela. “There are various reasons why Chevron might stop other than the revocation of the license but in terms of the U.S. government, I think that would be the only way,” he said.

Some analysts have said that if Chevron were to leave Venezuela its assets could end up in the hands of Russia’s state-led energy company Rosneft or other Russian interests. Abrams said Washington had ways to deal with that.

“The first question is whether Rosneft which portrays itself as just a business, just an oil company, would want to put more of its assets and activities in Venezuela, and that ought to be a business decision,” Abrams said. “Let’s see first if it is a business decision. That is who makes the decision? The company or the government of Russia,” Abrams said. “Obviously we have ways of responding if they do that.”

Washington last week slapped sanctions on a trading unit of Rosneft that has emerged as a key intermediary for the sale of Venezuelan oil and President Donald Trump on Tuesday warned more actions will be taken.

Rosneft has accused Washington of double standards saying it allows U.S. companies to work in Venezuela.

Chevron says its Venezuelan crude exports last year represented about 2% of the country’s total crude shipments and that its marketing activities are permitted under the license. It also said the proceeds go to maintenance of operations at joint ventures in Venezuela.

“Proceeds are not paid to PDVSA,” said Chevron spokesman Ray Fohr. “Our focus continues to be on our base business operations and supporting the more than 8,800 people who work with us and their families.”

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Wall Street deepens losses with virus spread in focus

NEW YORK (Reuters) – Wall Street added to losses on Tuesday with its three major stock indexes falling 1%, after officials said the coronavirus was “a rapidly escalating epidemic,” a day after virus worries sent the S&P 500 and the Dow Industrials to their biggest daily declines in two years.

While U.S. stocks started the session in positive territory, those gains were erased as investors, focused on the potential economic impact of the outbreak, noted it had spread to new countries including Spain.

Also on Tuesday, Iran’s death toll from the virus rose to 16, the highest outside China, while dozens of countries from South Korea to Italy accelerated emergency measures.

U.S. stock indexes were on track for a fourth day of losses, with fears of a pandemic knocking off more than 3% on Monday after a flare-up of infections in several countries. As of Monday’s close, the S&P 500 and the Dow Jones Industrials had erased their gains for the year-to-date.

“A lot of people who have been woken up by the volatility of the stock market will start to get a little panicky,” said Tom Plumb president of Plumb Funds in Madison, Wisconsin.

At 11:11 a.m. ET, the Dow Jones Industrial Average fell 275.4 points, or 0.98%, to 27,685.4, the S&P 500 lost 31.87 points, or 0.99%, to 3,194.02 and the Nasdaq Composite dropped 101.72 points, or 1.1%, to 9,119.56.

Of the S&P’s 11 industry sectors, consumer staples, up 0.1%, was the sole gainer while energy was the biggest laggard with a 1.8% dip.

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Last week, positive fourth-quarter corporate earnings and hopes of limited damage from the virus outbreak had pushed Wall Street to record highs.

While some investors had been betting that support from central banks such as the U.S. Federal Reserve would counter any weakness resulting from the virus, this confidence was starting to dim due to worries about supply chain disruption.

“The markets are also coming around to this idea that when it’s a problem with the supply side, the central banks are not equipped to deal with these kind of events,” said Seema Shah, chief investment strategist at Principal Global Investors in London.

Department store operator Macy’s Inc fell 3% despite reporting a smaller-than-expected drop in quarterly same-store sales.

Mastercard Inc shares fell 3.6% after announcing Chief Executive Officer Ajay Banga would step down at the start of the next year and be replaced by products head Michael Miebach.

HP Inc surged 7%, providing the biggest boost to the S&P, after saying it would step up efforts to slash costs and buy back stock, as it sought investor support to defend against a $35 billion takeover offer from U.S. printer maker Xerox Holdings Corp.

Shares of Dow-member Home Depot Inc also provided a boost, rising 0.8%, after the home improvement chain beat quarterly sales and profit estimates.

Declining issues outnumbered advancing ones on the NYSE by a 3.50-to-1 ratio; on Nasdaq, a 3.44-to-1 ratio favored decliners.

The S&P 500 posted 4 new 52-week highs and 32 new lows; the Nasdaq Composite recorded 21 new highs and 97 new lows.

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U.S. consumer confidence holds at higher levels despite coronavirus

WASHINGTON (Reuters) – U.S. consumer confidence edged up in February, suggesting a steady pace of consumer spending that could support the economy despite growing fears over the fast-spreading coronavirus, which have roiled financial markets.

The Conference Board said its consumer confidence index ticked up to 130.7 this month from a downwardly revised 130.4 in January. Economists polled by Reuters had forecast it edging up to 132.0 in February.

The survey made no mention of the coronavirus and economists do not believe that the illness, which has killed more than 2,000 people, mostly in China, and spread to other countries, would hurt consumer confidence. They noted that consumer confidence remained strong even as trade tensions between Washington and Beijing weighed on business sentiment.

“Based on how stubbornly high it has been through trade war rhetoric and other shocks, even a pandemic might not have made much of a dent in consumer confidence,” said Robert Frick, corporate economist with Navy Federal Credit Union in Vienna, Virginia. “The main reason it is hanging at such lofty levels, strong hiring, isn’t going away any time soon.”

The Conference Board survey’s present situation measure, based on consumers’ assessment of current business and labor market conditions, fell to 165.1 this month from 173.9 in January. But the expectations index increased to 107.8 this month from 101.4 in January.

The report follows a survey by data firm IHS Markit last Friday showing its flash Composite PMI Output Index, which tracks the U.S. manufacturing and services sectors, contracted to a 76-month low in February. IHS Markit attributed the plunge in the index to below the 50 threshold to the coronavirus outbreak, which it said was hurting the travel and tourism industries as well as disrupting supply chains.

Strong consumer confidence suggests the longest economic expansion on record, now in its 11th year, could withstand disruptions from the coronavirus.

“On average, Americans are upbeat about the future with their expectations moving up sharply in February,” said Chris Rupkey, chief economist at MUFG in New York. “If it holds up, this confidence consumers have about their future may help keep consumer spending on an even keel and right now the consumer is the economy with business investment down in the dumps.”

STOCKS HAMMERED

Investors on Monday dumped stocks and bought U.S. Treasuries, pushing the yield on the benchmark 10-year government bond its lowest level since 2016. The 30-year Treasury yield touched a record low at 1.813%.

Money markets have deepened their bets on interest rate cuts by the Federal Reserve. The U.S. central bank cut rates three times last year and has signaled its intention to keep monetary policy on hold at least through this year.

Goldman Sachs on Sunday cut its first-quarter gross domestic growth estimate by two-tenths of a percentage point to a 1.2% annualized rate. Growth estimates for the January-March quarter were also already on the lower side because Boeing (BA.N) suspended production of it troubled 737 MAX plane starting last month. The economy grew at a 2.1% pace in the fourth quarter and 2.3% in 2019.

Stocks on Wall Street extended their decline on Tuesday. The dollar fell against a basket of currencies, while U.S. Treasury prices were trading higher.

The Conference Board survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, fell to 29.8 in February from 35.3 in January. That measure closely correlates to the unemployment rate in the Labor Department’s employment report.

That suggests the unemployment rate likely increased this month after rising one-tenth of a percentage point to 3.6% in January as more people entered the labor market.

The increase in the Conference Board’s market differential fits in with sharp declines in job openings in November and December, which suggested a slowdown in employment growth. Still the labor market remains solid as highlighted by very low layoffs.

A solid labor market is driving a moderate pace of consumer spending and is helping to soften the blow on the economy from a prolonged downturn in business investment.

A second report on Tuesday showed the S&P CoreLogic Case-Shiller 20-metro-area house price index increased 2.9% from a year ago in December after rising 2.5% in November.

Tight inventory is keeping home prices elevated. But the supply squeeze could ease as building permits and the number of homes under construction are at levels last seen nearly 13 years ago. Demand for housing is being driven by the labor market and lower mortgage rates.

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