Stocks stumbled into Friday's open, then took another leg down as data showed the U.S. economy unexpectedly contracted in February. Deere (DE) and Texas Roadhouse (TXRH) soared on earnings. IPO Chewy (CHWY) vaulted higher on an analyst upgrade. Walmart (WMT) led the very few advancers on the Dow Jones today.
XThe Nasdaq opened 0.7% lower, then doubled down to a 1.3% loss. The S&P 500 sprawled to a 1% decline. The Dow Jones Industrial Average dropped 0.9%, with Microsoft (MSFT) down 2.8% and leading the retreat on the stock market today.
At the top of the S&P 500, Deere soared nearly 9% after a strong fiscal first-quarter earnings beat, with revenue falling less than expected. Pinnacle West Capital (PNW) jumped 2.5% on earnings, moving higher in a buy range above a 99.91 buy point.
BioMarin PharmaceuticalBMRN popped 2.5% to lead the Nasdaq 100, and edging past a 93.24 buy point. Pet food maker Chewy (CHWY), a recent initial public offering, jetted up almost 5%, after RBC Capital upgraded the stock to outperform.
Growth stocks First Solar (FSLR), Zscaler (ZS), Appian (APPN) and Universal Display (OLED) were taking sharp dives after reporting quarterly results late Thursday.
Domino's Pizza (DPZ) traded 2% lower, following its earnings-fueled 25.6% breakaway gap breakout on Thursday. The IBD Leaderboard stock was downgraded to hold, from buy, by Stifel Nicolaus Friday morning. Goldman Sachs boosted the stock's price target to 400 — about 7% above Thursday's closing price.
February PMI Dives, January Home Sales Due
Overall U.S. economic performance nosedived in February, according to researcher Markit, which reported its preliminary composite purchasing managers index reading for the month of 49.6. That was sharply below both January's 53.1 tally, and the 52.5 number projected by analysts. Numbers below 50 indicate economic contraction.
Manufacturing expanded narrowly, reading 50.8 for the month. Services fell to 49.4, down from 53.2 in January and disappointing forecasts for an uptick to 53.3.
January existing homes sales data are expected from the National Association of Realtors at 10 a.m. ET.
Speeches from five Federal Reserve Bank officials are scheduled during market operating hours, beginning with Dallas Federal Reserve Bank President Robert Kaplan, at 9:35 a.m. ET. An essay released Tuesday by the Federal Open Market Committee member said that the U.S. should experience solid growth in 2020, and that, unless circumstances change, the current Fed rate target of 1.5% to 1.75% "is roughly appropriate."
Dow Jones Today: Coca-Cola Warns On Coronavirus
Coca-Cola (KO) traded effectively flat early Friday, after the company warned the impact of China's coronavirus slowdown would translate to a 2- to 3-point decline in unit case volume, a 1- to 2-point dent in organic revenue and a 1- to 2-penny decrease in earnings per share for its first quarter. The company held its full-yuear guidance steady. China's is Coke's third largest market globally.
Coke shares are sitting on top of a six-week rally, up almost 7% from a mid-January breakout
Earnings News: EHealth, Colfax, Texas Roadhouse
Health insurance broker eHealth (EHTH) soared 6.2% higher after a strong fourth-quarter report and as Cantor Fitzgerald raised the stock's price target to 185, from 150. Database software innovator Dropbox (DBX) sailed up 19% on an earnings beat and a new, $600 million share repurchase program. Thinly traded Ducommum (DCO) vaulted 18% higher, jumping toward a buy point, as B. Riley upgraded the stock to buy following above-forecast fourth-quarter results late Thursday.
Colfax (CFX) muscled up 3.7% after reporting a better-than-expected 45% jump in earnings and a 55% revenue gain in its fourth-quarter report. The maker of welding supplies and medical devices has been testing support at its 10-week line, technically holding below a 36.73 buy point, after initially clearing that entry in December.
Texas Roadhouse (TXRH) roped an early 7% gain. The steak and barbecue restaurant chain received a handful of price target hikes after reporting late Thursday its earnings growth accelerated to a 45% gain in the fourth quarter, easily beating analyst targets. The company said it would open 30 new locations in 2020.
Texas Roadhouse shares are extended from a late-January breakout.
Enterprise software developer Bandwidth (BAND) swept up 9% as Needham, Robert W. Baird and JMP Securities all raised price targets on the stock following strong fourth-quarter results and first-quarter guidance reported late Thursday.
Bandwidth's gain moved shares out of a buy range above a 74.09 buy point in a deep cup-with-handle base.
Coronavirus, Covid-19 Update
The number of confirmed cases of the coronavirus named Covid-19 in China rose to 75,465 on Friday, according to the South China Morning Post. That was up less than 19% vs. the prior week as the spread of the contagion continued to slow. However, deaths from the illness rose to 2,236, up 62% week-over-week — an acceleration from Thursday death rate increase of 55%.
South Korea reported its number of confirmed Covid-19 cases doubled — to 204 — over the past 24 hours, sending the country into a high alert against the illness. In Iran, two more persons died, bringing its total casualties to four — the hightest number of coronavirus deaths outside of China.
The morbid task of tracking infection and death rates is an unscientific means of providing some gauge on the virus' status, and of its human impact and toll. That toll ultimately translates into the illness's effect upon the economic measures that drive the stock market. Foremost among those is the industrial and economic activity in China, the world's second-largest economy.
China Virus Impact: Auto Sales, Facebook
China is also the world's largest market for automobiles. And the China Passenger Car Association reported on Friday a 92% drop in auto sales in the country during the first half of February. The group forecast auto sales would decline at least 10% in the first half of 2020.
Walmart (WMT) and Apple both warned this week of hits to their first quarter revenue. The International Air Transport Association said Thursday the impact of coronavirus on travel demand will cost airlines globally more than $29 billion — mostly in the Asia-Pacific region. Facebook (FB) on Thursday canceled its participation in the Game Developers Conference scheduled in San Francisco next month, due to China virus concerns.
China suspended indefinitely three of its largest annual events — its National People's Congress, China Development Forum and the Boao Forum for Asia, a Davos-style gathering of regional business and political elites — due to virus concerns, according to the Morning Post.
A Wednesday note from Goldman Sachs, discussed in Barron's, estimated that just China's travel industry accounted for 0.4% of global GDP. The note also projected that, utlimately, missed work days in China caused by the conoravirus would be "roughly equivalent to the entire U.S. workforce taking an unplanned break for two months."
Dow Jones Today: Minding Home Depot's Buy Range
The Dow Jones today opens with a 0.6% loss so far for the week, tracking toward its first slip in three weeks. The Dow industrials — as well as the overall stock market — are behaving surprisingly well, given the levels of uncertainty washing over global markets related to China's coronavirus outbreak.
The Nasdaq has a 0.2% gain for the week through Thursday, trading down slightly from the new high chalked up in Wednesday's session. The S&P 500 is down 0.2% on the week, also narrowly below Wednesday's high.
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Small caps are slightly outpacing the market, with the Russell 2000 up 0.5% through Thursday and angling toward a third-straight weekly gain. The index is a bit more than 1% off a mid-January peak. That peak was the index's highest mark since September 2018.
Among Dow Jones stocks, JPMorgan continues to hug its 10-week line of support, moving it within 3% of what IBD MarketSmith chart analysis pin points as a flat base buy point at 141.20.
IBM (IBM) and McDonald's stock are holding in buy ranges above buy points following recent breakouts. Home Depot (HD) is approaching the top of its buy range after clearing a 236.63 buy point on Feb. 5. The current buy range for Home Depot stock tops out at 248.46.
Find Alan R. Elliott on Twitter @IBD_Aelliott
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