Stocks are set to rally for a second day with Dow on track to jump 400 points

U.S. stocks were set on Tuesday to continue the recovery rally following Friday’s steep sell-off sparked by concerns over China’s fast-spreading coronavirus.

Around 9 a.m. ET, Dow Jones Industrial Average futures were up by 380 points and indicated a gain of 400 points at the open. S&P 500 futures were up 1.3% and Nasdaq 100 futures were up by 1.6%.


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Stocks that have been hit by fears of the coronavirus slowing the economy bounced in premarket trading Tuesday. Apple jumped 2.1% and chipmakers rallied in early trading as well. Companies directly impacted by the coronavirus, including Carnival, which confirmed on Monday that a former cruise-line passenger tested positive for the virus, rose in the premarket. Carnival added 4.7%. Airlines bounced back as well.

The Dow fell 603 points, or 2.1% on Friday. On Monday, the average bounced back by 144 points, or 0.5%. Dow futures were up 1.1% on Tuesday.

Tuesday’s continued bounce comes after a Reuters report said China’s central bank could cut its key lending rate as well as banks’ reserve requirement ratios (RRRs) in the coming weeks to support economic growth. The report came a day after the People’s Bank of China unveiled liquidity injection measures to the tune of more than 1 trillion yuan.

“The balance between deleveraging and growth is likely to be tilted towards stimulus in order to make up ground lost due to the virus and quarantine,” said Larry Brainard, chairman for emerging markets at TS Lombard, in a note. “With Q1/20 GDP likely to fall sharply, we expect Beijing to respond aggressively with fiscal and monetary stimulus to get growth on track in Q2/20. This will generate a V-shaped recovery, led by the industrial sector.”

Chinese stocks jumped sharply overnight after a massive slump on Monday. The Shanghai Composite closed 1.3% higher while the Shenzhen A Shares index gained 1.8%. Other equity indexes in the region, including Hong Kong’s Hang Seng and the Korean Kospi, also posted strong gains.

That positive sentiment spilled over into European equity markets. The Stoxx 600 index gained 1.1%. Meanwhile, the German Dax climbed 1.2% and the France CAC 40 advanced 1.3%.

Markets were higher despite a climbing death toll from the coranvirus and despite disappointing earnings from Alphabet after the bell Monday.

As of Monday night, the virus death toll had reached 426 with 20,679 confirmed cases in China. Yet, Atlanta Federal Reserve Bank President Raphael Bostic on Monday said his outlook for the U.S. economy was unmoved by the virus.

Alphabet beat earnings estimates but missing on revenues, with Google’s advertising business falling short. Alphabet’s stock fell 3% in early trading.

Tesla shares were higher by 6% in the premarket, continuing their amazing run. On Monday alone, Tesla’s stock jumped 19.9% to post its biggest single-day gain in six years after Argus Research raised its price target to $808 from $556, sparking a short squeeze in the shares. Tesla was last at about $831 in the premarket.

U.S. oil futures, which hit a one-year low below $50 on Monday, recovered on Tuesday, helping market sentiment. Oil rose 1.3% to $50.75, easing concerns that the coronavirus would send the global economy into a recession.

Chubb, Disney, Ford, and Chipotle will report after trading hours on Tuesday. Disney shares were higher in premarket trading.

Source: cnbc.com | Original Link

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