U.S. Stocks Rebound After Last Week’s Big Drop - The Wall Street Journal

A screen showing stock movements at a securities firm in Hangzhou, China, on Monday. Chinese... — A screen showing stock movements at a securities firm in Hangzhou, China, on Monday. Chinese markets dropped sharply on the first day of trading after the extended Lunar New Year break. Photo: Agence France-Presse/Getty Images

Anna Isaac

The Wall Street Journal

Biography
@annaisaac
anna.isaac@wsj.com

Updated Feb. 3, 2020 10:16 am ET

U.S. stocks rebounded as markets opened Monday, shaking off concerns about the coronavirus that caused a sharp selloff last week.

The Dow Jones Industrial Average gained 301 points, or 1.1%, in morning trading. The S&P 500 rose 1.1%, while the Nasdaq Composite climbed 1.4%.

In Asia, Chinese markets tumbled sharply in the first day of trading following the extended Lunar New Year break. The Shanghai Composite Index closed 7.7% lower in its steepest drop since August 2015, with many stocks dropping by the maximum 10% that is allowed.

Investors are also closely watching Monday’s ballot in Iowa, a major electoral battleground, for insights into whether a candidate who supports a bigger role for government may beat out rival Democratic contenders. The early voting state plays a key role in the run-up to the presidential elections in November as it can provide a vital boost to some candidates vying to take on President Trump.

“Markets have previously reacted quite strongly when left-wing populist Democratic candidates have performed well,” said Oliver Jones, market economist at Capital Economics.

Many investors are also betting the volatility that has rattled U.S. markets over the past two weeks is here to stay, with the election season ramping up and the viral outbreak from China continuing to curtail business operations and trade. On Friday, the S&P 500 index suffered its worst day since August.

Tesla shared jumped 12% after analysts at Argus Research and ARK Invest raised their price targets for the electric-car maker.

Gilead Sciences climbed 5.9%. The drugmaker on Friday said it had provided doses of an experimental antiviral drug to doctors for the emergency treatment of a small number of patients infected by the new coronavirus.

In China, investors got their first chance in more than a week to parse the potential impact of the coronavirus outbreak on the economy. Efforts to contain the disease—which has infected more than 17,000 people—has already led to suspension of flights to the country, a halt or slowdown in business operations, and disruptions to global trade and supply chains.

“The fall of Chinese onshore equities is not a huge surprise, given what’s been happening elsewhere,” Mr. Jones said. “People are interpreting these falls as catch up.”

Trading day

All times EST Source:

Brent crude, the global benchmark for oil prices, fell 0.7% on worries that the widening virus outbreak will reduce Chinese energy consumption. Saudi Arabia is pushing for significant oil-production cuts in response to those concerns, according to OPEC officials. Representatives of the Organization of the Petroleum Exporting Countries and its allies are set to meet Tuesday and Wednesday to discuss next steps.

Over in the U.K., the British pound fell 1.4% against the U.S. dollar. The move reflected concerns about fresh trade talks between the European Union and the U.K., according to Jordan Rochester, a foreign-exchange strategist at Nomura Holdings.

The U.K. formally exited the EU Friday and entered into a transition period. Both sides fired opening salvos on Monday as they begin the complex negotiations that will determine the terms of their future relationship.

“We expect a tough talk in the opening rounds of the Brexit talks,” Mr. Rochester said. “Today, the EU and the U.K. are setting out their stalls.”

Among European equities, Ingenico Group climbed 15% in Paris after its board agreed to a cash-and-stock merger with payment-services giant Worldline in a transaction that will give Ingenico shareholders 35% of the combined business. Worldline ticked up 0.2%.