Markets struggling to find stability. After a wild ride in futures markets overnight, market participants will anxiously watch the news this week to find a reason to step in and support stocks after a 13% slide over the past seven trading sessions. Recession-like manufacturing surveys data in China, more international COVID-19 cases, and confirmed deaths in the United States added to anxiety over the weekend. In addition to news on COVID-19 and the potential for a policy response, investors will be watching Super Tuesday results, the U.S. Purchasing Managers’ Index (PMI) for manufacturing, and the February jobs report.
Chinese economy may contract during the first quarter. The hit to the Chinese economy may be larger than we had anticipated, based on a more than 14-point drop in its official PMI data for February. As reported over the weekend, the manufacturing PMI fell to a record low of 35.7, below the lows of the financial crisis at 38.8, while the services reading tumbled more than 20 points to slightly below 30.
Earnings season drawing to a close. With fewer than 20 S&P 500 companies left to report, S&P 500 earnings growth for Q4 2019 is tracking to a roughly 1% year-over-year increase, well above the 2.4% estimated decline as of January 20. Revenue growth of 3.9% represents a 1.1% upside surprise. Estimates have held up well in recent weeks, but they are expected to drop as more companies issue profit warnings due to the coronavirus outbreak.
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