Plus, Home Depot and Macy’s topped earnings estimates, while Shake Shack disappointed.
Stocks were slightly higher to start Tuesday with the Dow adding 48 points, or 0.2%. The S&P 500 gained 0.1%, while the Nasdaq traded 0.2% higher.
Confirmed cases of the coronavirus have surged past 80,000 while total deaths from the virus stand at at least 2,704. The U.S., Japan, and Hong Kong have issued travel warnings to South Korea as the COVID-19 outbreak there has sickened around 900 people and killed 9. Italy said infections there had risen to at least 283, while Iran said 95 people—including the country’s deputy health minister—had been infected with the virus, with 16 deaths nationwide. As cases outside of China swell higher, the World Health Organization warned that countries around the world need to be prepared for the fast-spreading coronavirus to be “literally knocking at the door.”
Jefferies equity strategist Simon Powell said in a note that the chance of a large outbreak in the U.S. is “increasingly likely,” and would be a scenario that would “rattle” markets in tandem. “We increasingly find it hard to believe that USA cases are as low as reported, and believe that given the flow of Chinese, Korean and Iranian nationals into North America, a large USA community-based outbreak is increasingly likely,” Powell wrote in the note released Tuesday morning. “Imagine trying to quarantine a large city in the USA for a month, similar to how the Chinese have shut down Wuhan, or the way the Italians are trying to ring-fence 10 towns near Milan. … Our working hypothesis is that it wouldn’t work, and could cause panic on a scale that would spook markets.”
The U.S. government will oversee an international trial of Gilead Sciences’ experimental drug remdesivir as a treatment for the coronavirus, while the drug is already being tested in China as a potential treatment for the deadly virus. The trial will be run by the University of Nebraska Medical Center and the National Institute of Allergy and Infectious Diseases and will be conducted at up to 50 sites globally. Bruce Aylward, assistant director-general with the World Health Organization, said yesterday after a tour through China that, “there is only one drug right now that we think may have real efficacy [against the virus] and that’s remdesivir.” China will release the results from its trial of remdesivir on April 27.
Home Depot shares opened 2% higher this morning after the home improvement retailer topped estimates in its Q4 earnings report. The company reported earnings per share of $2.28 on revenue of $25.78 billion, compared to estimates for earnings per share of $2.10 on revenue of $25.76 billion. CEO Craig Menear said the results demonstrate how Home Depot’s $11 billion investment program to improve customer experience in store and online is paying off. Menear said that fiscal 2019 was “marked by significant progress as we invest to transform ourselves into The Home Depot of the future,” and added that the company has “more conviction than ever that our strategic initiatives are creating a value proposition that is unique to the marketplace and will extend our leadership position for years to come.” Wells Fargo Securities analysts said Home Depot has a “favorable 2020 setup” and that the “best-in-class operator” was primed to “take share in a growing, yet still fragmented industry. However, investors will be eager for an update on how the coronavirus may impact the products it imports from China.”
In other earnings news, Macy’s shares gained as much as 6% premarket after the department store posted Q4 earnings that topped estimates. Macy’s reported adjusted earnings per share of $2.12 on revenue of $8.34 million, compared to consensus estimates for earnings pre share of $1.96 on revenue of $8.32 million. “Taken as a whole, 2019 did not play out as we intended for Macy’s, Inc. However, we executed well during the Holiday 2019 season,” said CEO and Chairman Jeff Gennette in a statement. Meanwhile, Shake Shack shares are down more than -12% this morning after the burger chain released disappointing quarterly results. Shake Shack reported a loss of $0.06 per share on $151.4 million in revenue, while analysts had expected a $0.01 per share loss on revenue of $153 million. In a statement, CEO Randy Garutti tried to reassure investors that the company’s expansion strategy would pay off in the long term, despite dragging down profitability in the near term. “We recognize this level of growth and investment, at times, can have near-term impact on same-Shack sales and other aspects of our financial performance,” Garutti said, adding that the company believes it “will ultimately benefit from this strategy over time.”
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Co-Diagnostics Inc (NASDAQ: CODX): Shares of this nano cap biotech have surged 339% so far this year, and more than 18% over the last month in reaction to Co-Diagnostics’ screening test for the coronavirus. Late last week, the company announced that it had submitted the technical file for the COVID-19 test for registration to Europe for approval, and said this morning that it has received approval for the diagnostic test and can now export the test to any country that requires the CE Mark. “Co-Diagnostics has received overwhelming interest in our novel coronavirus diagnostic from all over the world since first announcing its development a month ago,” said CEO Dwight Egan in a statement. “We look forward to scaling up production to meet global demand with this regulatory clearance in place, and to obtaining approvals from other bodies that will allow us to further increase the reach of this invaluable diagnostic tool.”