Plus, oil dropped to $46 per barrel, Best Buy delivered an earnings beat, and DoorDash just took the first step to go public.
Stocks fell to start Thursday with the Dow dropping 900 points, or 3.4%. The S&P 500 fell 3.3%, while the Nasdaq traded 3.7% lower.
This morning’s losses puts the Dow and S&P 500 deeper into correction territory, with the indexes down -10% from their all-time highs set earlier this month. All three major U.S. indexes are on track for their worst weekly percentage drop since the financial crisis. The MSCI All-Country World Index has fallen to its lowest level since October, while the Stoxx Europe 600 is also in correction territory. Goldman Sachs revised its earnings estimate for 2020 with strategists expecting no profit growth for U.S. companies in 2020 as the firm updates its earnings model to incorporate the likelihood of the coronavirus becoming widespread. “The way the market is going down, it’s happening pretty quickly, but it’s very difficult to say that it’s over,” said Wells Fargo Investment Institute senior global market strategist Sameer Samana. “Bottoming is a multistep process and you’re probably still in step one.”
U.S health officials have confirmed the first possible community transmission of COVID-19 in America, a troubling sign that the virus could be spreading untraced throughout the local community. The CDC said that it doesn’t know exactly how the California patient contracted the virus as they have no relevant history or exposure to another patient with the virus. “At this time, the patient’s exposure is unknown,” the CDC said in a statement. “It’s possible this could be an instance of community spread of COVID-19, which would be the first time this has happened in the United States.” The case brings the total number of cases of the virus in the U.S. to 60. In an address from the White House last night, President Donald Trump put Vice President Mike Pence in charge of the U.S. response to the deadly novel coronavirus, while also maintaining that the risk to the U.S. from the virus “remains very low,” even amid global fears that the outbreak could soon be a pandemic. The global death toll from the virus has surpassed 2,800, while there are now more than 82,000 confirmed cases worldwide with infections on every continent excluding Antarctica.
With the stock market dropping amid mounting concerns about the coronavirus outbreak’s impact on global manufacturing, exports, and consumption, investors have been flocking to safe havens. Gold is up nearly 1% this morning, while the yield on the benchmark 10-year Treasury note has fallen to a new low. The 10-year yield opened at an all-time low of 1.25% this morning, while the 30-year yield has slipped lower to 1.747%. Meanwhile, oil prices have continued their steep decline today with crude falling more than 5% to a low of $46.18 per barrel. “Current forecasts of crude oil demand have fallen off a cliff. As China is the largest consumer in the world, the unclear impact of the coronavirus is driving WTI lower and lower,” said KKM Financial founder and CEO Jeff Kilburg. “As China is the largest consumer in the world, the unclear impact of the coronavirus is driving WTI lower and lower.”
On the earnings front, Best Buy delivered a Q4 earnings beat on strong sales of headphones, appliances, and other items during the holiday season. The electronics retailer reported adjusted earnings per share of $2.90 on revenue of $15.2 billion, compared to estimates for earnings per share of $2.75 on revenue of $15.05 billion. Same-store sales growth came in at 3.2%, while analysts had expected growth of 1.9%. Best Buy CFO Matt Bilunas said that the company is monitoring the coronavirus outbreak and expects most of the impacts to be in the first half of the year. Bilunas said that the company factored the outbreak in to its Q1 and full-year guidance, but added that “we view this as a relatively short-term disruption that does not impact our long-term strategy and initiatives.” JCPenney also reported Q4 earnings that topped analysts expectations, even as same-store sales dropped -7.5% during the holiday season. JCPenney CEO Jill Soltau said that she is encouraged by the company’s turnaround progress, though Soltau still expects 2020 will bring further same-store declines. The company plans to close at least another six stores this year. Shares of the department store are down nearly -10% at the time of writing.
And food delivery service DoorDash announced this morning that it has taken the first step toward a public offering. DoorDash confidentially submitted a draft of its S-1 filing to the SEC, with Goldman Sachs as an underwriter for its IPO. The company recently raised $100 million in a funding round, valuing the company at $13 billion. DoorDash is the leader in digital food delivery, with a third of all food delivery sales in the U.S. thanks to partnerships ranging from local restaurants to global fast-food chains like McDonald’s.
Stocks We’re Watching
National Vision Holdings Inc (NASDAQ: EYE): National Vision shares are up nearly 9% this week after the optical retail company—which owns America’s Best Contacts & Eyeglasses, Eyeglass World, Vision Centers inside select Walmart store, and Vista Opticals outlets inside Fred Meyer stores—delivered an earnings beat. In its fourth quarter, National Vision reported non-GAAP earnings per share of $0.11, beating estimates by $0.10. The company also reported a 121.3% increase in net income to $3.9 million, and a 12.9% increase in net revenue to $401.8 million. “The fourth quarter represented a strong finish to another record year of revenues and profitability for National Vision, with double-digit growth in net revenue and Adjusted EBITDA in 2019,” said CEO Reade Fahs. “The team delivered our 72nd consecutive quarter of positive comparable store sales growth, demonstrating the consistency of our differentiated business model. Our fourth quarter and 2019 results reinforce our belief that our strong value message continues to resonate with patients and customers.”