Why David Tepper Says The Coronavirus Is A “Game Changer” For Stocks

Plus, Gilead Sciences may have an effective treatment for the rapidly-spreading virus, and manufacturing delivered an unexpected rebound. 

Stocks bounced back to start Monday with the Dow adding 332 points, or 1.2%. The S&P 500 gained 1%, while the Nasdaq traded 1.4% higher.

The death toll of the Chinese coronavirus has risen to 362, while total confirmed cases surpassing 17,400 globally. Chinese officials are evaluating adjusting their growth target for this year and China’s central bank has said that it will be injecting 1.2 trillion yuan ($173 billion) into the economy to cushion the shock to financial markets due to the outbreak. Over the weekend, the Trump administration introduced sweeping travel restrictions aimed at combating the spread of the rapidly-escalating virus, while China’s Foreign Ministry accused the U.S. of setting a “very bad example” in its reaction to the coronavirus saying that the Trump administration is spreading fear instead of providing assistance. And economist Mohamed El-Erian and billionaire hedge fund manager David Tepper are warning investors about buying the market dip caused by the coronavirus, with Tepper calling the virus a “game changer” for the market and calling on investors to “be cautious.” “For a long time I thought the market sentiment was so strong that we could overcome a mounting list of economic uncertainty,” El-Erian told CNBC. “But the coronavirus is different. It is big. It’s going to paralyze China. It’s going to cascade throughout the global economy. … We should pay more attention to this. And we should try and resist our inclination to buy the dip.”

Gilead Sciences shares are up 4% this morning following reports that suggested the company’s experimental antiviral drug remdesivir could be an effective treatment for the coronavirus. The Wall Street Journal reported Friday that Chinese officials had reached an agreement with Gilead to test remdesivir in patients with the novel virus, and the New England Journal of Medicine published a case report over the weekend on a man with the coronavirus in Washington state who was treated with remdesivir and whose condition has since improved. “Gilead seems to now be among the front-runners in developing a treatment for Coronavirus,” wrote Citi analyst Mohit Bansal in a note from today. “We could see commercial opportunity for GILD in longer term as well since typically countries stockpile such drugs to safeguard against future outbreaks.”

Apple could see a 10% decline in iPhone shipments in the first quarter due to the coronavirus, according to a note from TF International Securities analyst Ming-Chi Kuo. “Our latest survey indicates that the iPhone supply is being affected by the coronavirus and, therefore, we cut the iPhone shipment forecasts by 10% to 26-40 mn units in 1Q20,” Kuo said in the note. “It’s difficult to predict the shipments in 2Q2020 because of the uncertainties of the coronavirus epidemic and consumer confidence.” UBS upgraded Nike shares from Neutral to Buy and JPMorgan added the stock to its “analyst focus list” on Monday saying that the pullback Nike stock is experiencing due to the coronavirus is presenting “a multi-year buying opportunity.” Nike shares are down around 8% over the last two weeks as investors worry about the coronavirus’s impact on the athletic shoe giant’s Asia results.

U.S. manufacturing activity unexpectedly rebounded in January, posting its first expansion in six months. The Institute for Supply Management’s purchasing managers’ index increased to 50.9 in January from an almost four year low of 47.8 in December, according to data released Monday morning. Any reading above 50 indicates expansion, and the monthly advance was the largest since mid-2013. But whether the expansion continues, “we’re going to have to wait and see,” said Timothy Fiore, chair of the ISM’s manufacturing survey committee. “Weakness in the inputs for January questioned demand for expansion in February and whether we’re at the beginning of sustained PMI expansion.”

And in politics, House managers and defense lawyers are set to deliver their closing arguments in the impeachment trial against President Donald Trump today before the final vote on removing Trump from office on Wednesday afternoon. In a poll by NBC News and the Wall Street Journal, 46% of registered voters say the Senate should vote to remove the president from office, while 49% think the chamber should not vote to do so. However, 52% of respondents believe the president abused his power by asking a foreign government to investigate a political opponent and 53% say Trump obstructed Congress by not cooperating with the impeachment investigation. The Senate is expected to acquit Trump on Wednesday in a party-line vote. The Iowa caucus takes place today, with a poll indicating Bernie Sanders is leading with 28% of support from Democrats statewide. In the Emerson College poll of likely Democratic caucus voters, Joe Biden came in second with 21%, followed by Pete Buttigieg with 15% and Elizabeth Warren with 14%. 

Stocks We’re Watching

Centerra Gold Inc (OTC: CAGDF): Centerra Gold shares jumped nearly 7% on Friday after the miner announced the first gold pour from its Öksüt Mine in Turkey last week. “Congratulations to the team at Öksüt on pouring first gold and for doing so safely,” said Centerra President and CEO Scott Perry. “This is an important milestone for the project and for the growth of the Company as Öksüt is now our third operating mine and our third source of gold production going forward. Reaching the first gold pour is a testament to the dedication and hard work that our Öksüt team has put in to reach this goal safely.”

International Business Machines (NYSE: IBM): IBM shares gained 5% after it announced that president and CEO Virginia Rometty would be leaving her post at the beginning of April, and will be replaced by Arvind Krishna. Instinet analyst Jeffrey Kvaal said that the management change is “an opportunity for IBM to reset its narrative just as it returns to sustained revenue growth,” and added that Krishna’s appointment to the top spot “may allow him to hasten the pace of change at IBM.” While Bank of America analyst Wamshi Mohan said, “CEO transitions often can mark a turnaround in sentiment and strategy. We view this announcement as having the potential to drive a positive multiple re-rating in the story with the potential to pivot towards sustainable growth.”


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