Plus, the U.S. economy added 225,000 jobs in January, and Myriad Genetics shares are in free fall after it significantly missed on earnings.
Stocks slipped lower Friday morning with the Dow dropping 206 points, or 0.7%. The S&P 500 and Nasdaq both traded 0.6% lower.
The Labor Department was out with its jobs data this morning, reporting nonfarm payrolls rose by 225,000 in January – far surpassing economists’ estimates for 158,000. The jobless rate edged up to 3.6%, while average hourly earnings gained 3.1% year-over-year. Investors’ reaction to the jobs data was muted as the positive results undermine hopes for a possible Fed rate cut due to the coronavirus outbreak. “January’s better-than-expected jobs report is well-timed in that it boosts economic confidence just when coronavirus fears had investors questioning the growth outlook,” said FTSE Russell managing director of global markets research Alec Young. “That said, stocks are overbought after a huge rally, some of which has been predicated on hopes for a June Fed rate cut which now seems highly unlikely.”
Speaking of the coronavirus, cases have surged to more than 31,000 globally, while the death count has risen to 636. The Japanese Health Ministry confirmed there are 41 new cases of the virus on the Diamond Princess cruise ship under quarantine off the coast of Japan, bringing the total number of cases to 61 on the cruise ship carrying 3,700 passengers and crew. Meanwhile Singapore has raised its national disease response level to Orange, its second-highest level and the level used during the SARS epidemic. The city-state has confirmed three new cases of the coronavirus where no links have been found to previous cases and the sickened individuals have no recent travel history to China, raising alarms. The Orange designation indicates the nature of disease “is severe and spreads easily from person to person” but “has not spread widely in Singapore and is being contained,” according to Singapore’s Disease Outbreak Response System Condition framework. And in China, one of the first doctors who flagged the new coronavirus outbreak in the city of Wuhan has died. Ophthalmologist Li Wenliang sounded the alarm about the virus back in December and was then sanctioned by the Wuhan police for spreading “illegal and false” information. Li contracted the virus after treating patients with it and his death has unleashed a wave of fury over Chinese social media in reaction to Wenliang being silenced.
President Donald Trump heaped praise on Chinese President Xi Jinping for “leading the counterattack” against the coronavirus in an early morning call. “Just had a long and very good conversation by phone with President Xi of China,” Trump tweeted this morning. “He feels they are doing very well, even building hospitals in a matter of only days. … Great discipline is taking place in China, as President Xi strongly leads what will be a very successful operation. We are working closely with China to help!” Meanwhile, White House economic advisor Larry Kudlow told reporters the Trump administration doesn’t expect the coronavirus to have a big impact on the U.S. economy. “There’s a lot of variables involved and things we don’t know,” Kudlow said. “Internally we have looked at a drop in GDP of perhaps two-tenths of 1% – that’s all we found so far. Again, based on the past and based on what we’re seeing.”
Uber Technologies shares are up more than 10% this morning after the ride-hailing pioneer reported a Q4 loss that was narrower than expected and moved its EBITDA profitability forecast forward. CEO Dara Khosrowshahi said that the company expects to reach profitability by the end of this year, moving up its original promise of profitability from 2021. Khosrowshahi also said that the company plans to put a majority of its revenue growth back into its bottom line. “For every dollar of revenue growth, especially from Q4 to Q4, we expect to drop 50 cents to 55 cents to the bottom line,” the Uber CEO told CNBC. “We think that’s absolutely doable to get to profitability by Q4, but at the same time make the kinds of investment we want to make to keep a high growth rate for many years to come.”
Credit Suisse Group CEO Tidjane Thiam is out following a drawn-out spying scandal at the Swiss bank where former management boss Iqbal Khan was followed by private contractors in an effort to establish whether he was poaching colleagues and clients in his move to rival UBS. An internal investigation into the scandal found that Thiam had no knowledge of the surveillance, though it did result in the exit of COO Pierre-Olivier Bouee, who was found to have acted alone in directing the spying. Credit Suisse veteran Thomas Gottstein has been named to succeed Thiam. And Myriad Genetics shares are down 31% after the company announced quarterly earnings that significantly missed Wall Street’s expectations and disclosed that CEO Mark Capone was resigning effective immediately. “MYGN’s CEO departed; given the lack of evolution at the mgmt. and Board level, we are not sure this goes far enough given >10 years of underperformance and poor strategic vision,” wrote Cowen analyst Doug Schenkel in a note. “It was clearly time for a change – the questions remain: will MYGN go far enough, and when will we hear what comes next.”
Stocks We’re Watching
Unisys Corp (NYSE: UIS): Unisys shares jumped 46% after the tech services company announced a deal to sell its U.S. federal business to Science Applications International for $1.2 billion. “This transaction comes at a significant premium to the Unisys trading multiple, and is a tribute to the unique an attractive business that our U.S. Federal colleagues have built over many years,” said Peter Altabef, Unisys Chairman and CEO. “Under the leadership of Venkatapathi “PV” Puvvada, we have become known as a true innovator in the federal market, leveraging powerful intellectual property and a world-class team. This transaction will allow us to significantly enhance our balance sheet, which will create increased operational flexibility that will ultimately position us to better serve our clients while delivering increased value to investors.”
FGL Holdings (NYSE: FG): FGL Holdings soared more than 19% yesterday after reports that Fidelity National Financial nearing a deal to acquire the insurance and annuities specialist in a deal valued at $2.7 billion. Under the reported terms of the deal, Fidelity National would pay $12.50 per share for each FGL share outstanding, and is expected to close in the second quarter of 2020.
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