In Focus: The Markets Jan.21-Jan.24
One story dominated the markets last week, and it was the story of the Coronavirus, The virus which is believed to have originated in the Chinese city of Wuhan has dominated the headlines on Wall Street and Main Street.
During the week we saw markets close down on Tuesday after the U.S. identified its first case of someone carrying the virus in Washington State. On Wednesday, the Chinese government closed transportation to the city of Wuhan, leaving the markets with a mixed reaction. The Dow closed up but the S&P and Nasdaq closed down. On Thursday the World Health Organization made the decision to not declare the coronavirus a global emergency, which provided some relief for investors, but it was short lived. China closed transportation to a second city in an attempt to contain the virus, the news caused the Dow to close down again. On Friday there was news of more confirmed cases of the coronavirus, as well as a second person in the U.S. with the virus.
The markets have dealt with its share of medical emergencies since 2000. There was the SARS outbreak in late 2002. The SARS virus was responsible for close to 800 deaths in an eight month span. The markets have also dealt with two outbreaks of Ebola, and a severe outbreak of the West Nile Virus. During the SARS outbreak the Dow closed up in November 2002, the month of the first reported SARS case. The Dow would close down the next three months following the first SARS case; retesting lows from September 2002 before eventually moving back up. During that time airline stocks were hit hard, as fears to travel spread worldwide. It's likely that investors can expect the same thing to play out this time around with the coronavirus if the number of infections continue to increase.
Netflix vs Disney Plus
During the week investors received the first Netflix earnings report in a Disney Plus world. Netflix reported subscriber growth in the U.S. of 550,000, which came in below estimates. The company also reported international subscriber growth of 8.3 million, which surpassed the 7 million subs that were expected. Netflix's sold off following the earnings report, but on Thursday and Friday investors wised up and bid the stock up. Netflix reported year-over-year revenue growth of 30% during the quarter, and discussed plans to improve free cash flow and become cash flow positive.
In the U.K., parliament passed legislation implementing the withdrawal deal. The bill now opens the door for the country to leave the E.U. on January 31st. It's been three plus years since the vote to leave the European Union took place. The vote has cost two prime ministers their jobs, and the chaos of Brexit is far from being over. The U.K. still needs to establish trade deals with their former union as well as the United States.
The Dow, S&P 500, and Nasdaq all closed down on the week. The Dow lost 1.1% on the week, the S&P lost 1%, and the Nasdaq lost 0.07% on the week.
This week investors have Apple, Tesla, Amazon, Starbucks, Facebook, Microsoft, Visa, Verizon, and a dozen other major earning reports to look forward to. As we enter the third week of the earnings season it will be interesting to see if the focus goes back to stocks or will the coronavirus monopolize the headlines for a second week in a row.