After seeing a bounce yesterday, stocks are falling right back down with reported coronavirus cases in the U.S. now over 1,000 as the fallout continues to force event cancellations, corporate profit warnings and guidance withdrawals. Goldman Sachs equity strategist David Kostin told investors this morning that he believes "the S&P 500 bull market will soon end," noting that his new mid-year S&P 500 target of 2,450 represents 15% downside from current levels and 28% below the market peak. Meanwhile, House Democrats are expected to unveil a package this afternoon ahead of a planned vote this week to help boost the economy hit by the coronavirus outbreak, The Hill reported. Bipartisan discussions are still ongoing between Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin, but Democrats are still planning to move their own proposals to help mitigate the economic effects of the coronavirus, the report noted. Outside of the U.S., a lockdown continues in Italy while the Bank of England slashed its key interest rates.
ECONOMIC EVENTS: In the U.S., the Consumer Prices Index rose 0.1% for the headline figure and 0.2% on the core reading for February, as expected.
In Europe, the Bank of England's Monetary Policy Committee voted unanimously to reduce its bank rate by 50 basis points to 0.25%. The MPC also voted unanimously for the Bank of England to introduce a new term funding scheme with additional incentives for small and medium-sized enterprises, financed by the issuance of central bank reserves.
TOP NEWS: PepsiCo (PEP) announced an agreement to acquire energy drink maker Rockstar Energy Beverages for $3.85B. After the deal announcement, Stifel analyst Mark Astrachan noted that Rockstar is the fourth-largest U.S. energy drink brand and he views the deal as having a minimal impact on Monster Beverage (MNST) competitively. However, if acquiring Rockstar allows Pepsi to create a distribution agreement or take an equity stake in Bang, which is the third-largest U.S. energy drink brand, it could result in Coca-Cola (KO) wanting more control of its destiny in the category, Astrachan added.
In other M&A news, DXC Technology (DXC) announced an agreement to sell its U.S. state and local Health and Human Services business to Veritas Capital for $5B. Citi analyst Ashwin Shirvaikar said the deal came modestly quicker and at a higher price than expected, but Wells Fargo analyst Ed Caso noted that while the company announced its first asset sale it also pulled its fiscal year 2022 guidance.
Boeing (BA) reported 46 canceled jet orders for February, including 11 737 MAX planes canceled by Air Canada (ACDVF). The company also booked new orders for 18 planes, including 17 orders for 787 jets, resulting in a net loss of 28 orders. Additionally, Paula Seligson of Bloomberg reported that Boeing plans to draw down the full amount of a $13.825B loan as early as Friday as a precaution due to travel disruptions from the coronavirus.
Adidas (ADDYY), along with its report of fourth quarter earnings, said that the company has been experiencing a material negative impact on its operations due to the outbreak of the coronavirus after its business in Greater China performed strongly in the first three weeks of 2020. Revenues in Greater China have been around 80% below the prior year level between Chinese New Year on January 25 and the end of February, noted the footwear giant, which added that it expects revenues in Greater China in the first quarter of 2020 to be between EUR 800M and EUR 1B below the prior year level.
MAJOR MOVERS: Among the noteworthy gainers was Vir Biotechnology (VIR), which rose 13% after it announced a research collaboration agreement with the National Institutes of Health and the National Institute of Allergy and Infectious Diseases, Vaccine Research Center to advance characterization and development of human monoclonal antibodies against coronaviruses, including SARS-CoV-2, the virus that causes the disease COVID-19. Also higher was Cloudera (CLDR), which gained 4% after reporting quarterly results.
Among the notable losers was Matador Resources (MTDR), which fell 22% after providing an update on its 2020 operational plan following the decline in oil prices. Also lower was Avid Bioservices (CDMO), which dropped 30% after reporting quarterly results.
INDEXES: Near midday, the Dow was down 1,063.89, or 4.25%, to 23,954.27, the Nasdaq was down 294.32, or 3.53%, to 8,049.94, and the S&P 500 was down 108.42, or 3.76%, to 2,773.81.
PepsiCo
-3.74 (-2.79%)
Monster Beverage
-3.85 (-5.83%)
Coca-Cola
-1.75 (-3.26%)
DXC Technology
+0.43 (+2.62%)
Boeing
-26.715 (-11.56%)
Nike
-5.42 (-6.14%)
Adidas
+ (+0.00%)
Vir Biotechnology
+4.35 (+14.52%)
Cloudera
+0.38 (+4.83%)
Matador
-0.43 (-18.14%)
Avid Bioservices
-1.56 (-25.96%)