US Open – Stocks rally on earnings and on optimism China will contain virus, Oil slides, Gold remains steady

US stocks are rising after China’s National Health Commission announced plans to contain the coronavirus and following strong earnings results from IBM and Netflix.  The pneumonia-like virus has killed nine people and infected 473 people in China.  Financial markets are not panicking as health agencies are better prepared than they were in 2003 when SARS killed almost 800 people worldwide. 

The technology earnings are off to a good start following Netflix and IBM earnings results.  Netflix delivered a strong beat with the top and bottom line.  The streaming giant showed strong growth internationally that replaced lost revenue in the US.  The first quarter guidance was a little light on revenue side, but it could just be Netflix setting a low bar to beat.  Netflix is bracing for a wave of competition, but if they can continue to grow international revenue, the earnings outlook will be strong for the rest of the year. 

IBM’s string of 5 poor consecutive quarters is over and the stock is soaring following an earnings beat that saw notable improvements with cloud revenue.  The outlook was light but that was because the tech-giant is investing in their future.    

Johnson & Johnson also reported results and guidance that came roughly in-line.  Share have been up nicely over the past quarter so some investors are using this report as an excuse to cash out. 

Oil

Oil prices remain heavy on oversupply concerns and after the Saudi energy minister Price Abdulaziz did not offer any hints of optimism that the OPEC + production cuts would be extended beyond March.  Crude is just getting hit constantly with bearish headlines.  Yesterday, IEA head Birol noted he anticipates the oil market will be in surpus by a million barrels per day by the first half of the year.  China’s coronavirus will likely see travel restrictions that could end up hurting demand for crude during a peak travel time in China.  Oil is approaching critical support and it could get a little ugly if we see swelling supplies from the US.  WTI crude should see buyers come in around the $55.50 a barrel level. 

Gold

Gold prices are directionless as appeal for safe-havens have eased.  Gold is performing relatively well considering the solid start to earnings season.  With the banks and the early tech-giants reporting better than expected numbers and outlooks, gold remains steady as investors remain cautious.  Concerns are growing that we will see a return of risk aversion once the Fed signals the balance sheet will no longer keep growing at a pace of $60 billion a month or if we see phase-two talks hit a road block.  The longer-term bullish trend for gold prices remains in wait-and-see mode. 

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