Coronavirus economic impacts continue to grow as AAPL & HSBC joins the chorus of companies warning of sales and revenue declines due to the outbreak.  The early morning earnings miss my WMT only added to the selling pressure on the indexes this morning as markets around the world try to come to grips with the economic uncertainty.  With a short week filled with earnings and economic reports, we should plan for significant price volatility, news-driven reversals and potentially large morning gaps.  I would not expect the bulls to give up their quest to reach out to Dow 30,000 easily but I think it would be wise to expect the bears to become more aggressive as the virus impact grows.

Asian markets closed mixed but mostly lower as Moody’s lowers China’s economic growth projection.  European markets see only red this morning as German confidence sharply declines due to outbreak trade pressures.  US Futures this morning point a Dow gap down of more than 150 points ahead of a big day earnings reports.  Expect just about anything in the days ahead as the bulls and bears grapple with the unknown future impacts of the outbreak.

On the Calendar

On the Tuesday earnings calendar, we have over 140 companies reporting quarterly reports.  Notable reports include WMT, AAP, ACC, AWK, BLMN, DVN, ECL, EXPD, EXR, FLR, GRPN, HLF, LZB, LDOS, LC, MDT, & TRU.

Action Plan

Over the long weekend, coronavirus infections continue to expand with Singapore, and Japan is now warning of recession as a result.  APPL has now joined the chorus of companies that expect product delays, declining sales, and revenue projections as a result of the outbreak.  This morning German investor confidence sharply deteriorated as fears grow of significant world trade impacts.  Moody’s has once again lowered China’s economic growth forecast from 5.8% to 5.2% for 2020 with Macao and Hong Kong expected to face the biggest hit.  The London based HSBC which earns most it’s profits from Asia, is bracing for a first-quarter impact with longer-term effects throughout 2020. 

As a result, it’s not a surprise that markets around the world are reacting negatively over the last 12 hours.  Facing a short week of trading with a large number of earnings reports and a busy economic calendar, traders should expect substantial price volatility in the days ahead.  The bulls will not give up this rally easily with Dow 30,000 within reach.  On the other hand, with economic growth concerns growing, we should expect the bears to become increasingly aggressive as the outbreak impacts come to light.  Plan your risk carefully and don’t be surprised by news-driven reversals and large market opening gaps as the market wrestles with the uncertainty.

Trade Wisely,

Doug