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Stocks - Wall Street Pares Early Losses After Steady GDP Report

Stock MarketsJan 30, 2020 10:28AM ET
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By Geoffrey Smith -- U.S. stock markets pared early losses on Thursday after pockets of strength in U.S. corporate results help restrain fears about the spread of the coronavirus and its impact on the world economy.

By 10:25 AM ET (1525 GMT), the Dow Jones Industrial Average was down 89 points or 0.3%, having earlier been indicated much lower. The S&P 500 was down 0.5% and the Nasdaq Composite was down 0.4%.

The market drew some comfort from preliminary U.S. GDP figures, which showed annualized growth steady at 2.1% in the fourth quarter. That meant that overall growth in 2019 slowed to 2.3%, its slowest since 2016.

“Essentially demand for US made goods and services (largely services) continued to increase at a pace sufficient to generate growth of around 2% even as overall demand slowed, as the fall in demand for goods was concentrated in imports,” said Brad Setser, a senior fellow with the Council for Foreign Relations.

A bigger than expected slowdown in personal consumer expenditures put the issue of sub-target inflation – at which Federal Reserve Chairman Jerome Powell expressed his displeasure during Wednesday’s press conference – firmly back on the radar, a potential early indicator of a shift to a clearer easing bias at the central bank in the coming months.

Among individual stocks, the coronavirus claimed Carnival (NYSE:CCL) as its latest victim, falling 3.3% as a cruise ship operated by the company was blocked from leaving Civitavecchia outside Rome after a passenger fell ill with suspected symptoms of the disease. The virus has an incubation period of as much as 14 days, according to Chinese officials.

Elsewhere, Tesla (NASDAQ:TSLA) surged 11% to a new record high after beating forecasts for the fourth quarter and predicting at least a 35% increase in deliveries this year. The company also moved to address looming constraints on battery supplies, entering a partnership with China’s CATL and South Korea’s LG Chem.

Facebook (NASDAQ:FB) fell 5.9% after the company announced a 51% rise in operating costs in the fourth quarter, mainly related to tighter regulatory demands on privacy. This contributed to a sharp contraction in its profit margin in the quarter, raising fears that profitability could be permanently squeezed.

Chemicals company DuPont (NYSE:DD) fell 7.4% after issuing disappointing guidance for the coming year, while Altria (NYSE:MO) fell 7.1% after taking another $4.1 billion writedown against its investment in vaping products maker Juul Labs.

Oil and gas stocks continued to underperform as the coronavirus led to more airlines cancelling flights into and out of China. Chinese airlines alone are now cancelling nearly 1,000 flights a day. Sentiment was further soured by Royal Dutch Shell (LON:RDSa), which cut back its running stock repurchases by 60% after reporting a slump in profits and rise in its net debt ratio in the fourth quarter. U.S. crude futures were down 1.8% at $52.38 a barrel.

The dollar index, which tracks the greenback against a basket of developed-market peers, slipped 0.1% to 97.715, while gold futures rose 0.5% to $1,578.50 a troy ounce.

Stocks - Wall Street Pares Early Losses After Steady GDP Report

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