What's moving markets today: February 5, 2020
US stocks closed in the green for a third day in a row on Wednesday, rebounding from their coronavirus-related selloff and helped by corporate earnings.
The Dow finished 1.7%, or 483 points, higher. It was its best one-day percentage gain since June.
Crude oil is on the comeback trail.
US oil prices spiked as much as 4.6% Wednesday on waning fears about the the deadly coronavirus and hopes that OPEC will come to the rescue with supply cuts.
Those monster gains faded a bit by afternoon, with crude finishing up 2.2% to $50.75 a barrel.
The rally comes after US oil collapsed into a bear market Monday because of concerns about the coronavirus eating into China's once-voracious demand for commodities.
Yet investors are growing more optimistic that medical researchers will find a way to treat people infected with the deadly virus. Those hopes helped send the Dow soaring 400 points Wednesday.
And OPEC, along with its allies like Russia, are debating further reducing oil output. S&P Global Platts Analytics said it's reasonable to expect a 1 million barrel per day production cut by OPEC.
The oil rebound brought relief to the S&P 500's beaten-down energy sector (XLE), which soared 3.5%, making it the day's best performer.
But the rally could quickly reverse if oil prices resume their recent collapse. Stay tuned.
Food delivery company GrubHub (GRUB) appears to be back on track. GrubHub said Wednesday that sales rose 19%, topping analysts' forecasts. The company posted a net loss that was a bit worse than expected. But its adjusted earnings easily surpassed estimates. Its stock was up after hours.
That should be good news for GrubHub. The stock plunged more than 40% in October following disastrous results and a bleak outlook. GrubHub cited "promiscuous" diners willing to try rival services from Uber Eats (UBER), DoorDash and Postmates.
But GrubHub CEO Matt Maloney noted in Wednesday's earnings release that the company was able to add more diners in the quarter and boost its selection of restaurants.
GrubHub, which shot down rumors last month that it could be an acquisition target, has rebounded so far in 2020. The stock is up nearly 15% so far this year. GrubHub is also testing a new offering called Ultimate -- technology that makes it easier for people to order food to go and track exactly when the meal will be ready.
The new service could help differentiate GrubHub from its rivals. DoorDash is still a threat, said Ed Lavery, director of investor solutions for market intelligence data firm SimilarWeb. Lavery added that Uber Eats has held steady while Postmates "still looks like the underdog lingering at the bottom."
Stocks have been volatile over the past weeks amid fears about the coronavirus outbreak and corporate earnings. So how do investors make sense of this nervous market?
"You want to think about it as the market responding to one of these large, unquantifiable risks," said Binky Chadha, chief global strategist and head of asset allocation at Deutsche Bank.
Chadha likens the market volatility to what happens around geopolitical risk events with sharp but short-lived selloffs and quick rebounds.
Despite coronavirus worries, the market is benefitting from higher expectations for earnings and economic growth.
"We do expect a rebound in growth," but the market is priced for a much larger increase, Chadha said on the CNN Business' digital live show Markets Now. This suggests that at some point there could be a "disappointment selloff," he added.
In terms of attractive sectors, Chadha likes tech and defensive industries, like real estate and consumer staples.
"The defensive sectors look cheap given the kind of growth they have already priced in," Chadha said.
Tesla stock has been going through the roof in recent days as Wall Street's outlook for the company improved and short sellers scrambled to cover their positions.
The stock (TLSA) rallied past $900 Tuesday. It is up 71% since the start of the year. Today, Tesla shares are down nearly 20%, retracing some of their sharp gains. The stock might have gotten ahead of itself, according to Bill Selesky, senior research analyst at Argus Research.
But is it too late for investors to get a piece of the pie? Perhaps not, Selesky said. He upgraded his price target for the stock on Monday.
That said, investors, particularly with a shorter-term investing horizon, need to have a bit of a strong stomach to get in, given the recent price volatility, Selesky said.
But over a longer horizon, things are looking promising for the car maker.
"We still see good things happening with Tesla," Selesky said. "We see annual production rate going up in 2020. We think that's a positive sign, and we also see consumers still buying Teslas and great demand," he said.
US stocks are again climbing higher, but today's jump in equities is not only about a rebound from coronavirus fears.
"What we've seen today is really a reflection of earnings," Teddy Weisberg, founder of Seaport Securities, told Alison Kosik on CNN Business' digital live show Markets Now.
On balance, the market is being helped by the "US economy, corporate earnings and a very accommodative Fed," Weisberg said.
Rockstar Games is losing one of the creative executives behind some of its most successful video games. Dan Houser, VP and co-founder of Rockstar Games, took an extended break in spring 2019 and will be leaving March 11, parent company Take-Two Interactive Software, Inc. said in a Securities and Exchange Commission filing.
The stock was down 4.5% mid-morning.
Dan and Sam Houser are the brothers behind hit games like "Grand Theft Auto V" and "Red Dead Redemption II."
A Take-Two spokesperson told CNN Business that Sam Houser's role at Rockstar Games, which he founded in 1998, remains unchanged. He and the team will focus on current and future projects. Take-Two declined to say why Dan Houser is leaving.
Wall Street is bullish on Take-Two if it can deliver another entry in the Grand Theft Auto franchise, whose fifth installment was the best-selling video game in the United States in this decade, according to NPD Group. But Dan Houser's departure will "raise questions as to timing and progress," Jefferies analysts wrote in a note. "Given the very low visibility into the Houser brothers and Rockstar as a whole, it's difficult to decipher what this means for the pipeline," they wrote.
"Dan contributed to ALL of Rockstar’s hits this century... They have a TON of hits, and he contributed to all of them," said Michael Pachter, an analyst at private financial services firm Wedbush. "It’s hard to know what each man’s contribution was, but my bias is that Sam is pretty capable."
Take-Two reports earnings tomorrow after market close.
In economic news, payroll processor ADP reported much better than expected gains in private sector jobs for January, fueling expectations for a strong jobs report from the US government on Friday.
ADP, the gigantic payroll company, said the American private sector added 291,000 jobs last month. That's a lot of jobs, especially considering economists surveyed by Refinitiv estimated employers would "only" add 156,000 new positions in January.
So what does this mean for Friday's official jobs report? Well, not much. ADP doesn't have a great (or even a good) track record at predicting the Labor Department's much-more-widely accepted labor market report, which it will release at the end of the week.
But it's another solid data point in a jobs market full of them. Hooray for American jobs!