Market Insights

Stocks sank into the red last week as investors balked at chasing highs — especially with coronavirus still spreading in China.

The S&P 500 slid 1.25 percent in the holiday-shortened week between Friday, February 14, and Friday, February 21. Big technology companies with exposure to Asia led the selling. That meant Apple (AAPL) and semiconductors like Intel (INTC).

Investors now face at least three big questions on Monday morning:

How Much Will Coronavirus Hurt Stocks?

Last week began on a bearish foot after AAPL warned that the coronavirus outbreak would disrupt iPhone production and impact sales. Other companies including Nvidia (NVDA), Analog Devices (ADI) and Procter & Gamble (PG) and Norwegian Cruise Lines (NCLH) issued similar warnings.

Semiconductors are the most important industry because they rely on China as a key market. Shuttered factories in Asia likely mean less business, regardless of previous guidance. Chip makers also matter because they’ve been one of the main groups leading the current bull market.

This morning’s broad selling reflects worries about a global economic slowdown. The market will look beyond individual company results and focus on the possibility of quarantines and delayed investments. Fundamentals could cease to matter — at least in the short-term.

After chip makers and AAPL, big sectors at risk may include financials, energy and transports. On the flip side, health-care, real-estate and precious metals could benefit.

Will Gold Keep Flying?

Speaking of precious metals, gold futures (@GC) closed last week at their highest level in almost seven years. Bullion started to climb in 2019 as the Federal Reserve moved toward cutting interest rates. It paused for several months but has surged to life on worries about coronavirus.

Investors watching gold may want to keep an eye on silver, which remains inexpensive compared with its yellow peer. Some of the big symbols to watch include:

• SPDR Gold Trust (GLD): Each share represents one-tenth of an ounce of physical gold.
• iShares Silver Trust (SLV): Each share represents one ounce of physical silver.
• Market Vectors Gold Miners ETF (GDX): An exchange-traded fund pegged to gold-mining companies.

Interest rates are the next question after precious metals. Treasury yields are plunging to long-term lows, a classic sign of risk aversion. This could be especially bad news for banks that make money from lending.

Will Housing Benefit?

The low interest rates come at the beginning of the spring home-buying season. That could add even more strength to a housing market that’s already rebounding.

Last week, housing starts, building permits and existing home sales all rose more than expected. Data on the industry has mostly surprised to the upside for several months as a lack of inventory finally translates into more business.

The S&P 500 hit another record high on Wednesday, and closed less than 2 percent below that peak. The index has advanced steadily since breaking out in late October.

Technology was the leading sector before last week’s pullback. Now it’s tied with utilities and real-estate investment trusts as the leaders in 2020.

Solar energy was the single best performing industry group last week after strong quarterly results Enphase Energy (ENPH) and SolarEdge Technologies (SEDG) shooting to new highs.

Deere Spikes, ViacomCBS Drops

There were also interesting movers at the company level.

E-Trade Financial (ETFC) spiked 21 percent after getting acquired by Morgan Stanley (MS). That made it the biggest gainer in the S&P 500.

Deere (DE) also had its best day in 2-1/2 years on Friday. The tractor maker’s earnings beat estimates and management predicted more improvement as the trade deal with China boosts agricultural exports.

ViacomCBS (CBS), however, tanked 19 percent. The media company’s results missed estimates in its first report since being formed in a merger. That made it the biggest decliner in the S&P 500 last week.

Coronavirus Sinks Cruise Lines

NCLH followed with an 11 percent drop after warning that coronavirus would cut more than 10 percent off full-year earnings. It took another down after the State Department warned against Asian cruises.

This coming week is one of the last busy periods of earning season.

Home Depot (HD) and Macy’s (M) report tomorrow morning, followed Salesforce.com (CRM) after the closing bell.

Lowe’s (LOW) issues results in the premarket Wednesday. Square (SQ) and Bookings (BKNG) are due in the afternoon.

Best Buy is due Thursday morning. Beyond Meat (BYND) and Baidu (BIDU) follow after the close.

Foot Locker (FL) is the main company on Friday morning.