Investors will be bracing for another potentially volatile week ahead for markets.
The Coronavirus is now officially more deadly than SARS. There have been 811 deaths in mainland China alone, which brings the global death toll to 813. China has pledged 71.85 billion yuan, or $10.26 billion, to fight the virus.
Global supply chain disruptions, halted tourism and heightened uncertainty from the coronavirus has rippled through world markets. Economists at UBS revised its forecast for GDP growth in the U.S. due to effects from the coronavirus.
“We see the net effect on the U.S. as being small, but the quarterly swings are likely to be measurable. For the U.S., we see the effect coming through three channels: tourism, exports, and a temporary disruption to manufacturing because of delayed imports,” economist Seth Carpenter wrote in a note Feb. 7. “For Q1, we have trimmed our real GDP estimate by 0.2 pp to a 0.4% q/q annual rate. We assume that the hit in the U.S. from the coronavirus is mostly reversed over the course of Q2 and Q3.”
Thus, market participants will turn to Federal Reserve Chairman Jay Powell’s semi-annual testimony in front of Congress this week for clues on whether or not the central bank’s stance on interest rates has changed.
“If the Fed recognizes a sharp slowing in Q1, they will be surprised, worried, and prompted to cut rates, as early as the March FOMC. However, the Fed is wary of a temporary disruption from the virus,” Carpenter said. “In January, Chair Powell highlighted ‘...there is likely to be some disruption to activity in China and possibly globally...’ If the Fed expects any slowing to be temporary, they will be inclined to wait for more information, hurting the odds of a cut in March. Indeed, if manufacturing starts to recover, those odds fall a bit more.”
New Hampshire primary
Meanwhile, after the disastrous Iowa caucuses, attention will shift to the New Hampshire primary Tuesday. It will be a big test for former Vice President Joe Biden following his disappointing results in Iowa, according to TD Securities. “Polls and betting markets suggest continued momentum in [New Hampshire] for Bernie Sanders and Pete Buttigieg following their strong showing in Iowa. The next contest will be in Nevada on Feb 22,” the firm wrote in a note Feb. 7.
Finally, on Friday, investors will get another pulse on the health of the U.S. consumer when the Commerce Department releases retail sales data for the month of January. Economists polled by Bloomberg expect retail sales rose 0.3% in January. Core retail sales, excluding volatile auto and gas, are expected to have accelerated 0.3%.
“Healthy consumer fundamentals have been supporting personal spending activity. The improvement in the January ISM non-manufacturing survey likely reflects strong consumer demand to some degree,” according to Nomura. “In addition, warmer-than-usual temperatures during January may have supported a pickup in receipts at building-material and home improvement stores. Sales at auto dealerships likely rose decently, which would be consistent with a rebound in WardsAuto’s light vehicle sales data for January.”
Tuesday: NFIB Small Business Optimism, January (103.5 expected, 102.7 in December); JOLTS Job Openings, December (7000 expected, 6800 in November)
Wednesday: MBA Mortgage Applications, week ended Feb. 7 (5.0% prior); Monthly Budget Statement, January ($8.9 billion expected, -$13.3 billion in December)
Thursday: CPI month-on-month, January (0.2% expected, 0.2% in December); CPI excluding Food & Energy, January (0.2% expected, 0.1% in December); CPI year-on-year, January (2.5% expected, 2.3% in December); Initial Jobless Claims, week ended Feb. 8 (210,000 expected, 202,000 prior); Continuing Claims, week ended Feb. 1 (1.748 million expected, 1.751 million prior); Bloomberg Consumer Confidence, week ended Feb. 9 (66.5 prior)
Friday: Import Price Index month-on-month, January (-0.2% expected, 0.3% in December); Retail Sales month-on-month, January (0.3% expected, 0.3% in December); Retail Sales excluding Auto month-on-month, January (0.3% expected, 0.7% in December); Retail Sales excluding Auto & Gas month-on-month, January (0.3% expected, 0.5% in December); Industrial Production month-on-month, January (-0.2% expected, -0.3% in December); Capacity Utilization, January (76.8% expected, 77.0% in December); University of Michigan Sentiment, February preliminary (99.2 expected, 99.8 prior)
Monday: Allergan (AGN) before market open
Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.
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