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Stock Gains Pause as China Sees Jump in Virus Cases

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02/13/2020 | 12:35pm EST

By Joe Wallace

A rally in U.S. stocks took a break Thursday after a spike in the number of new coronavirus cases in the Chinese province at the epicenter of a global outbreak.

The Dow Jones Industrial Average lost 29 points, or 0.1%, to 29521, retreating from a record set the prior day. The S&P 500 rose less than 0.1% and the Nasdaq Composite added less than 0.1%.

Chinese officials reported the number of newly confirmed infections in Hubei jumped nearly 10-fold overnight, raising the prospect of a longer period of economic disruption in China than investors previously anticipated and weighing on markets that had climbed for much of the past two weeks.

The number of newly confirmed infections in the province jumped to 14,840 on Wednesday, from 1,638 a day earlier, after the provincial health commission started to count clinically diagnosed cases, on top of people with a positive laboratory test.

The rising number of cases has prompted "renewed concern around the dynamics of the coronavirus," said James McCormick, a strategist at NatWest Markets. "Having had several days of relative calm, it's a bit of a wake-up call that this process is probably going to go on for quite some time."

Investors became "a bit complacent" in recent days as the number of new cases appeared to have slowed, helping push equity markets in the U.S. and Europe to all-time highs, Mr. McCormick said.

Although the number of confirmed cases in the U.S. remains low, analysts said disruption to business and travel in China could ripple through the American economy. A drop-off in tourism and slowdown in exports to China could pull down annualized U.S. growth by half a percentage point in the first quarter, according to economists at Goldman Sachs Group.

Among individual stocks, shares of Cisco Systems fell 5.6% after the telecom gear maker said economic uncertainties had delayed investment decisions at some companies, denting its sales growth.

MGM Resorts fell 5.4% after the resort operator withdrew its 2020 forecast, citing uncertainty around the coronavirus outbreak, and said its chief executive Jim Murren was stepping down.

Haven assets climbed, with gold prices rising 0.5%.

Haven assets climbed, with gold prices rising 0.4%.

"As time goes on, people are realizing more of the telltale signs of the economic impact" of coronavirus, said Cliff Tan, East Asian head of markets research at MUFG.

In one such sign, Chinese auto sales dropped 18% in January to 1.94 million vehicles, according to data from the government-backed China Association of Automobile Manufacturers on Thursday. Car sales typically slide during the Lunar New Year holiday, but Mr. Tan said he expects them to tumble further in February. "How can you buy a car if you can't get to the dealership?" he said.

Elsewhere, the Stoxx Europe 600 retreated less than 0.1%, and the Shanghai Composite Index closed down 0.7%.

The British pound rose 0.7% against the dollar after Sajid Javid, chancellor of the Exchequer, stepped down. Sterling rose on the basis that "this could mean a stronger hand on the fiscal controls" for Prime Minister Boris Johnon, said John Wraith, rates strategist at UBS Group. "The prospect for more significant fiscal loosening or fiscal stimulus is greater."

Investors have overreacted to Mr. Javid's resignation, according to Mr. Wraith. The departure appeared to be the result of a political power struggle rather than a clash over economic policy, he said.

Akane Otani contributed to this article

Write to Joe Wallace at Joe.Wallace@wsj.com


Stocks mentioned in the article
ChangeLast1st jan.
CHINA-SHANGHAI COMP -0.32% 2975.4 End-of-day quote.-2.97%
CISCO SYSTEMS, INC., -0.84% 46.1936 Delayed Quote.-2.86%
DJ INDUSTRIAL 0.42% 29352.9 Delayed Quote.3.01%
EURO / BRITISH POUND (EUR/GBP) 0.72% 0.83617 Delayed Quote.-1.79%
GOLD 0.61% 1610.807 Delayed Quote.4.42%
GOLDMAN SACHS GROUP INC. 1.78% 237.38 Delayed Quote.1.43%
MGM CHINA HOLDINGS LIMITED 1.19% 11.88 End-of-day quote.-8.05%
MGM RESORTS INTERNATIONAL 0.39% 32.145 Delayed Quote.-5.26%
NASDAQ 100 0.92% 9717.567222 Delayed Quote.10.20%
NASDAQ COMP. 0.88% 9818.990199 Delayed Quote.8.45%
RIPPLE - BITCOIN -0.69%End-of-day quote.2.67%
RIPPLE - ETHEREUM 2.23% 0.0011 End-of-day quote.-19.57%
RIPPLE - EURO -0.96% 0.2741 End-of-day quote.51.04%
RIPPLE - UNITED STATES DOLLAR -1.17% 0.2952 End-of-day quote.46.33%
S&P 500 0.52% 3387.62 Delayed Quote.4.32%
S&P/CITIC 300 INDEX 0.00% 3533.58 Delayed Quote.-0.32%
S&P/CITIC 50 INDEX 0.00% 3586.5 Delayed Quote.-4.11%
STOXX EUROPE 600 0.83% 433.9 Delayed Quote.3.53%
STOXX EUROPE 600 NR 0.83% 937.68 Delayed Quote.3.66%
UBS GROUP -0.12% 12.91 Delayed Quote.6.05%
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