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U.S. Stocks Rebound, While Oil Skids on Virus Worries

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02/03/2020 | 01:36pm EDT

By Alexander Osipovich and Anna Isaac

U.S. stocks rebounded Monday, shaking off concerns about the coronavirus that caused a sharp selloff last week.

The Dow Jones Industrial Average rose 180 points, or 0.6%, in afternoon trading. The S&P 500 gained 0.9%, while the Nasdaq Composite climbed 1.4%.

With the bounce, the S&P 500 is back in positive territory for the year. A big drop Friday -- the worst day for the broad-based index since August -- had briefly wiped out its year-to-date gains for 2020.

Oil prices, meanwhile, fell on worries that the outbreak will reduce Chinese energy consumption. Futures on Brent crude, the global oil benchmark, tumbled 2.3% to $55.34 a barrel. They are down nearly 20% from their recent peak in September. U.S. crude futures fell 1.4% to $50.83 a barrel.

Saudi Arabia is pushing for significant oil-production cuts in a bid to prop up prices, according to OPEC officials. Representatives of the Organization of the Petroleum Exporting Countries and its allies are set to meet Tuesday and Wednesday to discuss next steps.

Stock investors may have seen Friday's selloff as a buying opportunity, said Michael Mullaney, director of global markets research at Boston Partners. He noted that with past outbreaks, such as severe acute respiratory syndrome, or SARS, stocks have tended to drop initially, only to bounce back once the rate of new infections slows.

"Once you see a slowdown in the uptick of new cases, historically the market has generally done quite well after that," Mr. Mullaney said.

Chinese authorities have quarantined millions of people to contain the virus, which has infected more than 17,000 people and has been linked to more than 360 deaths. Major global airlines have suspended flights to mainland China.

Chinese markets tumbled sharply Monday, the first day of trading following the extended Lunar New Year break. The Shanghai Composite Index closed 7.7% lower in its steepest drop since August 2015, with many stocks dropping by the maximum 10% that is allowed. But the move had been largely expected because Chinese markets closed just as the outbreak was beginning to draw widespread attention.

Investors were also closely watching Monday's presidential caucuses in Iowa for insights into whether a candidate who supports a bigger role for government may beat out rival Democratic contenders. The state is expected to play a key role in winnowing down the field of Democratic candidates as the party chooses who will take on President Trump in November.

"Markets have previously reacted quite strongly when left-wing populist Democratic candidates have performed well," said Oliver Jones, market economist at Capital Economics.

Many investors are also betting the volatility that has rattled U.S. markets over the past two weeks is here to stay, with the election season ramping up and the coronavirus outbreak continuing to curtail business operations and trade.

Tesla shared jumped 16% after analysts at Argus Research and ARK Invest raised their price targets for the electric-car maker.

Gilead Sciences climbed 5.7%. The drugmaker on Friday said it had provided doses of an experimental antiviral drug to doctors for the emergency treatment of a small number of patients infected by the coronavirus.

In the U.K., the British pound fell 1.5% against the U.S. dollar. The move reflected concerns about fresh trade talks between the European Union and the U.K., said Jordan Rochester, a foreign-exchange strategist at Nomura Holdings.

The U.K. formally exited the EU Friday and entered into a transition period. Both sides fired opening salvos on Monday as they begin the complex negotiations that will determine the terms of their future relationship.

"We expect a tough talk in the opening rounds of the Brexit talks," Mr. Rochester said. "Today, the EU and the U.K. are setting out their stalls."

The pan-European Stoxx Europe 600 gained 0.2%. France's Ingenico Group rallied 17% after its board agreed to a cash-and-stock merger with payment-services giant Worldline in a deal that will give Ingenico shareholders 35% of the combined business. Worldline ticked up 0.5%.

--Steven Russolillo, Xie Yu and Caitlin Ostroff contributed to this article.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com and Anna Isaac at anna.isaac@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
CHINESE ENERGY HOLDINGS LIMITED 0.00% 0.355 End-of-day quote.0.00%
DJ INDUSTRIAL -4.06% 21636.78 Delayed Quote.-20.98%
EURO / BRITISH POUND (EUR/GBP) 0.02% 0.89455 Delayed Quote.7.16%
GILEAD SCIENCES -1.37% 72.85 Delayed Quote.12.11%
INGENICO GROUP -5.87% 97.14 Real-time Quote.0.35%
LONDON BRENT OIL 2.92% 25.760538 Delayed Quote.-59.21%
NASDAQ 100 -3.91% 7588.372902 Delayed Quote.-9.57%
NASDAQ COMP. -3.79% 7502.377567 Delayed Quote.-13.10%
NOMURA CO., LTD. 5.57% 739 End-of-day quote.4.23%
NOMURA HOLDINGS, INC. 8.36% 443.5 End-of-day quote.3.65%
S&P 500 -3.37% 2541.47 Delayed Quote.-21.34%
S&P/CITIC 300 INDEX -0.02% 3245.43 Delayed Quote.-8.62%
S&P/CITIC 50 INDEX -0.04% 3291.87 Delayed Quote.-11.91%
STOXX EUROPE 600 -3.26% 310.9 Delayed Quote.-22.72%
STOXX EUROPE 600 NR -3.25% 674.81 Delayed Quote.-22.29%
TESLA, INC. -2.61% 514.36 Delayed Quote.22.96%
WORLDLINE -5.04% 53.75 Real-time Quote.-14.89%
WTI -5.49% 21.8 Delayed Quote.-60.50%
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