Monday's Stock Market Close: US Equities Climb As Market Partly Recovers From Friday’s Huge Sell-Off

U.S. stocks rose on Monday as investors waded back into the market finding bargains after Friday’s massive sell-off, but fears about the impact of the ongoing coronavirus scare in China.

The Dow Jones Industrial Average rose 139.61 points to 28,395.64 while the S&P 500 gained 23.48 points to 3,249 and the Nasdaq Composite Index advanced 123.05 points to 9,273.98.

Volume on the New York Stock Exchange totaled 3.15 billion shares with 1,894 issues advancing, 135 setting new highs, and 1,042 declining, with 84 setting new lows.

Active movers were NIO Inc (NIO), Ford Motor Co. (F) and Advanced Micro Devices Inc. (AMD)

In China the death toll from the virus outbreak climbed to at least 361 while more than 17,000 people were infected. The first death outside of China was reported in the Philippines.

“We had that sharp sell-off on Friday, so it’s natural to see a bounce-back,” said Keith Lerner, chief market strategist at Truist/SunTrust Advisory. “But we think this corrective period has a bit more to go.”

“We are looking for higher highs in the S&P 500 Index once the Coronavirus fears subside,” said Marc Chaikin, CEO of Chaikin Analytics, in a note. “Buying opportunities abound in strong sectors and industry groups.”

However, Mohamed El-Erian, chief economic advisor at Allianz, is wary of Monday’s bounce.

“The coronavirus is different. It is big. It’s going to paralyze China. It’s going to cascade into the global economy,” El-Erian told CNBC on Monday. “We should try and resist our inclination to buy the dip.”

After being closed for several days for the lunar year holiday, the Shanghai Composite index plunged 7.72%, its largest daily decline in more than four years.

On Sunday Chinese authorities said they will flood the country’s financial system with $170 billion in extra liquidity to provide a boost to markets and the economy. On Monday the People’s Bank of China cut the interest rate it charges banks for short-term funding.

China has now supplanted all other macroeconomic and geopolitical worries.

“No one cares about the Middle East, no one cares about Brexit if China is wobbly,” said Mathan Somasundaram, Blue Ocean Equities market portfolio strategist in Sydney, Australia. “There’s no way China is going to be consuming anything if they’re shut down.”

Goldman Sachs predicted that the virus may lower Chinese growth to 5.5% for the year, down from 6.1% in 2019.

The Institute for Supply Management said on Monday that its index of national factory activity jumped to a reading of 50.9 in January, the highest level since July, up from an upwardly revised 47.8 in December. (A reading above 50 indicates expansion in the manufacturing sector). The index had contracted for five straight months.

The Commerce Department said on Monday that construction spending decreased 0.2% in December, the first such decline since June

Nike (NKE) jumped 3.1% after analysts at UBS and JPMorgan recommended purchasing shares on irus-related weakness. JPMorgan called the stock’s recent slide a “multi-year buying opportunity.” Tesla (TSLA) surged 19.9% after an Argus Research analyst boosted his price target to $808 per share.

Also in Asia, Hong Kong‘s Hang Seng index edged up 0.17% and Japan’s Nikkei-225 fell 1.01%.

In Europe markets closed higher, as Britain’s FTSE-100 rose 0.71%, France’s CAC-40 climbed 0.52% and Germany’s DAX gained 0.5%.

Crude oil futures dropped 2.95% at $50.04 per barrel and Brent crude fell 0.16% at $54.289. Gold futures slipped 0.44%.

The euro dipped 0.32% at $1.106 while the pound sterling plunged 1.6% at $1.2993.

The yield on the 10-year Treasury was unchanged at 1.52% while yield on the 30-year Treasury fell 0.89% to 1.997%.