U.S. markets and stock ETFs shook off coronavirus concerns and strengthened Monday as investors focused on corporate earnings and a surprise bounce in economic activity.
On Monday, the Invesco QQQ Trust (NASDAQ: QQQ) was up 1.3%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) rose 0.6% and SPDR S&P 500 ETF (NYSEArca: SPY) gained 0.9%.
Supporting the rebound in equities on Monday, ISM data revealed the manufacturing sector grew in January after five consecutive months of contraction, potentially signaling that a prolonged slump in business investment may have bottomed, Reuters reports.
“Sure we’ve been held back on worries about coronavirus, but this morning it’s been a story of data showing U.S. economy is really strong,” John Brady, managing director at R.J. O’Brien & Associates, told Reuters.
Further adding to the positive risk-on sentiment, China’s central bank has stepped in to improve liquidity in an attempt to mitigate some of the negative impact of the virus outbreak on the emerging economy.
The markets made a strong rebound on Monday after the plunge on Friday that sent the Dow down more than 600 points while the S&P 500 experienced its worst week in six months and the Nasdaq saw its biggest weekly pullback in four months.
“It may have been overdone last week. It’s very hard to get a grasp of things like pandemics. We’re still in the spreading stage and it’s difficult to say whether it’s over or not,” Brady added.
Michael Mullaney, director of global markets research at Boston Partners, argued that the selling on Friday may have opened up a good buying opportunity, noting that in previous outbreaks like SARS, stocks bounced back after the initial sell-off reaction, the Wall Street Journal reports.
“Once you see a slowdown in the uptick of new cases, historically the market has generally done quite well after that,” Mullaney told the WSJ.
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