Stocks end lower as market retreats from records

By Chris Matthews and Mark DeCambre, MarketWatch , Andrea Riquier

Coronavirus death toll rises to more than 630

U.S. stocks closed lower Friday, a day after all three benchmark indexes finished at records, as some investors locked in recent stock gains following a stellar January jobs report that exceeded economists' expectations.

Also on investors' radar were efforts to contain the fast-moving coronavirus amid a busy week of quarterly earnings reports.

How did benchmarks fare?

The Dow Jones Industrial Average fell 277.26 points, or 0.9%, to end at 29,102.51, while the S&P 500 index lost 18.07 points, or 0.5%, to finish at 3,327.71. The Nasdaq Composite Index lost 51.64 points, or 0.5%, to close at 9,520.51.

Equity benchmarks still notched sizable weekly gains, with the Dow up 3% for the week, the S&P 500 index advancing 3.2%, and the Nasdaq gaining 4%.

What drove the market?

The U.S. economy added 225,000 jobs in January (http://www.marketwatch.com/story/us-adds-225000-jobs-in-january-as- hiring-speeds-up-unemployment-rises-to-36-2020-02-07), well above the 165,000 jobs expected by economists polled by MarketWatch, while the unemployment rate ticked up slightly to 3.6% as the share of Americans in the labor force rose by 0.2 percentage point.

Read:How economists are interpreting a January jobs report that shows the U.S. added 225,000 jobs (http:// www.marketwatch.com/story/heres-how-economists-are-interpreting-a-january-report-that-shows-the-us-added-225000-jobs- 2020-02-07)

Stocks marked their first day of losses after a week of aggressive gains that saw markets carve out all-time highs, driven by concerns over the outbreak of coronavirus.

"The largest-weighted stocks are not so economically sensitive," said Diane Jaffee, a portfolio manager at TCW, about the pullback following the jobs report, which included a dip in shares of Apple Inc. (AAPL). "While these $1 trillion club (http://www.marketwatch.com/story/amazon-set-to-become-fourth-us-tech-company-worth-1-trillion-2020-01-31) companies continue to do well, they're not really aided or abetted by an economic cycle being positive."

Average hourly wages rose 0.2% last month, the Labor Department said, versus expectations of a 0.3% rise. Year-over- year, earnings have gained 3.1%, down from a postrecession peak of 3.4% in February.

"January's better-than-expected jobs report is well-timed in that it boosts economic confidence just when coronavirus fears had investors questioning the growth outlook," according to Alec Young, managing director of global markets research at FTSE Russell.

"That said, stocks are overbought after a huge rally, some of which has been predicated on hopes for a June Fed rate cut, which now seems highly unlikely," he added. "As such, equities may not react positively in the near term despite the strong read on the labor market."

Meanwhile, China's National Health Commission on Friday confirmed more than 31,000 cases of the deadly pneumonialike virus in the country, with more than 630 deaths. The disease also continues to spread outside the country.

Read:Coronavirus update: 638 deaths, Four from Royal Caribbean ship in Bayonne to undergo testing, Foxconn to make surgical masks (http://www.marketwatch.com/story/coronavirus-update-638-deaths-4-from-royal-caribbean-ship-in-bayonne- to-undergo-testing-foxconn-to-make-surgical-masks-2020-02-07)

The People's Bank of China has injected 1.7 trillion yuan ($243.88 billion) of liquidity into the financial system to stem the impact from the Wuhan virus that has hurt travel and economic output, and the government is considering additional stimulus to stem any downturn, according to the Associated Press.

Analysts estimate that China's gross domestic product will likely slow to 5%, but most of the effects are likely to dissipate after the first quarter.

"The coronavirus outbreak will be temporary and will not change the long-term improvement of China's economy," said Pan Gongsheng, a PBOC vice governor, at a news briefing Friday.

Liz Ann Sonders, chief investment strategist at Charles Schwab, told MarketWatch that this week's gains have "been more about central banks' reaction to coronavirus," then about optimism that it has been sufficiently contained.

"You've seen the PBOC and Bank of Japan step up with central bank liquidity, while the market is pricing in a higher chance that the Fed will cut rates too," she said. If this week's rally has in fact been driven by reactions to such stimulus, "You can see a stronger-than-expected jobs report as reason to believe the Fed won't cut rates, putting pressure on the market," she said.

Meanwhile in the U.S., Federal Reserve Vice Chairman for Supervision Randal Quarles said Thursday he wants to encourage banks to tap the Fed's discount (http://www.marketwatch.com/story/encouraging-banks-to-tap-fed-discount- window-could-prevent-another-repo-market-freeze-says-quarles-2020-02-06) window to help prevent another repo market freeze.

In other economic data, wholesale inventories in the U.S. fell 0.2% in December, according to the Commerce Department (http://www.marketwatch.com/story/wholesale-inventories-in-the-us-slip-02-in-december-2020-02-07). A report on consumer credit is due at 3 p.m. Eastern Time.

Which stocks were in focus?

How did other markets trade?

Investors bid up government bonds (http://www.marketwatch.com/story/treasury-yields-shift-lower-as-traders-brace-for- employment-report-2020-02-07), sending the yield on the 10-year U.S. Treasury note lower by about 6.6 basis points to 1.578%. Bond prices move inversely to yields.

Oil prices declined. The price of a barrel of West Texas Intermediate crude for March delivery fell 54 cents, or 1.1% to $50.41 on the New York Mercantile Exchange. In precious metals (http://www.marketwatch.com/story/gold-edges-lower-as- investors-await-us-employment-figures-2020-02-07), gold for April delivery rose $4.30 to $1,574.30 an ounce on Comex, as investors sold stocks and bought bullion and other defensive havens.

The U.S. dollar gained 0.2% relative to a basket of six trading peers.

In Europe, stocks settled lower Friday, with the Stoxx Europe 600 shedding 0.3%, but still up 3.3% for the week, according to Dow Jones Market Data.

In Asia overnight, stocks traded mixed. The China CSI 300 was virtually unchanged, while Japan's Nikkei 225 lost 0.2% and the Hong Kong's Hang Seng lost 0.3%.

-Chris Matthews; 415-439-6400; AskNewswires@dowjones.com


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  02-07-20 1623ET
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