Stocks – Wall Street Drifts Lower at Open; Virus Delays China Restart

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By Geoffrey Smith — Wall Street edged higher at the opening on Monday, reversing earlier losses on continued fears about the impact of the coronavirus on the world economy, amidst reports that China’s factories were slow to return to work after a lengthy and enforce New Year holiday.

By 10:20 AM ET (1520 GMT), the was up 80 points or 0.3%, while the S&P 500 and the were both up 0.4%, all seemingly content to await congressional testimony from Federal Reserve Chairman Jerome Powell on Tuesday and Wednesday before committing to any bigger moves.

Uncertainty was the watchword on Monday, owing to the difficulty of forming a coherent picture of how quickly China’s factories and shops can return to anything like their pre-holiday level of activity.

Apple (NASDAQ:) stock, for example, fell 0.6% amid conflicting reports about the reopening of factories belonging to Hon Hai Precision – also known as Foxconn – where the bulk of iPhones are made.

Reuters reported that Foxconn had reopened factories with staffing levels at around 10% of normal, while Bloomberg reported that the company had sent a message to staff on its internal app saying that it couldn’t give a date for the resumption of production.

Market research firm Trendforce said on Monday it had cut its forecast for iPhone production by about 10% to 41 million handsets for the three months through March. The only bright spot for Apple (NASDAQ:) is that the first quarter of the calendar year is in any case normally the slowest.

Tesla (NASDAQ:) stock leaped 4.9% but was off intraday highs after a highly speculative analysis in Forbes touting a possible takeover by Alphabet (NASDAQ:). Additionally, initial enthusiasm about the partial reopening of its Shanghai plant gave way to the realization that production – and cash flow – may take weeks if not months to ramp up fully. Reports suggested that the ramp up at Tesla and elsewhere will be delayed by the quarantining of laborers who return from holidays from other parts of the country.

Chinese state media on Monday ran an interview with a leading local virologist suggesting that the incubation period for the coronavirus could be as much as 24 days, rather than the 14 reported hitherto.

Elswhere among individual stocks on Monday, struggling mall operator Taubman Centers stock rose 53% after rival Simon Property (NYSE:) offered to buy one-third of the Taubman family stake in a deal that values the group at $3.6 billion including debt. The deal still needs approval from Taubman’s free shareholders.

Exxon Mobil (NYSE:) stock dipped back towards a new 10-year low again as futures tumbled below $50 a barrel again on growing fears that OPEC and its ally Russia aren’t acting to stop a new glut forming on world markets as Chinese demand collapses.

Stocks also came under pressure from the strengthening dollar, which hit its highest level since October against developed-market peers, including a four-month high against the euro.

A stronger dollar not only reduces the value of U.S. companies’ export earnings, it also tends to tighten financing conditions for the world economy, as dollar-denominated debt becomes more difficult for foreign companies and governments to service.

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