Stocks took off out of the gate this morning on reports on Chinese television that said a drug being tested by researchers at Zhejiang University in China was effective against the virus. That speculation got further traction on news that China had started a clinical trial to test Gilead Sciences(GILD) Remdesivir, an antiviral developed for Ebola and SARS, against the coronavirus. China’s health regulator also recommended AbbVie (ABBV) Kaletra, already approved as an HIV medicine, as an antiviral drug for the coronavirus.
What’s interesting to me is that market didn’t pull back on 1) more detailed reporting on how long it would take to put any new drug into clinical trials, 2) a warning from the World Health Organization stressing how far any drug is from being used to treat humans, and 3) news from Tesla (TSLA) that the coronavirus was delaying delivery of its cars in China.
The Standard & Poor’s 500 opened at 3324.91, paused its advance briefly at 3313.88 at 10:30 a.m. New York time, and then moved up to 3337.40 at 3:23 p.m. before losing at 3332.39, ahead 1.13% on the day . In the process the index set a new record high closing price.
News reports that the drug being tested by Chinese researchers had been tested on cells outside the human body, putting any clinical trials a long way down the road didn’t change the market’s positive sentiment.
Nor did news from Tesla that the virus outbreak would slow delivery of cars. Tesla shares closed down today 17.8% on the news. But evidence that the coronavirus would have a more than minor impact on the Chinese, U.S., and global economies didn’t shift sentiment in a market that in recent days has demonstrated that it thinks the impact will be relatively minor and shortlived.
News with a contrary view was also reported by Hon Hai Precision Industry (also known as Foxconn.) The company, Apple’s main producer partner, but its 2020 revenue target on the effects of the coronavirus and then announced that it would quarantine workers at its Zhehgzhou iPhone manufacturing facilities for up to two weeks. (Essentially, as I understand it, the workers would be on lockdown in the factory.)
The news came too late to have any effect in Asian markets, but if you looked hard enough there were a few signs of a crack in the recent rally. JD.Com, an e-commerce and logistics company, saw its ADRs drop 1.02% in New York trading. On the other hand, China Southern Airlines (ZNH), a company that has felt the firstling effects of the virus on its air traffic and share price, closed up 0.73% in New York trading of its ADRs.
Apple, which has deep exposure to any disruption of its Chinese supply chain, saw its shares closed ahead 0.82% on the day.