S&P 500, Nasdaq set to retreat from record highs as virus fears build

(Reuters) – U.S. stock indexes were set to open slightly lower on Thursday as a spike in the number of coronavirus cases outside China raised concerns about the global impact of the epidemic, while E*Trade Financial soared on a buyout offer from Morgan Stanley.

The discount brokerage (ETFC.O) was up 23.9% in premarket trading after Morgan Stanley (MS.N) offered to buy it in a $13 billion deal, the biggest by a Wall Street bank since the global financial crisis.

Morgan Stanley’s shares fell 4.9%.

The mood elsewhere was more subdued, as the number of new coronavirus cases jumped in South Korea, with Japan reporting two new deaths. Research also suggested that the virus was spreading faster than previously thought.

“There is still uncertainty about how long this (outbreak) is going to last and how big the economic effect is going to be, not just on China, but on supply chains around the world,” Scott Brown, chief economist at Raymond James in St. Petersburg, Florida, said.

Recent data from China has pointed to a slowdown in the outbreak, but the figures partly reflect a change in the diagnostic method, adding a degree of skepticism to whether the daily tallies accurately reflect the spread of the virus.

“There is longer term optimism,” said Brown. “Once (the virus) is contained, you are going to see a snap back in growth.”

Recent policy easing by China, a largely better-than-expected fourth quarter earnings season and hopes that the economic jolt from the coronavirus will be short-lived have pushed Wall Street’s main indexes to new highs in recent weeks.

The benchmark S&P 500 .SPX and the tech-heavy Nasdaq .IXIC closed at record highs on Wednesday.

At 9:01 a.m. ET, Dow e-minis 1YMcv1 were down 68 points, or 0.23%. S&P 500 e-minis EScv1 were down 8 points, or 0.24% and Nasdaq 100 e-minis NQcv1 were down 28 points, or 0.29%.

In other corporate news, L Brands Inc (LB.N) slid 10.4% on plans to sell control of its Victoria’s Secret unit to investment firm Sycamore Partners, valuing the lingerie brand at $1.1 billion.

ViacomCBS Inc (VIAC.O) dropped 8.6% as its earnings fell short of revenue and profit expectations in its first quarterly earnings results since closing its merger.

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