Daily market review

United States

Oversold conditions and hopes for a big US fiscal stimulus package boosted US equities Friday, as the market continued its volatile daily seesaw pattern. The Dow industrials jumped 9.4 percent, the S&P 500 rose 9.2 percent, and the NASDAQ was up 9.3 percent, with gains accelerating into the close.

Markets also reacted favorably to President Trump's announcement of increased testing and other emergency measures. This followed news of an array of other governments' stimulus efforts including liquidity additions and new spending from Australia, China, Japan, and the UK -- and more expected from the Eurozone -- plus a surprise Canadian 50 basis point rate cut.

Among sectors, financials led the gains, as money center banks in particular recovered from Thursday's huge losses. Technology outperformed, led by software and internet names. Consumer staples and communications services outperformed. Laggards included industrials, consumer discretionary, healthcare, and materials. Energy lagged the most to extend the week's huge losses, as oil prices declined again.

Among companies in focus, Adobe, the software company, rose 18 percent on an earnings beat and guidance upgrade. Oracle, the software company, rose 20 percent after an earnings beat and increase in share repurchases. Broadcom ended up 7 percent as tech stocks rallied late, despite the chipmaker withdrawing its guidance due to uncertain business conditions.

In US economic news, coronavirus effects hurt consumer sentiment more than forecasters were expecting so far this month, at 95.9 versus Econoday's consensus for 98.0 and 101.0 in February. This is the lowest reading since October but is still historically very solid.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.35 to US$34.04 while gold fell US$47.20 to US$1,522.30. The US dollar rose against most major currencies. The US Treasury 30-year bond yield rose 10 basis points to 1.56 percent while the 10-year note yield rose 10 basis points to 0.99 percent.


Hopes for US fiscal stimulus alongside European efforts lifted stocks Friday. The Europe-wide STOXX 600 rose 1.0 percent, the German DAX gained 0.8 percent, the French CAC rose 1.8 percent, and the UK FTSE-100 was up 1.7 percent.

Among sectors, outperformers included basic resources, utilities, banks, chemicals, autos, and retail. Underperformers included travel & leisure, despite a bounceback in airlines, real estate, oil & gas, health care, media, and insurance.

Among companies in focus, Roche rose 3.15 percent after the FDA authorized use of the Swiss pharma's test for Covid-19. Italian banks led banks higher as interest rates rebounded, with Banco BPM up 15 percent. German airline Lufthansa rose 7.1 percent.

Asia Pacific

Major Asian markets experienced extreme volatility and diverged widely Friday, but closed the week well down. Investors' attention remained focused on news about the global coronavirus pandemic and ongoing efforts to curb its spread and limit its social and economic impact. Across the region, major events were cancelled, businesses and public facilities closed, and transport restrictions tightened, while officials continued to take steps to improve liquidity and support economic activity, including a large fiscal package announced by the Indonesian government.

Australia's All Ordinaries index saw particularly sharp moves, dropping around 8 percent early in the session but then staging an extraordinary recovery after the Australian government announced plans to restrict public gatherings of more than 500 people at the start of next week. Earlier in the day, the Reserve Bank of Australia took aggressive steps to boost liquidity, adding around double its usual daily amount to short-term bank funding. The index closed up 4.1 percent on the day to finish the week down 11.1 percent.

Japanese shares also sold off heavily at the open, following the lead set by Wall Street Thursday, but managed to recover some of these losses later in the session. The Nikkei and Topix indices closed the day down 6.1 percent and 5.0 percent respectively, extending weekly losses to 16.0 percent and 14.3 percent respectively. Shanghai Composite index fell 12 percent on the day and 4.8 percent on the week, while Hong Kong's Hang Seng index closed down 1.1 percent on the day and 8.1 percent on the week. Shares of regional airlines again sold off heavily.

The regional data calendar was light Friday and had no material impact on investor sentiment. Japan's Index of Tertiary Industry Activity (seasonally adjusted) rose 0.8 percent on the month in January after falling 0.2 percent in December. These data largely pre-date the impact of the coronavirus outbreak. The Markit Services PMI survey, published earlier this month, indicated that activity in the sector strengthened in January before weakening sharply in February in response to the outbreak.

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