Daily market review

United States

The continuing rout in oil markets and bleak corporate results spurred another risk-off move Tuesday. The Dow industrials fell 2.7 percent, the S&P 500 fell 3.1 percent, and the NASDAQ dropped 3.5 percent.

Among companies reporting, banks unveiled more credit provisions, a big earnings hit. Consumer staples benefited from shoppers stocking up. Software companies reported orders dropped as the coronavirus forced businesses to shut down and cancel orders. Many companies have pulled their full-year guidance amid uncertainty over the impact of the virus.

Worries that the virus was hitting growth sectors, including the FAANGs and software, rattled investors Tuesday, with technology and software among the worst performers. Losses occurred across all S&P sectors. Oddly, energy outperformed; oil prices remained under meaningful pressure but off their lows in the afternoon on reports oil producers may accelerate planned output cuts. Other outperformers included defensives including consumer staples and utilities.

Among companies reporting, IBM, a Dow component, dropped 3 percent after reporting in-line earnings and revenues, but pulling its guidance. Dow member Coca-Cola also fell 2.5 percent after saying it started the first quarter with good momentum, but now sees consumers pulling back, and can't anticipate the rest of the year's results. Travelers' the financial services company, another Dow component, rebounded to end flat after raising its dividend, despite an earnings miss driven by a credit provision. J.M. Smucker, the jam maker, fell 3.5 percent despite raising its 2020 guidance.

In US economic data, existing home sales fell 8.5 percent to a 5.270 million annual rate in March reflecting the initial impact of the coronavirus. Yet sellers were holding tight as the median price rose sharply to $280,600 for year-on-year growth of 8.0 percent.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell by US$6.00 to US$19.93, while spot gold fell US$11.49 to US$1,684.16. The US dollar rose against major currencies. The US Treasury 30-year bond yield fell 6 basis points 1.16 percent while the 10-year note yield fell 4 basis points to 0.57 percent.


Oil market turmoil and more pandemic fallout depressed equities again Tuesday. The Europe-wide STOXX 600 dropped 3.4 percent, the German DAX lost 4.0 percent, the French CAC 3.8 percent, and the UK FTSE-100 was off 3.0 percent.

Markets were hurt by gloomy quarterly results as many companies reported big hits from the coronavirus. SAP, the German software goliath, dropped 5 percent after missing expectations for earnings and revenues, and warning that software license sales would continue to plunge. Total, the French oil supermajor, fell 3.8 percent, along with BP, off 3 percent, and Royal Dutch Shell, down 2.4 percent.

On the positive side, Sartorius, the German laboratory equipment maker, rose 6.4 percent after raising its sales forecast. Peugeot managed to rise 0.3 percent after maintaining its targets despite projecting a 25 percent drop in the European automobile market this year.

All sectors declined, but holding up best were health care, real estate, retail, utilities and travel & leisure, while worst off were basic resources, technology, banks, media, oil & gas, telecom, financial services, and autos.

In economic data, ZEW's April current conditions measure was marked down sharply and, at just minus 91.5, was a massive 48.4 points short of March. However, expectations are key and they jumped a record 77.7 points to 28.2 and point to strong optimism among German analysts.

Asia Pacific

Major Asian markets closed lower Tuesday, with weakness in global oil prices again the main focus. Conflicting reports about the health of North Korean leader Kim Jong Un circulated during the Asian trading session. Australia's All Ordinaries index was one of the weaker performers, closing down 2.5 percent on the day, with airline Virgin Australia announcing it had entered voluntary administration in an effort to restructure operations and remain in business. Japan's Nikkei and Topix indices fell 2.0 percent and 1.2 percent respectively, while Hong Kong's Hang Seng index dropped 2.2 percent and the Shanghai Composite index closed down 0.9 percent.

Minutes of the Reserve Bank of Australia's April meeting expressed confidence that aggressive monetary and fiscal policy measures put in place in recent weeks would cushion the impact of the global coronavirus pandemic on the Australian economy. Speaking after the release of the minutes, RBA Governor Philip Lowe warned that employment and output will contract sharply over the next few months, consistent with weekly payrolls data, also published Tuesday, indicating that labor market conditions have already deteriorated significantly in recent weeks. Governor Lowe also noted that inflation will likely turn negative in the near-term and remain low for years.

Looking ahead*

On Wednesday in Europe, UK CPI, UK PPI, French business climate indicator, and Eurozone EC consumer confidence reports are scheduled. In North America, it's Canadian CPI, and in the US, the weekly EIA petroleum inventories report.

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