Daily market review

United States

Equities slipped Tuesday as Monday's rally faltered on weak earnings at some big retailers and doubts over vaccine progress. The Dow industrials fell 1.6 percent, the S&P 500 dropped 1.1 percent, and the NASDAQ slipped 0.5 percent.

A STAT news agency report questioning positive vaccine trial news from US biotech Moderna weakened risk appetite Tuesday. This came after Moderna's upbeat statement powered big gains Monday. The FAANGs held up best with autos, chipmakers, homebuilders, transports, and media outperforming. Laggards included oil services, biotech, banks, and utilities.

Dow component Home Depot fell 2.7 percent after suspending its guidance and reporting rising expenses related to the pandemic. Kohl's, another big retailer, fell 7.7 percent after it reported a bigger-than expected loss due to virus effects. Walmart, another Dow component, fell 2.2 percent despite big earnings and revenues beats, reflecting consumers stocking up on low-cost essentials. On the plus side, Southwest Airlines rose 2.4 percent after reporting a modest uptick in passenger demand from disastrously low levels.

In US economic data, housing starts fell 30 percent during the virus effects of April to a 0.891 million annual rate while permits were pulled down 20 percent to 1.074 million. These levels were last seen in 2014.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 59 cents to US$34.67, while spot gold rose US$14.82 to US$1,746.00. The US dollar fell slightly against major currencies. The US Treasury 30-year bond yield fell 2 basis points to 1.41 percent while the 10-year note yield fell 4 basis points to 0.69 percent.


Equities retreated Tuesday as the market consolidated some of Monday's rally, and optimism over near-term economic reopening appeared overdone. The Europe-wide STOXX 600 fell 0.6 percent, the German DAX rose 0.2 percent, the French CAC declined 0.9 percent, and the UK FTSE-100 fell 0.8 percent.

Losses were limited by positive sentiment linked to EU moves to create a big economic recovery fund. Market participants generally are holding onto expectations for re-openings to continue through the summer, with a slow recovery in the second half.

Telecom, autos, and banks led the decliners, with technology, financial services, basic resources, and insurance outperforming. Among stocks in focus, UK tobacco leader Imperial Brands dropped 6.5 percent after cutting its dividend. Centrica, the UK energy firm, dropped 5.4 percent after its UK energy peer Ovo Energy announced cost cuts amid weak demand. Telecom Italia fell 9 percent after pulling its guidance.

Bank stocks were pressured by concerns over profitability amid widening credit problems, especially in Spain, Italy, and Greece. Banco Sabadell, the Spanish bank, fell 12 percent, and Banco BPM of Italy was off 7.3 percent to lead the sector lower.

Asia Pacific

Major Asian markets posted solid gains Tuesday, following the lead set by Wall Street Monday on news that US biotech firm Moderna reported positive results for a potential Covid-19 vaccine. Japan's Nikkei and Topix indices closed up 1.5 percent and 1.8 percent respectively, the Hong Kong's Hang Seng index advanced 1.9 percent, and Australia's All Ordinaries index rose 1.8 percent. The Shanghai Composite index underperformed with an increase of 0.8 percent.

Tuesday's regional calendar was light. The Reserve Bank of Australia published the minutes of its May 5 meeting at which policy rates were kept on hold at 0.25 percent. Discussion was in line with the statement published after the meeting, with officials reaffirming their commitment to not increase rates until progress is made towards full employment and they are confident that inflation will be sustainably within their 2 to 3 percent target range. New Zealand producer price data showed an increase in output price inflation from 1.5 percent in the fourth quarter to 2.2 percent in the first quarter, with manufacturing and utilities prices stronger offset by weaker growth in agricultural prices.

Looking ahead*

On Wednesday in Asia/Pacific, the Japanese machine orders report scheduled. In Europe, UK CPI, UK PPI, Eurozone HICP, and Eurozone EC consumer confidence flash reports are due. In North America, the US Federal Open Market Committee minutes are scheduled.

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