Daily market review

United States

Demand for value stocks, positive commentary from consumer-facing companies, and rising oil prices helped major stock indexes advance Tuesday. The Dow industrial index rose 1.1 percent; the S&P 500 gained 0.8 percent, and the NASDAQ was up 0.6 percent.

Demand for beaten-down value stocks and cyclicals appeared to reflect skepticism about the strength of momentum stocks, including the FAANGs that have powered the market's months-long rally. Widespread US civil disturbances this week added to worries that the reopening narrative and growth stocks may falter.

Energy shares outperformed on an uptick in oil prices on reports OPEC may move forward its next meeting to limit output. Exploration and production companies led winners, including Haliburton, up 5.8 percent, and Apache, up 4.2 percent.

Tech shares lagged, in part reflecting worries over the worsening US-China relationship and the rotation into value stocks that have lagged until the past few weeks. Among leaders Tuesday were paper/packaging, construction, engineering, industrials, consumer finance, and apparel, while laggards included the FAANGs, food, software, biotech, internets, biotech, and discount retailers.

Among companies in focus, credit card company Visa rose 1.0 percent after reporting much better payment volumes in May from April in many countries. Dick's Sporting Goods rose 3.7 percent after the retail chain reported a progressive recovery in sales. Bank of America, up 0.9 percent, announced new spending to help communities hit by the pandemic.

Financial services company Western Union jumped 11.3 percent after reporting a surge in consumer-to-consumer transactions in May. Notable decliners included Lands End, the clothier, off 11.1 percent on a Q1 earnings miss. Another decliner, 1800flowers, was off 1.2 percent after an analyst downgrade reflecting weaker consumer confidence in the recession.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.09 to US$39.62, while spot gold fell US$10.16 to US$1,728.48. The US dollar weakened against most major currencies. The US Treasury 30-year bond yield rose 3 basis points to 1.48 percent while the 10-year note yield rose 2 basis points to 0.68 percent.


Hopes for new official stimulus lifted equities Tuesday with German stocks soaring on expectations for heavy German government spending. The Europe-wide STOXX 600 rose 1.6 percent, the German DAX rallied 3.8 percent, the French CAC gained 2.0 percent, and the UK FTSE-100 rose 0.9 percent.

Markets increasingly expect the European Central Bank to expand its asset purchase program at its meeting Thursday, including broadening the range of assets it will buy. In addition, Germany's ruling coalition was moving toward announcing another big fiscal stimulus package, and will reportedly offer sales incentives for auto sales, which boosted the big German automakers. Daimler rose 6.7 percent, VW gained 3.2 percent, and BMW gained 4.9 percent. Automakers also benefited from favorable auto registration data for France and Italy. Lufthansa advanced by 4 percent after its board accepted a government bailout.

Other leading sectors were insurance, real estate, oil & gas, banks, travel & leisure, industrials, basic resources, chemicals, and construction & materials. Lagging were health care, food & beverage, personal & household goods, telecom, and retail.

In economic data, UK house prices fell 1.7 percent on the month in May. This was nearly double market expectations and the steepest decline since February 2009. Annual inflation slowed from 3.7 percent to a 6-month low of 1.8 percent.

Asia Pacific

Major Asian markets closed higher Tuesday, with a light regional data calendar keeping regional investor focus on the serious social unrest in the United States and US-China tensions. Japan's Nikkei and Topix indices both advanced 1.2 percent the day, while Hong Kong's Hang Seng index closed up 1.1 percent. Australia's All Ordinaries index rose 0.4 percent and the Shanghai Composite index gained 0.2 percent.

The Reserve Bank of Australia left its main policy rate on hold at a record low of 0.25 percent at its monthly meeting Tuesday, in line with the consensus forecast. Officials said the Australian economy is going though "a very difficult period" in response to the Covid-19 pandemic and that the outlook remains highly uncertain. Nevertheless, they also believe that the depth of the downturn in activity might be less than previously expected given recent progress in curbing the spread of the disease, the associated easing of restrictions on businesses and households, and the scale of monetary and fiscal policy support put in place to support the economy.

Looking ahead*

On Wednesday in Asia/Pacific: Hong Kong PMI, Japan PMI composite, Singapore PMI, India Services PMI, Australia GDP, and China General Services PMI reports are due. In Europe, Swiss GDP, PMI composite data for France, Germany and Eurozone, plus German unemployment rate, Eurozone PPI, Eurozone unemployment rate, and UK CIPS/PMI services reports are scheduled for release. In North America, the Bank of Canada policy announcement, US ADP employment, US factory orders, and US ISM non-manufacturing index reports are all due.

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