Daily market review

United States

Mega-cap momentum stocks recovered from their worst levels to help major indexes end slightly weaker Friday in volatile trading. The Dow Jones industrial index declined 0.6 percent, the S&P 500 fell 0.8 percent, and the NASDAQ dropped 1.3 percent.

Tech shares including Apple (up 0.1 percent), Alphabet (down 3.0 percent), Microsoft (down 1.4 percent), plus Amazon (down 2.2 percent) and Facebook (down 2.9 percent) faced heavy selling pressure early Friday after Thursday's rout, but they recovered as buyers emerged in the afternoon.

Investors favored cyclical stocks, with banks bolstered by rising interest rates and a steepening yield curve. Industrials, materials, insurance, autos, aerospace & defense, airlines, and beverages outperformed. Boeing rose 1.4 percent. JP Morgan rose 2.1 percent. BankAmerica rose 3.4 percent. Cruise operator Carnival rose 5.3 percent.

Among companies in the news, Wayfair, the online furniture retailer, fell 5.3 percent, and Lululemon, the sports clothier, fell 4.4 percent after analyst downgrades. Oxford Industries, the clothing retailer, dropped 14 percent amid disappointment over its quarter.

In US economic news, nonfarm payrolls rose 1.371 million August, just shy of Econoday's consensus, but private payrolls (which exclude government) came in more than 300,000 below the consensus, at 1.027 million. Employment in government increased by 344,000 in August, accounting for 1/4 of the monthly gain in total payrolls and reflecting the hiring of 238,000 temporary 2020 Census workers.

The unemployment rate did better than expectations, at 8.4 for a 1.8 percentage point decline from July and just below Econoday's consensus range. The improvement reflects both a rise in the number of employed and also a decline in the number of unemployed actively looking for work.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.46 to US$42.50 while spot gold rose US$5.92 to US$1936.65. The US dollar was mixed against major currencies. The US Treasury 30-year bond yield rose 10 basis points to 1.46 percent while the 10-year note yield rose 8 basis points to 0.72 percent.


Fallout from Thursday's rout in US tech and momentum shares hit Europe Friday while banks and value stocks fared better. The Europe-wide STOXX 600 declined 1.1 percent, the German DAX fell 1.7 percent, the French CAC was off 0.9 percent, and the UK FTSE-100 was also down 0.9 percent.

European markets also suffered from talk about downside risks for the Eurozone amid worries that the pandemic will linger and delay recovery, with the rising euro hurting exporters and increasing deflation risks.

Among sectors, banks held up better on news that Spanish banks Bankia (up 33 percent) and Caixabank (up 12 percent) were in merger talks. Miners and autos/parts also outperformed. Among stocks in focus, miner Glencore rose 2.8 percent and steel giant Arcelor Mittal rose 2 percent. On the downside, worst off were technology, real estate, and utilities. SAP, the German software leader, fell 2.1 percent, and ASML, the Dutch chipmaker, fell 4.1 percent.

In economic data, German manufacturers' orders continued their recovery in July but at a sharply weaker pace than in June. A smaller than expected 2.8 percent monthly increase followed an upwardly revised 28.8 percent jump in June. However, orders were still more than 10 percent below their pre-lockdown level in February.

Asia Pacific

Major Asian markets sold off Friday after sharp losses on Wall Street Thursday, though moves on the week were mixed. Australia's All Ordinaries index was among the weakest performers both on the day and on the week, closing down 3.1 percent and 2.4 percent respectively. Declines were more modest for Hong Kong's Hang Seng index and the Shanghai Composite index, closing down 0.8 percent and 0.9 percent respectively on the day, but both also recorded substantial declines on the week of 2.4 percent and 1.4 percent respectively. Japan's Nikkei and Topix indices fell 1.1 percent and 0.9 percent respectively on the day but outperformed on the week with gains of 1.4 percent and 0.7 percent respectively.

Retail sales in Australia increased on the month for the third consecutive month in July as Covid-19 cases stabilized or fell in most of the country, allowing some restrictions to be eased. Sales rose 3.2 percent on the month in July after increasing 2.7 percent in June, with year-on-year growth picking up from 8.6 percent to 12.8 percent. Stronger month-on-month growth reflects positive growth in all major categories of spending and in all but one state and territory, the exception being Victoria, Australia's second most populous state and location of almost 25 percent of national economic activity. Sales there fell 2.1 percent on the month in July, reflecting the impact of a strict lockdown put in place in response to a spike in Covid-19 cases.

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