Daily market review

United States

The pullback in tech and momentum stocks continued Wednesday as they failed to hold Tuesday's gains, while cyclicals were not hit as hard. The Dow Jones industrial index fell 1.9 percent, the S&P 500 declined 2.4 percent, and the NASDAQ dropped 3.0 percent.

Among sectors, technology and communications services weighed on the market, with Apple off 4.2 percent, Microsoft down 3.3 percent, and Google off 3.5 percent. Tesla dropped 10.3 percent after founder Elon Musk unveiled his battery and production forecasts.

Energy shares lagged again as they continued the week's selloff, with exploration and production companies worst off. Health care held up best, with support from Johnson & Johnson, up 0.2 percent after saying its single-dose vaccine is entering final testing in the US.

Weakness in Amazon, down 4.1 percent, held back consumer discretionary shares. Financials outperformed but continued weakness in banks held them back, with Wells Fargo down 3.5 percent, and JP Morgan down 1.6 percent.

Among companies in focus, sportswear company Nike rose 8.8 percent on an earnings beat, and Lululemon rose 1.0 percent after resuming its buyback program. On the downside, American Express fell 3.0 percent after a downgrade at Bank of America. KB Home fell 7.6 percent after a downgrade at KeyBanc, despite an earnings and revenues beat.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 19 cents to US$41.55, while spot gold dropped US$43.18 to US$1,859.51. The US dollar rose sharply against most major currencies. The US Treasury 30-year bond yield declined 1 basis point to 1.42 percent while the 10-year note yield was unchanged at 0.67 percent.


Hopes for more government stimulus and a rebound in travel stocks bolstered equities Wednesday. The Europe-wide STOXX 600 rose 0.6 percent, the German DAX percent gained 0.4 percent, the French CAC rose 0.6 percent, and the UK FTSE-100 rose 1.2 percent.

UK stocks outperformed on expectations for an extension of the UK job furlough scheme and other fiscal measures to boost the economy. Meanwhile, travel stocks perked up as Lufthansa rose 2.3 percent on news it would roll out a rapid Covid-19 antigen test for passengers.

Among sectors, travel & leisure led winners, along with retail, personal & household, media, and utilities. Laggards included real estate, oil & gas, banks, telecom, and food & beverage.

Among companies in focus, German sportswear companies Puma rose 3.7 percent and Adidas rose 3.9 percent, after Nike, their US competitor, reported upbeat quarterly results. On the negative side, Swiss pharma Roche fell 3 percent on disappointing news on its clinical trials for its Alzheimer's drug. Danish pharma Genmab fell 5.7 percent on worries over a legal dispute.

In economic data, the Eurozone flash composite output index fell from August's final 51.9 to 50.1 in September and barely above the 50-expansion threshold. The decline mostly reflected services, where the flash slid from 50.5 to just 47.6, back into contraction territory and a 4-month low. Separately, the UK flash composite eased to 55.7 in September from August's 59.1.

Asia Pacific

Most major Asian markets were little changed Wednesday, with incoming data doing little to impact investor sentiment. Australia's All Ordinaries index was the main exception posting a strong 2.3 percent gain as further declines in new Covid-19 cases raised hopes that travel and other restrictions on business and households can soon be eased. Comments from a senior Reserve Bank of Australia official about the economic and policy outlook also boosted speculation that officials may consider other policy options at their next meeting in early October. Japan's Nikkei and Topix indices both edged 0.1 percent lower as trading resumed after holidays on Monday and Tuesday; the Shanghai Composite index and Hong Kong's Hang Seng index advanced 0.2 percent and 0.1 percent respectively.

The Reserve Bank of New Zealand left its official cash rate unchanged at 0.25 percent at its meeting Wednesday, and also kept the upper limit for its asset purchase program at NZ$100 billion as part of ongoing efforts to keep domestic interest rates low. Despite keeping these policy settings unchanged, officials believe additional policy tools may be needed to support economic recovery and directed RBNZ staff to put in place a program to provide additional funding for bank lending by the end of the year.

Flash PMI survey data for Japan show the ongoing impact of the Covid-19 pandemic on the domestic economy has remained substantial during September, with aggregate activity still contracting at a significant pace. The flash manufacturing index for September was 47.3, up only 1 tenth from August, while the service sector index came in at 45.6 for a 6 tenths gain.

Looking ahead*

On Thursday in Asia-Pacific, BOJ policy minutes and the New Zealand merchandise trade report are due. In Europe, the French business climate indicator, German Ifo survey, UK CBI distributive trade figures, and SNB policy announcement are scheduled. In North America, US jobless claims, US new home sales, the Kansas City Fed manufacturing index, and another appearance by Fed Chair Jay Powell are on tap.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies