Daily market review

United States

Rotation into cyclicals/value and out of momentum/growth stocks continued for a second day Tuesday on prospects for the rollout of Covid-19 vaccines. The Dow Jones industrial index rose 0.9 percent, while the S&P 500 eased 0.1 percent and the NASDAQ 100 fell 1.4 percent.

Expected fiscal stimulus in the first quarter continues to bolster cyclicals, along with relief that the US election is mostly past, plus better-than-expected earnings. Weakness in mega-caps depressed the broader market, and rising interest rates on recovery hopes were another factor hemming in growth stocks.

Among sectors, industrials, energy, and consumer staples outperformed the most, with drug stores, tobacco, and beverages leading. Health care, financials, and materials also beat the market. Lagging most were communications services, technology, and consumer discretionary, with most FAANGs down for a second day. Facebook was off 2.3 percent, Amazon down 3.5 percent, and Google was off 1.3 percent.

Among companies in the news, builder DR Horton rose 9 percent as its orders, margins, and guidance blew away expectations. Ulta Beauty, the salon chain, gained 7.4 percent after announcing a partnership with box-chain Target. Hain, the health food company, rose 8 percent on an earnings and revenues beat. Boeing surged 5.2 percent on reports the FAA soon may remove its order grounding the 737 Max.

On the downside, Beyond Meat dropped 17 percent after missing expectations for earnings and revenues. Carnival Corp., the cruise line operator, fell 13 percent after announcing a new share offering following its huge rally Monday. Zoom Video, the online meeting host, fell 9 percent as investors exited the stay-at-home trade.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.33 to US$43.63 while spot gold rose US$7.58 to US$1,873.46. The US dollar was steady against most major currencies. The US Treasury 30-year bond yield rose 3 basis points to 1.75 percent while the 10-year note yield rose 2 basis points to 0.95 percent.


Monday's hopeful vaccine news from Pfizer/BioNTech underpinned equities again Tuesday. The Europe-wide STOXX 600 rose 0.9 percent, the German DAX gained 0.5 percent, the French CAC rose 1.6 percent, and the UK FTSE-100 was up 1.8 percent.

Among sectors, autos, energy, insurance, and banks were the best performers while lagging the most were health care, technology, and travel. The favorable vaccine news was tempered by concern about logistics around rolling out the vaccine, and by the near-term impact of widening European lockdowns as the virus currently spreads.

Among companies in focus, URW, the French shopping center operator, jumped 21 percent after its shareholders rejected a new round of stock issuance. Thyssenkrupp, the German industrial conglomerate, rose 2.3 percent on news it may get a German government bailout. Bic, the French consumer products maker, rose 8 percent as the market liked its restructuring plan. Henkel, the consumer goods maker, rose 0.5 percent after affirming its guidance.

In economic news, the German ZEW report matched expectations for a deterioration in analysts' assessment of the economy. Separately, The September/October UK labour report was mixed but mostly showed weak conditions before the latest lockdown came into effect.

Asia Pacific

Most major Asian markets closed higher Tuesday, with regional investor sentiment supported by gains on Wall Street Monday after Pfizer and BioNtech announced a high efficacy rate for their Covid-19 vaccine. Shares of airlines across the region rallied particularly sharply on hopes that a successful vaccine will result in a recovery in air travel.

Japan's Nikkei and Topix indices rose 0.3 percent and 1.1 percent respectively, the former hitting a new 29-year high, while Hong Kong's Hang Seng index and Australia's All Ordinaries index advanced 1.1 percent and 0.4 percent respectively. The Shanghai underperformed, closing down 0.4 prevent after the release of inflation data showing weaker price pressures.

China's headline consumer price index increased 0.5 percent on the year in October, slowing from 1.7 percent in September and below the consensus forecast of 0.8 percent. The index fell 0.3 percent on the month after advancing 0.2 percent previously. Weaker headline inflation in October was driven by a substantially smaller increase in food prices which, in turn, reflected a drop in pork prices as supply recovers from the impact of an earlier outbreak of swine fever. Non-food prices, in contrast, were unchanged on the year for the second consecutive month with broadly offsetting moves among major categories, suggesting that underlying price pressures remain steady and subdued.

Looking ahead*

On Wednesday in Asia/Pacific, the Reserve Bank of New Zealand policy announcement and China's new yuan loan report are scheduled. No major reports are due in Europe or North America.

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