United States
Energy and financials led US markets slightly higher Tuesday in a renewed rotation into cyclicals while growth and defensives lagged. The Dow Jones industrial index firmed 0.2 percent, the S&P 500 was unchanged, and the NASDAQ 100 rose 0.3 percent.
An uptick in oil prices gave energy stocks a boost while consumer discretionary, financials, and industrials outperformed as investors looked to the expected recovery in the second half. Cyclicals benefited from incoming Senate Majority Leader Charles Schumer's comment that the new Congress would make aggressive stimulus its first priority, including bigger relief checks, support for state and local governments, and funding for vaccines.
Markets appeared to overlook US political conflicts and focused instead on the pandemic and the expected recovery in the second half, with support from monetary and fiscal stimulus.
Lagging were utilities, health care, information technology, and communications services, with notable weakness in mega-caps Facebook, down 2.2 percent, and Google down 1.1 percent.
Among companies in focus, General Motors rose 6.3 percent after unveiling its electric van and plans for flying cars. Online retailer Etsy rose 12 percent along with retailer Wayfair, up 7.9 percent on stimulus hopes and the vogue for online spending for home goods.
These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.11 to US$56.54 while spot gold gained US$9.90 to US$1,856.40. The US dollar fell sharply against major currencies. The US Treasury 30-year bond yield was unchanged at 1.88 percent while the 10-year note declined 1 basis point to 1.13 percent.
Europe
Cyclicals perked up while defensives lagged to leave equity indexes mostly flat Tuesday. The Europe-wide STOXX 600 rose 0.1 percent, the German DAX eased 0.1 percent, the French CAC eased 0.2 percent, and the UK FTSE-100 was down 0.8 percent.
UK stocks suffered from sterling's uptick and more bad news on Covid cases. In focus were reports that Germany and other European countries may extend lockdowns as efforts to contain the virus have faltered. Strong auto sales results gave European automakers a boost.
Among sectors, cyclicals led the way higher, with autos, banks, oil & gas, and travel & leisure leading. Defensives lagged, with utilities, consumer staples, and health care weakest.
Among companies in focus, Maersk rose 3.4% after an analyst upgrade. Zur Rose, the Swiss drugstore chain, rose 14 percent after an analyst buy rating. Among oil stocks, BP rose 2.1 and Royal Dutch Shell rose 1.9 percent as oil prices gained. Among auto shares, BMW rose 1.2 percent and Renault rose 1.7 percent on positive sales results.
Asia Pacific
Major Asian markets posted mostly mixed results Tuesday. Authorities announced a national state of emergency in Malaysia and tighter lockdowns in parts of China in response to rising Covid-19 cases.
Despite the new lockdown, the Shanghai Composite rebounded from weakness in recent sessions with a strong 2.1 percent gain, while Hong Kong's Hang Seng posted a solid 1.3 percent gain. Other gainers included the Bombay Sensex at 0.5 percent.
India's consumer price index rose 4.59 percent on the year in December, slowing sharply from 6.93 percent in November and moving back within the Reserve Bank of India's target range of 2.0 percent to 6.0 percent for the first time since March 2020. The inflation dip may provide an opportunity for the Reserve Bank of India to lower rates at their next meeting early next month.
Looking ahead*
On Wednesday in Asia/Pacific, Chinese merchandise trade is scheduled. In Europe, Italian industrial production and Eurozone industrial production reports are due. In North America, US CPI, Fed Beige Book and the US Treasury Statement are on tap.
