Daily market review

United States

Equities ended flat to slightly weaker Tuesday, with growth stocks holding up best and with earnings and US fiscal news in focus. Both the Dow Jones industrial average and NASDAQ eased 0.1 percent while the S&P 500 slipped 0.2 percent.

Some analysts said reports that President Biden may accept a smaller compromise stimulus package contributed to the afternoon weakness. Caution crept in late as some big earnings results were due after the close.

Among sectors, communications services fared best with internet stocks leading and Twitter up 3.8 percent. Amazon, with a gain of 1.0 percent, and auto stocks helped consumer discretionary stocks beat the market. Consumer staples outperformed with a lift from grocery stores, including Kroger, up 7.3 percent. Energy stocks lagged again, with Exxon off 2.2 percent.

Earnings were due after the close from Microsoft, up 1.2 percent, Starbucks, up 1.2 percent, and AMD, up 0.6 percent. Among companies reporting Tuesday, 3M rose 3.3 percent on better-than-expected quarterly results. Johnson & Johnson gained 2.7 percent on an earnings beat and better guidance, and expectations for positive results in its vaccine trials. General Electric rose 2.7 percent on news of a better showing in its key industrial units.

In US economic news, consumer confidence at 89.3 in January modestly exceeded Econoday's consensus for 88.5, with current conditions weaker and expectations ticking higher. The assessment of the month's jobs market was negative with more saying jobs are hard to get (23.8 versus December's 22.9 percent) and fewer saying jobs are plentiful.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil eased 3 cents to US$55.82 while spot gold fell US$4.13 to US$1,851.51. The US dollar declined against most major currencies. The US Treasury 30-year bond yield rose 1 basis point to 1.80 percent while the 10-year note rose 1 basis point to 1.04 percent.


German stocks led equities higher on upbeat earnings Tuesday despite downbeat Covid-19 news. The Europe-wide STOXX 600 rose 0.6 percent, the German DAX gained 1.7 percent, the French CAC rose 0.9 percent, and the UK FTSE-100 was up 0.2 percent.

Italian stocks also outperformed on news that Prime Minister Silvio Conte had resigned and would seek to form a new government. Italy's FTSE-MIB index rose 1.2 percent. UniCredit, the Italian bank, rose 4.5 percent after naming a new CEO.

Strength in automakers and industrials helped Germany outperform, with BMW, the luxury automaker, up 3.1 percent after the European Union approved a battery subsidy for electric vehicles. Autoliv, the Swedish auto parts supplier, rose 5.3 percent on an earnings beat.

Other sectors outperforming included chemicals and financial services, with UBS, the Swiss bank, up 2.4 percent after topping earnings expectations. Lagging sectors included travel & leisure, utilities, and health care.

In economic news, UK labour market data showed further weakening in job market conditions but by less than expected with a significant but misleading pickup in wage pressures tied to the destruction of low-wage jobs. The claimant count showed the number of people out of work rose only 7,000 in December after 38,100 in November.

Asia Pacific

Major Asian markets fell back Tuesday in a big risk-off move to reverse Monday's strong gains. Investors focused on pandemic fears, renewed US-China tensions, worries that US fiscal stimulus might be delayed, and speculation that China may shift to a tighter monetary policy stance.

Expectations for immediate US fiscal measures have faded amid Republican opposition to US fiscal stimulus plans and comments Monday from US Senate Majority Leader Charles Schumer suggesting the stimulus package may wait several weeks.

Hong Kong markets led the way lower, with the Hang Seng index dropping 2.6 percent, its biggest one-day decline since May 2020. Mainland Chinese markets also fell back, with the Shanghai composite down 1.5 percent. Chinese cyclical sectors and growth stocks alike were hurt as an uptick in Chinese short-term interest rates to pre-Covid levels fueled speculation that the People's Bank of China may be poised to adopt a tightening bias, in part to rein in equity market speculation.

Japanese markets also weakened, with the Nikkei 225 index off 0.9% and the broader Topix down 0.8%. South Korea's KOSPI the benchmark KOSPI declined 2.1 percent on the same worries over US and Chinese policy stimulus, despite unexpectedly strong Korean fourth-quarter GDP figures.

Among companies in focus, Tencent, the Chinese tech darling, fell 6.3 percent in Hong Kong after rallying 11 percent Monday. In Seoul, Korean semiconductor leader Samsung Electronics fell 3 percent and Hyundai Motor fell 3.3 percent.

Looking ahead*

On Wednesday in Asia/Pacific, Australian CPI and Chinese industrial profits reports are scheduled. In Europe, the German Gfk consumer climate report is due. In North America, the FOMC policy announcement, Fed chair press conference, and US durable goods report are on tap.

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