Daily market review

United States

Dip-buying after Wednesday's steep selloff gave equities a boost Thursday, with cyclicals/value stocks leading. The Dow Jones industrial average and the S&P 500 both rose 1.0 percent and NASDAQ 100 gained 0.5 percent.

Airlines advanced to lead industrials higher, with American Airlines up 9.3 percent and Southwest Airlines up 0.8 percent after better-than-expected quarterly results, and as American Airlines became the subject of another short squeeze with online retail traders battling institutions holding short positions.

Health care outperformed, with medical technology leader Abiomed up 8.1 percent on strong quarterly results. Communications services, financials, and materials also beat the market.

Lagging were technology, with Apple off despite another blowout quarterly report, as traders sold on the good news. Consumer staples, consumer discretionary, and energy shares lagged.

Among companies in focus, Tesla fell 3.3 percent after an earnings miss, and Facebook fell 2.6 percent as investors picked apart a strong quarterly report from the social network.

Among Dow stocks, Intel rose 4.6 percent, American Express gained 4.3 percent, and Disney gained 5.4 percent. Comcast was a notable winner, up 6.6 percent on a revenues and earnings beat. On the downside, Pulte, the homebuilder, fell 5.6 percent as house closings and guidance missed.

In US economic data, economic growth slowed to a 4.0 percent annual rate in the fourth quarter, just below expectations for a 4.1 percent increase and compared to a third-quarter rebound of 33.4 percent. Separately, initial jobless claims fell in the January 23 week to 847,000, lower than expected. Finally, new home sales slowed in December to an 842,000 annual rate that was nearly 30,000 below the consensus expectation. Yet relative to a downwardly revised 829,000 in November, the sales rate rose 1.6 percent on the month.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil eased 12 cents to US$55.49 while spot gold rose 74 cents to US$1,841.97. The US dollar eased against most major currencies. The US Treasury 30-year bond yield rose 3 basis points to 1.81 percent while the 10-year note rose 4 basis points to 1.05 percent.


Most equities markets recovered early losses to end slightly better Thursday as investors bought Wednesday's dip. The Europe-wide STOXX 600 edged up 0.1 percent, the German DAX rose 0.3 percent, the French CAC gained 0.9 percent, while the UK FTSE-100 fell 0.6 percent.

Some analysts said markets were now looking past Wednesday's focus on the unusual US retail activity around GameStop and other heavily shorted stocks, and were refocusing on fundamentals and expectations for rollout of vaccines to boost the recovery.

Outperforming were retail, travel & leisure, construction & materials, and basic resources. Telecom, health care and real estate lagged. Among winners, EasyJet rose 4.3 percent on news its burn rate had declined. STMicroelectronics, the chipmaker, rose 3.8 percent on an earnings beat. On the downside, Elior Group, the French caterer, fell 11 percent on a bigger revenues miss.

In economic news, the EU Commission's latest survey found a deterioration in economic sentiment at the start of the year. However, the 0.9 point drop was from a much higher revised 92.4 in December and, at 91.5, the January reading was on the strong side of expectations. In ECB comments, Governing Council member Olli Rehn said the bank stands ready to adjust all of its instruments, and repeated the ECB is keeping a close eye on the euro's appreciation.

Asia Pacific

Wednesday's sharp selloff on Wall Street spilled over to major Asia/Pacific markets Thursday with Hong Kong shares hit hardest as investors shed risk. Worries about tightening monetary conditions in China added to the negative sentiment.

Hong Kong's Hang Seng index dropped 2.6 percent with technology, finance, and energy sectors leading the selloff. Meanwhile, China's Shanghai composite fell 1.9 percent as investors focused on rising money market interest rates. The People's Bank of China drained liquidity aggressively Thursday, which suggested the PBOC is leaning against speculative pressures that have driven risk assets higher.

In Japan, the Nikkei 225 dropped 1.5 percent and the Topix lost 1.1 percent. Technology shares were hit hardest. Australia's S&P/ASX index lost 1.9 percent, with technology and mining share hit hardest but all sectors lower.

Among companies in focus, Korean giant Samsung Electronics fell 2.4 percent after an earnings miss and profits warning for the first quarter. Sinopharm, the Chinese big pharma, lost 3 percent on a report it will acquire China Traditional Medicine Holdings. Airline Cathay Pacific dropped 9.7 percent after announcing it will issue debt to bolster its finances.

In economic news, Japanese retail sales fell 0.8 percent on the month in December after dropping 2.1 percent in November, with year-on-year growth weakening from an increase of 0.6 percent in November to a fall of 0.3 percent in December.

Looking ahead*

On Friday in Asia/Pacific, Japanese unemployment, Japanese industrial production, Hong Kong GDP, and Australian PPI reports are scheduled. In Europe, French GDP flash, UK Nationwide house prices, French consumer manufactured goods consumption, French PPI, Swiss KOF leading indicator, German unemployment, German GDP flash, Eurozone M3, and Italian PPI reports are due. In North America, US employment cost index, US personal income and outlays, US Chicago PMI, US consumer sentiment, and US pending home sales index reports are on tap.

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