Daily market review

United States

Earnings, economic data, and hopes for US stimulus gave equities a lift Thursday, with value/cyclical stocks leading. The Dow Jones industrial average and the S&P 500 both rose 1.1 percent and the NASDAQ 100 gained 1.2 percent.

Progress on Capitol Hill toward passage of another big US fiscal stimulus package bolstered recovery hopes, while comments from Federal Reserve officials supported expectations for the Fed to remain on hold this year.

Among sectors, financials led the winners, paced by banks, insurance, and credit cards. Industrials outperformed, led by transports and aerospace & defense. Technology outperformed, with Paypal up 7.4 percent after strong earnings, and Apple up 2.6 percent on buzz surrounding its electric car plans.

Consumer discretionary was in line but held back by weakness in chain stores and restaurants. Consumer staples were weak after an earnings miss at Clorox, which fell 6.3 percent. Materials lagged on a miss at International Paper, down 7.7 percent.

Phillip Morris gained 4.2 percent, Ebay rose 5.3 percent, and MetLife rose 6.1 percent on earnings beats. Merck, the big pharma, fell 1.6 percent on an earnings miss and news that its CEO will step down. UnitedHealth was also down 2.5 percent to hold down health care.

Bolstering expectations for improvement in tomorrow's employment report, initial jobless claims came in well below expectations at 779,000 with significant downward revisions to the two prior weeks totaling 74,000.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 42 cents to US$58.86 while spot gold dropped US$38.99 to US$1,794.39. The US dollar rose against most major currencies but weakened vs sterling. The US Treasury 30-year bond yield was up 1 basis points at 1.93 percent while the 10-year note yield was flat at 1.14 percent.


Equities were mixed to better Thursday with strength in banks offset by weakness in energy and utilities. The Europe-wide STOXX 600 rose 0.6 percent, the German DAX gained 0.9 percent, the French CAC rose 0.8 percent, and the UK FTSE-100 was up 0.1 percent.

Among sectors, banks fared best on favorable earnings, along with travel & leisure, health care, and insurance. UK banks got a lift after the Bank of England said UK growth should rebound: NatWest was up 4.5 percent and Barclays rose 2.8 percent. Lagging were personal & household goods, energy, and utilities.

Among companies reporting, Dassault, the French defense contractor, rose 6 percent on an earnings beat. Nordea Bank rose 3.6 percent and Danske Bank gained 1.6 percent after topping earnings expectations. Roche Holdings, the Swiss pharma, gained 2.2 percent after announcing a dividend.

Among decliners, Royal Dutch Shell fell 2 percent on an earnings miss. Deutsche Bank fell 0.7 percent on an earnings beat but revenue shortfall. Unilever fell 6 percent after disappointing the market on underlying earnings. BT, the UK telecom, fell 3.3 percent on disappointing guidance.

In economic news, the BoE left monetary policy unchanged at this month's MPC meeting. The bank also asked the Prudential Regulatory Authority to ensure the banking system could implement negative rates, if needed, after a 6-month period. The overall QE ceiling was held at the £895 billion level.

Asia Pacific

Equities retreated Thursday amid profit-taking after a lackluster close on Wall Street. Korean and Japanese markets lagged on weakness in technology stocks and China was hurt by liquidity worries.

Semiconductors led the Korean KOSPI down 1.4 percent, with Samsung Electronics off 2.5 percent and SK Hynix down 3.9 percent. Tech stocks pushed Japanese markets down too, with the Nikkei 225 off 1.1 percent and the broader Topix off 0.3 percent. Among Japanese stocks, Sony bucked the trend to advance 9.5 percent on an earnings beat.

In China, the Shanghai Composite index was down 0.4 percent as the PBOC allowed money market rates to remain elevated headed into the Lunar New Year holiday. Some analysts warned that valuations were overextended headed into earnings season. Hong Kong's Hang Seng index retreated 0.7 percent on fallout from Chinese liquidity concerns, with selling concentrated in the IT sector.

Australia's S&P/ASX 200 index was down 0.9 percent and the All Ordinaries 0.7 percent lower, the first drop after three days of gains with real estate, utilities, miners, and health care leading the decline. Biotechs depressed health care stocks. Industrials were hurt by a selloff in transportation stocks. Falling precious metals prices hurt miners, with BHP down 0.5 percent.

Among companies in focus, Origin Energy, the Australian utility, fell 6.9 percent after downgrading its guidance. BYD, the Chinese automaker, fell 4.5 percent on disappointing January sales.

Looking ahead*

On Friday in Asia/Pacific, the Japanese household spending report, the Reserve Bank of Australia policy report, and the Reserve Bank of India policy announcement are scheduled. In Europe, the following are due: German manufacturers' orders, French merchandise trade, UK Halifax House Price Index, and Italian retail sales. In North America, reports are scheduled on US employment, US international trade in goods and services, US consumer credit, the Canadian Labour Force Survey, Canadian merchandise trade, and Canadian Ivey PMI.

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