Daily market review

United States

Cyclicals improved Friday on reopening hopes while growth stocks lagged amid concern over rising interest rates. The Dow Jones industrial average ended flat, the S&P 500 eased 0.2 percent and the NASDAQ composite firmed 0.1 percent.

Among sectors, materials, financials, energy, and industrials outperformed while lagging were communications services, consumer staples, health care, and utilities.

Interest rates continued their recent rise Friday and the yield curve steepened amid optimism over economic recovery, with new impetus from Treasury Secretary Janet Yellen's latest endorsement of big fiscal stimulus. The Yellen comments gave investors another excuse to rotate out of growth stocks with high multiples, including the FAANGs, into cheaper cyclicals expected to benefit most from the recovery.

Facebook was down 2.9 percent, Amazon down 2.4 percent, and Google down 0.8 percent. On the positive side, Deere, the machinery maker, rallied 9.9 percent after topping earnings expectations. Caterpillar rose 5 percent, and JP Morgan gained 1.7 percent on the steeper yield curve. Novovax was another winner, up 4.8 percent, on news it would sell more vaccines to Covax, the global vaccine effort.

Markets were somewhat soothed by comment from Fed officials, including New York Fed President John Williams, who downplayed concern over rising yields, and said the recovery has a long way to go.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 70 cents to US$62.68 while spot gold rose US$6.90 to US$1781.40. The US dollar was mostly weaker vs. major currencies but gained vs. the Swiss franc. The US Treasury 30-year bond yield was up 5 basis points at 2.13 percent while the 10-year note yield was up 4 basis points at 1.34 percent.


Renewed recovery hopes and positive company earnings helped equities gain Friday despite angst over rising bond yields. The Europe-wide STOXX 600 rose 0.5 percent, the German DAX and the French CAC both gained 0.8 percent, and the UK FTSE-100 firmed 0.1 percent.

Cyclicals improved on positive news on the impact of vaccines in cutting transmission rates, and better news on vaccine distribution bolstered recovery hopes, along with moderately better economic data.

Among sectors, the best performers were banks and basic resources, while energy declined as oil prices retreated as supply disruptions eased from Texas. Health care, media and real estate lagged the broader move.

Among companies reporting, Lundin Mining rose 8.3 percent, Moncler, the retailer, gained 6 percent, and Hermes, the luxury clothier, rose 3.3 percent on earnings beats. On the downside, Renault declined 4.9 percent despite in-line results. BW Offshore declined 3.5 percent on an earnings miss.

In economic news, German business activity continued to grow in February and at a slightly faster rate than in January. However, while a 51.3 flash composite output index was up from January's final 50.8, it still showed sluggish growth. Separately, Eurozone business activity struggled in February with the flash composite output index at 48.1, a tick above the market consensus and up from January's final 47.8.

Separately, UK retailers saw demand collapse in January. Following a 0.4 percent monthly rise in December, sales volumes slumped by 8.2 percent, their worst performance since last April during the first wave of the virus. Annual growth dropped from 3.1 percent to minus 5.9 percent.

Asia Pacific

Equities were mixed Friday with Japan and Australia off on weakness in banks and commodities, and on carryover from declines on Wall Street. Chinese markets improved, but concerns lingered over higher bond yields and the prospect of less supportive economic policy.

Chinese equity indexes recovered initial losses in a mixed showing with energy and utilities rising while materials and industrials lagged. The Shanghai Composite Index gained 0.6 percent while the CSI300 index edged up 0.2 percent. Concerns lingered over the prospect of tighter central bank policy and worries that the Chinese government wants to tamp down market speculation.

Hong Kong shares tracked Mainland Chinese markets slightly higher, with the Hang Seng up 0.2 percent, paced by gains in materials stocks. Tech stocks faced continued selling pressure on valuation concerns following their recent steep gains, with Tencent off 0.9 percent.

South Korea recovered early declines to end higher with the KOSPI up 0.7 percent. Hyundai Motors gained 2.8 percent, and chipmaker Samsung Electronics firmed 0.6 percent to lead winners.

On the downside, Japan's Nikkei 225 dropped 1.0 percent and the Topix fell 0.8 percent as investors continued taking profits on recent strength. Fast Retailing, owner of Uniqlo stores, fell 2.4 percent amid concern the retail juggernaut is overdue for correction and is now over-weighted in the Nikkei 225.

Australian shares retreated to give up the week's gains, with the All Ordinaries index off 1.3 percent. Most sectors declined, led by energy as oil prices fell. Health care suffered from weakness in CSL, down 5.0 percent, after a downgrade at Credit Suisse. Materials declined on a selloff in iron prices.

In economic news, Australian retail sales rose a solid 0.6 percent on the month in January after a 4.1 percent drop in December. Year-over-year sales were up a very sizable 10.7 percent, near the best pace of the Covid recovery.

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