Daily market review

United States

Value/cyclicals boosted equities Wednesday, with energy leading the advance on expectations for recovery, while growth stocks benefited from dip-buying. The Dow Jones industrial average rose 1.4 percent, the S&P 500 gained 1.1 percent and the NASDAQ composite was up 1.0 percent.

An array of positive Covid news bolstered recovery hopes and the reopening trade. The news included the expected near-term US rollout of the Johnson & Johnson vaccine, and faster delivery of vaccines from Pfizer and Moderna. Markets also reacted favorably to Fed Chair Jerome Powell's latest restatement of the Fed's commitment to keep rates low, and upbeat comments on stimulus prospects from top congressional Democrats.

Rotation into cyclicals continued to lift energy shares, along with rising oil prices, and higher bond yields supported financials. Airlines boosted industrials, and metal stocks led materials. Technology stocks lagged, with Apple off 0.4 percent, but the iPhone maker ended at the day's highs. Amazon, down 1.1 percent, hurt consumer discretionary though restaurants and other reopening plays held up better. Utilities lagged the most as interest rates continued higher.

Among companies leading, Occidental Petroleum gained 8 percent, Boeing jumped 8.1 percent, General Motors gained 3.5 percent, Alcoa rose 9.2 percent, while Tesla gained 6.2 percent.

In US economic data, new home sales topped expectations at a 923,000 annual rate in January for a sharp 4.3 percent gain from a sharply upward revised 885,000 rate in December.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.18 to US$67.04 while spot gold fell US$4.38 to US$1,801.11. The US dollar was mostly lower vs. major currencies. The US Treasury 30-year bond yield was up 4 basis points at 2.23 percent while the 10-year note yield gained 4 basis points to 1.39 percent.


Recovery hopes bolstered equities Wednesday on positive coronavirus trends, including vaccine rollouts and reopenings in Europe. The Europe-wide STOXX 600 rose 0.5 percent, the German DAX gained 0.8 percent, the French CAC firmed 0.3 percent, and the UK FTSE-100 was up 0.5 percent.

Rising bond yields limited the equity market gains. On the positive side were reports of faster vaccine rollouts across Europe, which spurred hopes for faster easing in mobility restrictions; an upbeat German GDP report was also a plus.

Among sectors, the reopening trade helped travel & leisure outperform, along with cyclicals including oil & gas, basic resources, industrials, banks, autos, construction, and chemicals. Lagging were media, personal & household goods, telecom, real estate, technology, utilities, food & beverage, and health care.

Among companies in the news, Solvay, the Belgian chemicals maker, rose 5.8 percent and Telecom Italia rose 9 percent on earnings beats. On the downside, Telefonica Deutschland fell 2.8 percent and Wolters Kluwer, the Dutch media business, fell 5.7 percent on disappointing results, and Puma, the sportswear company, fell 2.3 percent on weaker guidance.

In economic data, German quarterly economic growth was revised up from 0.1 percent to a higher-than-expected 0.3 percent in the second look at fourth quarter GDP.

Asia Pacific

Equities dropped Wednesday on policy tightening worries, concerns over high valuations, and a Hong Kong tax increase.

Hong Kong led the regional selloff, with the Hang Seng dropping 3 percent on news the city would raise the stamp duty on stock transactions, which spurred a flight of Mainland Chinese investors. The tax news aggravated a selloff spurred by spillover from Wall Street losses in tech stocks and the recent rotation out of highly-valued growth stocks. Hong Kong Exchanges and Clearing, the stock market operator, fell 9 percent. BYD, the Chinese automaker, fell 6 percent on weak Chinese auto sales in February.

Fallout from Hong Kong's imposition of higher taxes on stock trades hit Chinese shares, with the Shanghai Composite Index down 2 percent and the blue-chip CSI300 index off 2.6 percent. Concern about prospective tightening from the People's Bank of China also weighed on equities, with highly-valued sectors suffering the most.

The selloff in China and rising US Treasury yields depressed South Korean shares, with the KOSPI down 2.5 percent. Samsung Heavy Industries fell 3.6 percent, Hyundai Motors fell 3.9 percent, and chipmaker SK Hynix lost 1.8 percent in the downdraft.

Japanese shares fell too, with the Nikkei 225 off 1.6 percent and the Topix down 1.8 percent amid fallout from the tech stock selloff on Wall Street. Investors rotated out of growth stocks into cyclicals/value sectors as progress on vaccines and falling global Covid case counts fed recovery hopes. Among companies in focus, Softbank fell 5.2 percent on news it will invest in biotech.

Australian shares fell as miners were hit by a retreat in commodities prices after recent sharp gains, and tech stocks suffered from disappointing earnings. The All Ordinaries index declined 0.9 percent, paced by a 3.1 percent drop in BHP, the miner. Appen, the Australian artificial intelligence firm, fell 13 percent, and Nanosonics, the biotech, fell 7.5 percent on disappointing results.

Looking ahead*

On Thursday in Asia/Pacific, Australian capex figures are due and the Bank of Korea will make its policy announcement. In Europe, German Gfk consumer climate, Eurozone money supply, Italian business and consumer confidence, and Eurozone economic sentiment reports are scheduled. In North America, US durable goods, US GDP, US jobless claims, US pending home sales, and Kansas City Fed manufacturing reports are on tap.

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