Daily market review

United States

Reopening hopes lifted cyclicals/value stocks but growth/technology lagged to depress the broader market as bond yields continued higher. The Dow Jones industrial average rose 1.0 percent while the S&P 500 fell 0.5 percent and the NASDAQ dropped 2.4 percent.

Rotation out of growth into cyclicals continued on news that US vaccinations have picked up speed and on Saturday's Senate approval of a $1.9 trillion fiscal package, both adding to expectations for a strong, near-term economic recovery. Markets broadly got a lift from hedge fund manager David Tepper's comment that he is getting bullish on stocks, and sees bond yields peaking, but the selloff in tech stocks resumed late in the day.

Among sectors leading the rally were financials, industrials, materials, and consumer discretionary, while lagging were information technology and energy, with the latter retreating after weeks of strong gains.

Among companies in focus, several mega-caps remained under pressure on the rotation out of growth including Apple, down 4.2 percent, Google, down 4.3 percent, Microsoft, down 1.8 percent, and Tesla, down 5.8 percent. Among old-economy stalwarts, United Airlines rose 7 percent and Walt Disney was up 6.3 percent on the reopening trade; General Electric gained 4.3 percent on news it will spin off its aircraft leasing business.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell $1.59 to US$67.97 while spot gold fell US$17.54 to US$1,680.54. The US dollar rose sharply vs. major currencies. The US Treasury 30-year bond yield rose 3 basis points at 2.33 percent while the 10-year note yield rose 3 basis points to 1.59 percent.


The reopening trade lifted equities Monday, with cyclicals/value stocks leading, on hopes for faster vaccine rollout. The Europe-wide STOXX 600 rallied 2.1 percent, the German DAX jumped 3.3 percent, the French CAC rose 2.1 percent, and the FTSE-100 rose 1.3 percent.

Risk assets also benefited from more progress toward passage of the US fiscal stimulus package. Markets liked news that the European Union would seek to bring in more vaccines from the US, and the EU would double its vaccine deliveries to 100 million per month in April. UK schools reopened to all students on Monday.

Gains were across the board, but best performing sectors were autos, banks, chemicals, basic resources, construction, industrials, and insurance. Lagging but still better were oil & gas, food & beverage, financial services utilities, and personal & household goods.

Among companies in the news, Pearson, the publisher, rose 5.7 percent on favorable reaction to its full-year results, and Deutsche Post rose 5.4 percent on a share buyback. On the downside, Direct Line Insurance slipped 1.8 percent on disappointing annual results. HelloFresh, the food service, fell 5 percent on an analyst downgrade.

In economic data, German industrial production was surprisingly weak in January. Offsetting an upward revision to a 1.9 percent monthly gain December, a 2.5 percent January fall was the steepest since last April's 17.2 percent slump and slashed annual growth from 1.2 percent to minus 3.8 percent.

Asia Pacific

Rising US bond yields and worries about tighter Chinese economic policy weakened most major Asia/Pacific markets Monday though Australia managed gains on rising commodities prices.

China's Shanghai Composite index fell 2.3 percent after the government's modest 6 percent growth target for 2021 raised concern that tighter fiscal and monetary policy are coming, as forecasters see growth above 8 percent. Markets reacted negatively, paradoxically, to US Senate passage of the latest US fiscal stimulus package, as many investors see it as likely to bring more restraint from Chinese authorities.

Hong Kong tracked Mainland Chinese markets lower, with the Hang Seng index off 1.9 percent, paced by losses in highly-valued technology shares. Energy shares managed gains on rising oil prices, while property and financials also held up.

Rising US bond yields undercut Japanese equities, along with position adjustments headed into fiscal year end. The Nikkei share average declined 0.4 percent and the Topix eased 0.2 percent. Sectors were mixed with technology and growth stocks dropping. On the positive side, miners, iron & steel, coal, and financials fared better. Among companies in focus, Takeda Pharma rose 3.9 percent after saying it would seek OK to provide the Moderna vaccine, while Nippon Steel gained 3.3 percent after saying it was cutting capacity to move to a carbon-neutral future.

In Australia, strong commodity prices lifted miners to boost the major indexes, along with positive news on US fiscal stimulus efforts. The All Ordinaries index firmed by 0.4 percent. Gold and iron miners led materials gains, while energy stocks outperformed on rising oil prices after the latest attacks on Saudi refineries. Upbeat Chinese economic data supported miners too, with BHP up 2.4 percent. Information technology, health care, industrials, and property shares lagged.

In economic news, China's trade surplus widened from US$78.17 billion in December to US$103.25 billion for January and February combined. Officials combine the trade data for the first two months of the year to remove distortions caused by the timing of lunar new year holidays. Exports rose 60.6 percent on the year for January and February combined, accelerating sharply from year-on-year growth of 18.1 percent in December, while imports rose 22.2 percent after increasing 6.5 percent previously.

Looking ahead*

On Tuesday in Asia, Japanese household spending will be released as will Japanese GDP. In Europe, German merchandise trade, Italian industrial production, and Eurozone GDP will be posted. In North America, the NFIB small business optimism index is due.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies