Daily market review

United States

Rising US bond yields kept growth stocks under pressure Friday while cyclicals/value stocks were better bid on recovery hopes. The Dow Jones industrial average rose 0.9 percent while the S&P 500 firmed 0.1 percent, and the NASDAQ declined 0.6 percent.

The recovery hopes and heavy new US Treasury supply pushed US market rates higher Friday, with another boost from a somewhat stronger-than-expected US producer price report.

The steeper US yield curve helped bank stocks outperform, while other cyclicals advanced, led by energy and industrials. On the downside, the broader market was depressed by a selloff in mega-caps and growth stocks on rising bond yields and the rotation into value. Communications services lagged, with Facebook down 2 percent and Google off 2.5 percent. Consumer discretionary suffered from weakness in Amazon, down 0.8 percent. Tech stocks were a big loser, with chipmakers and software suffering.

Among value stocks, Boeing rose 6.8 percent on news of a big order, GM gained 5.2 percent, and Caterpillar gained 4.2 percent. Old-fashioned cyclicals remained in favor after President Biden signed the $1.9 trillion stimulus package, on the president's pledge to accelerate vaccinations, and other positive vaccine news.

Among companies in the news, Novavax, the US vaccine maker, rose 8.1 percent on positive efficacy news in its UK vaccine trials. Vail Resorts, up 3 percent, was another winner on an earnings and revenues beat, and better guidance. Nordstrom, the retailer, rose 10.6 percent on an upgrade at Jefferies.

In US economic news, annual rates of producer-price inflation came in high, boosted by weak prices a year ago during the great lockdown, while monthly rates of growth are less severe. Total producer prices rose 0.5 percent in February which is a strong rise that beats Econoday's consensus by 1 tenth as does the annual rate of 2.8 percent which is a 2-year high and beats the consensus by 2 tenths. But core readings show less pressure, especially monthly ones at 0.2 percent both when excluding food and energy and when further excluding trade services.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil declined 46 cents to US$69.24 while spot gold firmed 58 cents to US$1,724.08. The US dollar rose vs. most major currencies, except the Canadian dollar. The US Treasury 30-year bond yield rose 8 basis points to 2.38 percent while the 10-year note yield jumped 9 basis points to 1.63 percent.


Equities were mixed to weaker Friday with a split showing among sectors, and rising bond yields in focus. The Europe-wide STOXX 600 eased 0.3 percent, the German DAX declined 0.5 percent, the French CAC firmed 0.2 percent, and the FTSE-100 was up 0.4 percent.

Bond yields rose despite the ECB announcement Thursday that it would accelerate asset purchases, as investors focused on US fiscal stimulus and progress on rolling out vaccines. A Bloomberg story reported the ECB did not intend its announcement to show much of a shift in its policy stance.

Among sectors, best performers were banks, retail, construction, insurance, telecom, and oil & gas. Lagging were technology, health care, media, autos, utilities, chemicals, real estate, and travel & leisure.

Among companies in the news, UK clothier Burberry rose 6.9 percent on better trading results, Deutsche Bank rose 1.6 percent after issuing 2021 guidance, and Deutsche Telekom rose 1.8 percent as the market liked its 5G plans. On the downside, Daimler fell 1.9 percent on a share placement, and Berkeley Group, the UK property business, fell 5.8 percent on disappointing guidance.

In economic news, UK goods production was significantly weaker than expected in January. A 1.5 percent monthly decline was the first fall of any size since last April and left output 5.0 percent below its pre-pandemic level in February 2020. Separately, the Eurozone goods producing sector made a solid start to 2021. Output (ex-construction) rose a steeper than expected 0.8 percent on the month and that after a sharply shallower revised 0.1 percent dip in December. On the positive side, UK GDP figures topped expectations for January.

Asia Pacific

A better showing on Wall Street Thursday and hopes for a stronger global recovery helped most major Asian equity markets rise Friday but US and Chinese policy news limited risk appetite.

China's Shanghai composite rose 0.5 percent while the CSI300 edged up 0.4 percent with beaten-down infrastructure stocks leading the advance. Gains were capped as investors focused on perceptions that China's government wants to assert its control and limit risk-taking. After annual government meetings ended Thursday, Chinese Premier Li Keqiang said the government's 6 percent growth target was "not low," and the government would not ease policy to pursue faster growth. He also pledged to expand oversight of fintech firms and curb monopolies.

Separately, several leading fintechs and tech firms were hit by Chinese government fines for making acquisitions and investments that displeased Chinese regulators. China announced antitrust fines against Tencent, Baidu, ByteDance, and Didi Chuxing, which appear to have joined Alibaba as targets for a government crackdown.

Hong Kong stocks weakened, with the Hang Seng down 2.2 percent, paced by a selloff in Tencent, down 4.4 percent, and Baidu, down 4.1 percent. US-China tensions added to the negative sentiment after the US condemned Chinese moves to limit Hong Kong's independence, and after the US imposed new limits on sales of 5G goods to Huawei, the Chinese telecom champion.

Japanese equities outperformed, with the Nikkei share average up 1.7 percent and the Topix up 1.4 percent, on carry-over from Thursday's Wall Street rally in tech and growth stocks, with investors focused also on the impact of US fiscal stimulus on the global recovery. Tech and energy shares led the winners in Tokyo while financials and real estate lagged. Among companies in focus. Rakuten, the consumer-facing tech giant, rose 8.6 percent on news of big investments from the Japanese Post, Tencent, and others.

Australian markets advanced on global recovery hopes, with the All Ordinaries index up 0.9 percent, after the US enacted its latest fiscal spending package. Tech stocks and miners led the winners, with Afterpay, the fintech, up 2.2 percent, and BHP, the iron miner, up 2.5 percent.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies

Looking forward