Daily market review

United States

A selloff in technology and growth shares spurred by rising market interest rates knocked US equity averages lower Thursday. Energy stocks sold off on plunging oil prices, though value stocks generally held up better. The Dow Jones industrial average slipped 0.5 percent, the S&P 500 fell 1.5 percent, and the NASDAQ dropped 3.0 percent.

Among growth stocks, tech and communications services led the declines after the US Treasury 10-year yield briefly traded above 1.75 percent and the long bond yield at 2.50 percent. Homebuilders weakened on rising rates, and Amazon, down 3.4 percent, pulled down consumer discretionary. Apple, the tech champion, also fell 3.4 percent.

Industrials and materials outperformed on the recovery story, and best off were financials, with bank profits expected to rise with the steepening yield curve. Markets saw a surprising uptick in weekly US jobless claims, but took note of a shockingly strong manufacturing reading from the Philadelphia Federal Reserve.

Among companies in focus, Williams-Sonoma, the luxury home goods maker, jumped 19 percent as demand surged during the pandemic lockdown. Hartford Financial rose 18 percent on a report of a preliminary takeover offer from Chubb, the insurer, which fell 3 percent.

On the downside, Lordstown Motors fell 14 percent on disappointing earnings and after announcing it is being probed by the SEC. Dollar General fell 4.7 percent after reporting disappointing earnings. Clorox fell 2.7 percent after a downgrade at DA Davidson. Tesla dropped 7 percent in the growth stock washout and news of a crash involving one of its vehicles on autopilot. Chevron lagged, down 3.6 percent on the oil price fall.

In US economic news, initial jobless claims disappointed as they increased 45,000 to 770,000 in the week ended March 13, while Econoday's consensus was for a decline to 700,000. Separately, the Philadelphia Fed's manufacturing index surged to 51.8, a 50-year high that more than doubled February's already strong reading.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil dropped US$5.88 to US$62.19 while spot gold fell US$10.17 to US$1,734.97. The US dollar rose sharply vs. major currencies. The US Treasury 30-year bond yield rose 5 basis points to 2.47 percent while the 10-year note yield rose 8 basis points to 1.72 percent.


Cyclicals led European equities a bit higher Thursday boosted by Wednesday's decision by the Federal Reserve to wait for more positive economic data before raising rates or tapering asset purchases. The Europe-wide STOXX 600 firmed 0.4 percent, the German DAX rose 1.2 percent, the French CAC was up 0.1 percent, and the FTSE-100 rose 0.3 percent.

Markets were unmoved by news the Bank of England left policy on hold, though it acknowledged the recovery was going better than expected. Worries about rollout of European vaccines were a headwind for markets, as the UK became the latest to report supply disruptions and delays.

Automakers continued their recent rally to help German markets outperform, while rising long-term market interest rates gave banks and insurance companies a boost, and miners improved on the recovery narrative. Rising interest rates hurt real estate and utilities while declining oil prices undercut energy stocks.

Among companies in the news, Brunel, the Dutch management consulting firm, rallied 16 percent after an analyst upgrade. Lookers PLC, the UK auto dealer, rose 9.6 percent on better guidance. Eckert & Ziegler, the medical equipment maker, rose 9.4 percent on an earnings beat. On the downside, Zur Rose, the Swiss online pharmacy, fell 13 percent on an earnings disappointment. Fever-tree Drinks, the UK mixer maker fell 12 percent on disappointing results. Nokia, the Finnish telecom equipment maker, fell 6 percent after reiterating its guidance.

Asia Pacific

Bullish reaction to the Federal Reserve's Wednesday policy announcement boosted most Asian equities Thursday, but rising bond yields capped gains and weakened Australian equities.

China's Shanghai composite rose 0.5 percent while the CSI300 gained 0.8 percent, paced by strength in health care and consumer staples. Hong Kong stocks advanced with the Hang Seng up 1.3 percent on the Fed news, led by technology and industrials.

Investors were looking to US-China diplomatic talks later Thursday, with signs that the US is in no mood to ease its tough stance; the US reportedly sanctioned more Chinese government officials in connection with China's crackdown on democracy in Hong Kong.

Japanese stocks rose as the Fed news bolstered global recovery hopes, with the Nikkei up 1.0 percent. Chipmakers outperformed, with Advantest up 3.3 percent and Tokyo Electron up 2.7 percent. Travel stocks gained on news Japan may ease lockdown measures, with Japan Airlines up 1.5 percent.

Investors noted a Nikkei report that the Bank of Japan may adjust monetary policy to allow interest rates to move in a wider band. The Nikkei also said the BOJ is likely to scrap its target for ETF purchases and restrict purchases to periods of market turmoil.

Among Asian companies in the news, China's Sunny Optical Technology rose 9.5 percent after an earnings beat. China Telecom rose 3 percent on a fundraising round to invest in 5G technology. Toyota Motor gained 4.1 percent after announcing production cuts in North America. On the downside, Chong Kun Pharmaceutical declined 21 percent after Korean regulators rejected its pancreatic drug. Weimob, the Chinese software maker, fell 18 percent on an earnings miss, and Nexteer Automotive, the Chinese auto parts supplier, fell 5.5 percent also on an earnings miss.

Australian markets edged down, with the All Ordinaries index off 0.6 percent, as profit-taking pressures continued, and Australian bond yields remained elevated. Technology, industrials, real estate, and health care all lagged while energy, materials, and consumer discretionary shares held up best.

In economic news, Australian labour force data were much stronger than expected, as the number of employed rose by 88,700 in February, more than doubling expectations and up from an increase of 29,500 in January. The unemployment rate fell more than expected to 5.8 percent vs. expectations for 6.3 percent.

Looking ahead*

On Friday in Asia/Pacific, Japanese CPI, China loan prime rate, and Australian retail sales reports are due. In Europe, UK public sector finance and German PPI reports are scheduled. In North America, Canadian retail sales figures are on tap.

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Global Bond Market Recap

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