Daily market review

United States

Value/cyclicals rebounded Wednesday after recent weakness while declines in mega-caps depressed the overall market. The Dow Jones industrial average rose 0.2 percent while the S&P 500 fell 0.4 percent, and the NASDAQ lost 1.0 percent.

Mega-caps and growth stocks, including the FANMAG complex, saw profit-taking following recent strength. Some said the strong IPO Wednesday for Coinbase, the first crypto-currency company to list in the US market, gave some traders their cue to take back some risk.

Banks led off earnings season with mostly positive results to help financials outperform. Wells Fargo was one of the day's big winners, up 5.5 percent, along with Goldman Sachs, up 2.3 percent, after earnings beats. JP Morgan retreated 1.9 percent despite earnings and revenues beats, as the bank noted flagging loan demand.

Other outperformers included materials and industrials. Energy stocks led winners on a positive day for crude oil prices.

On the downside Amazon, down 2.0 percent, hurt consumer discretionary, and tech lagged with semiconductors and software falling. Microsoft was down 1.1 percent, and Apple down 1.8 percent. Internets depressed communications services with Facebook down 2.2 percent.

In other macro news, the Fed's beige book described growth as "moderate" but flagged greater optimism linked to vaccines and the prospect of higher inflation. Meanwhile, Fed Chair Jerome Powell reiterated the Fed's patient stance and focus on high unemployment and the pandemic's harmful effects.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$2.50 to US$66.42 while spot gold fell US$8.33 to US$1,736.60. The US dollar weakened vs. most major currencies but not the Swiss franc. The US Treasury 30-year bond yield rose 2 basis points to 2.32 percent and the 10-year note yield rose 1 basis point to 1.63 percent.


Upbeat earnings helped European markets mostly edge up Wednesday though vaccine worries limited risk appetite. Technology and luxury consumer goods stocks outperformed, and markets got a lift from US bank earnings. The Europe-wide STOXX 600 rose 0.2 percent, the German DAX eased 0.2 percent, the French CAC rose 0.4 percent, and the FTSE-100 was up 0.7 percent.

Mostly negative vaccine news remained in focus after more countries suspended use of the AstraZeneca and Johnson & Johnson vaccines. Separately, France announced new curbs on visitors from locations where certain variants were prevalent, and German leaders remained at odds over anti-virus restrictions.

Rising Brent oil prices helped UK markets outperform, with BP up 3.4 percent and Royal Dutch Shell up 3.1 percent.

LVMH, the French luxury conglomerate, gained 2.9 percent on an earnings beat, and Burberry, the UK luxury clothing company, rose 1.2 percent on the LVMH news. SAP, the German software giant, rose 1.8 percent after raising its guidance. EasyJet, the budget airline, rose 5.8 percent after saying it sees business picking up in May.

On the downside, Tesco, the UK retailer, fell 1.2 percent on an earnings miss due to virus effects. Hella, the German auto parts supplier, declined 1.9 percent after an earnings miss.

In economic data, the Eurozone goods producing sector had a poor February. Output (ex-construction) fell 1.0 percent on the month, marginally steeper than the market consensus and its second decline in the last three months. As a result, annual workday adjusted growth slid back below zero and at minus 1.6 percent, touched its weakest rate since last October.

Asia Pacific

Major equities markets were mixed Wednesday with tech stocks helping Chinese markets improve and Japanese markets edging down in cautious trading.

Tech stocks perked up to help Chinese equities firm, with the Shanghai composite rising 0.6 percent and the CSI composite up 0.8 percent. Growth stocks outperformed value for a second day with tech stocks better after Chinese regulators gave giant fintechs a month to show they are falling into line with the government's dictates. Among sectors, health care lagged while consumer discretionary and materials stocks outperformed.

Hong Kong outperformed mainland Chinese markets, with the Hang Seng up 1.4 percent, paced by tech, including Baidu, up 3.2 percent, Alibaba, up 2.0 percent, and JD.com, up 2.6 percent.

Japanese markets edged down with the Nikkei down 0.4 percent and the Topix off 0.3 percent, though conviction was lacking ahead of key earnings reports. Risk sentiment was hurt by news of US authorities suspending use of the Johnson & Johnson vaccine, with value/cyclical stocks lagging. Marine transport, textiles, and metals led the decline while holding up best were iron & steel, and instruments. Japanese markets were not helped by news of an unexpected drop in machinery orders.

Australia's All Ordinaries index rose 0.7 percent amid expectations for strong results in US earnings, and support from a strong Australian consumer sentiment reading, which bolstered recovery hopes. Among sectors, tech stocks outperformed, paced by strength in buy-now-pay-later stocks, while rising gold prices gave materials a lift. Travel stocks lagged on concerns about vaccine delays.

In economic data, Japan's private sector machinery orders (excluding volatile items) fell 8.5 percent on the month in February after dropping 4.5 percent in January, and fell 7.1 percent on the year after advancing 1.5 percent previously. Growth in orders was much weaker than the consensus forecast for a month-over-month increase of 2.4 percent and a year-over-year increase of 2.3 percent.

Looking ahead*

On Thursday in Asia/Pacific, the Bank of Korea policy announcement is due, plus Indian wholesale price index, and the Australian labour force survey. In Europe, German, French, and Italian CPI reports are scheduled. In North America, reports on Canadian manufacturing sales, US jobless claims, Philadelphia Fed manufacturing, US retail sales, US Empire State manufacturing, US industrial production, business inventories, and the US housing market index are all on tap.

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