Daily market review

United States

Technology and other growth sectors perked up Thursday as interest rates retraced Wednesday's uptick. Value/cyclicals lagged, with a drop in commodities prices weighing on materials and energy stocks. The Dow Jones industrial average declined 0.6 percent, the S&P 500 was flat, and the NASDAQ gained 0.9 percent.

The FANMAG complex led the winners as the US 10-year note yield declined 5 basis points after rising 6 basis points on Wednesday in reaction to the Federal Reserve having penciled in a 50-basis-point rate hike in 2023.

News of an unexpected rebound in US jobless claims attracted attention. Jobless claims in the June 12 week rose 37,000 to 412,000, ending a six-week streak of declines. Econoday's consensus had anticipated a decrease to 360,000, with the highest forecast at 370,000.

Among sectors, tech got a boost from rallies in chipmakers and software, with heavily weighted Apple also up 1.3 percent. Megacap internet stocks lifted communications services. Biotech stocks advanced to boost health care. Lagging were industrials, while financials suffered as bank stocks gave up Wednesday's uptick. A selloff in precious metals hit materials, and energy lagged the most as crude oil extended its selloff into the close. Commodities suffered on the dollar's rally after the Fed policy news.

Among companies in the news, Lennar, the homebuilder, rose 3.6 percent on an earnings and revenues beat. Ford Motor fell 1.6 percent in the value-stock downdraft despite raising its guidance and expectations for electric vehicle sales.

In other US economic news, the Philadelphia Fed's manufacturing report showed steady growth at a high rate, headlined by a 30.7 index that matched Econoday's consensus. Growth in new orders, however, slowed but remained strong at 22.2.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell 90 cents to US$73.20 while spot gold fell US$60.41 to US$1,773.02. The US dollar rallied for a second day vs. major currencies. The US Treasury 30-year bond yield fell 10 basis points at 2.11 percent and the 10-year note yield fell 5 basis points at 1.52 percent.


Equities were mixed after the Fed's policy announcement, with a selloff in commodities weighing on miners while rising interest rates boosted banks. The Europe-wide STOXX 600 and the German DAX both rose 0.1 percent, the French CAC firmed 0.2 percent, and UK FTSE 100 slipped 0.4 percent.

Among sectors, basic resources and energy lagged as commodity prices weakened after the Fed policy statement. Oil supermajor British Petroleum declined 1.5 percent and BHP, the miner, fell 3.3 percent to depress the FTSE 100. Other laggards included chemicals, real estate, and construction.

On the positive side, travel stocks improved on news the UK may ease quarantine rules for people who've been vaccinated, but the effect was muted by the extension of UK restrictions into July. Ryanair, the airline, rose 3.0 percent, and TUI, the German travel agent, gained 2.4 percent. Other outperformers included retail, technology, autos, banks, and personal & household goods. Bank stocks got a post-Fed boost on hopes for higher interest rates.

Among companies in focus, Trainline, the UK rail ticket seller, gained 5.1 percent after reporting bookings have recovered to pre-pandemic levels. Halfords, the UK bicycle retailer, rose 3.9 percent on an earnings beat.

Asia Pacific

The Federal Reserve's policy announcement weakened most Asia/Pacific equities markets Thursday, with Japan lagging, though China managed gains.

Tech stocks led Chinese markets slightly higher with the CSI up 0.4 percent and the Shanghai composite up 0.2 percent. Semiconductors led the winners on news that the Chinese government would make a big push in third-generation microchips.

Risk appetite also got a boost as worries about Chinese monetary tightening receded following softer-than-expected economic data from China, including industrial production for May. Concern over the Fed's stance limited gains. Hong Kong tracked mainland China markets higher, with the Hang Seng index up 0.4 percent.

Japanese equities tracked US equities lower on the Fed news with the Nikkei down 0.9 percent and the broader Topix down 0.6 percent. News that Japan will proceed with lifting most anti-virus restrictions heading into the Olympics was regarded as a positive despite news coverage raising concerns about a resulting resurgence. Growth stocks lagged but value weakened too, with losses in most sectors. Worst were pharma, services, instruments, and communications services. Banks and financials held up best.

Australian markets recovered from their early lows with help from a surprisingly strong jobs report, but the All Ordinaries index ended 0.4 percent lower in line with Wall Street's selloff after the Fed policy announcement. Mining and energy stocks lagged as commodities declined, while financials rose, led by the biggest banks, as Australian bond yields followed US long-term yields higher.

Among companies in focus, SOHO China, the property developer, rose 22 percent on news it may be acquired by Blackstone. SMIC, the chipmaker, rose 5.4 percent after reporting strong demand and on the news of Chinese official investment in chip technology. Toshiba, the Japanese industrial conglomerate, rose 1.3 percent after its chairman said he might step down. On the downside, New Oriental Education fell 13 percent as the market braces for a government crackdown on the private tutoring industry. Sony, the electronics giant, fell 2.3 percent, and Softbank, the tech investor, fell 1.4 percent.

In Australian economic data for May, the number of employed rose by 115,200, rebounding strongly from a decline of 30,600 in April, and far above expectations for an increase of 30,000. The number of unemployed fell by 53,000 in May, pushing the unemployment rate down from 5.5 percent to 5.1 percent, its lowest since February 2020 and below the consensus forecast of 5.5 percent.

Looking ahead*

On Friday in Asia/Pacific, the Japanese CPI report is due. In Europe, German PPI and UK retail sales reports are scheduled. No major economic reports are on the calendar for North America.

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