Daily market review

United States

Value/cyclicals suffered Monday from fear of another global Covid wave while growth stocks held up better. The Dow Jones industrial average declined by 0.4 percent, the S&P 500 firmed 0.2 percent, and the NASDAQ jumped 1.0 percent.

Worst off were energy stocks as oil prices retreated on growth worries spurred by the global spread of the Delta variant, plus expectations for increased oil output. Industrials and financials also dropped, and US long-term interest rates slipped on the more negative economic outlook, with the 10-year note yield back below 1.50 percent.

The NASDAQ outperformed, led by strength in tech stocks and communications services with lower US interest rates. Chipmakers led the tech stock rally, along with megacaps Apple, up 1.3 percent, Microsoft, up 1.4 percent, and Tesla, up 2.5 percent. High dividend-paying utilities advanced on the decline in rates. Consumer discretionary was another winner powered by Amazon, up 1.3 percent, and by homebuilders. Consumer staples also beat the market on the stay-at-home trade.

On the downside, materials lagged on losses in chemicals and industrial metals. Industrials suffered with weakness centered in airlines and aerospace & defense. Banks depressed financials on the decline in long rates.

Among companies in focus, Nvidia rose 5 percent after saying it will team with Alphabet on artificial intelligence and after competitor Broadcom backed Nvidia's proposed acquisition of chip designer Arm. Meanwhile, Facebook rose 4.2 percent to lead communications services after a federal court dismissed the Federal Trade Commission's antitrust lawsuit against the social network. Finally, Boeing fell 3.4 percent on a Reuters report of possible delays in the Federal Aviation Administration certification of Boeing's 777 Max aircraft.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell US$1.42 to US$74.70 while spot gold declined 53 cents to US$1,779.12. The US dollar was mixed vs. major currencies. The US Treasury 30-year bond yield fell 5 basis points to 2.10 percent and the 10-year note yield was down 5 basis points at 1.47 percent.


Rising Covid case counts weakened equities Monday, with reopening plays suffering. The Europe-wide STOXX 600 declined 0.6 percent, the German DAX eased 0.3 percent, the French CAC dropped 1.0 percent, and UK FTSE 100 was down 0.9 percent.

Rising instances of the Delta variant in Europe and Asia and the prospect of new travel restrictions hit travel & leisure hardest. Other laggards included oil & gas, banks, retail, construction, autos & parts, real estate, and basic resources. Holding up best were health care, technology, utilities, food & beverage, and chemicals.

French stocks lagged as political uncertainty rose after a setback for Prime Minister Emmanuel Macron's party in weekend regional elections. Declining oil and commodities prices weighed on energy and basic materials stocks. Finally, uncertainty over prospects for US infrastructure spending added to the weak showing for value/cyclical shares.

Among companies in focus, luxury clothier Burberry fell 8.7 percent after its CEO took a position at rival Salvatore Ferragamo, which declined 2.7 percent. Daimler, the German automaker, fell 2.7 percent as it prepares to sell its truck unit. On the positive side, Roche rose 0.9 percent after the European Commission approved its Neuromyelitis medicine, and Sanofi rose 1.0 percent on positive clinical trial results for its RSV medication.

Asia Pacific

Asian markets were narrowly mixed Monday, with risk sentiment hurt by renewed Covid-19 worries after cases ticked up across Southeast Asia and Australia extended and widened its lockdowns in response to the spreading Delta variant.

China's benchmark CSI 300 rose 0.2 percent and the Shanghai composite was flat. Value stocks weakened while growth gained. Among sectors, telecom services and health care rose while financials and energy stocks weakened. Hong Kong's Hang Seng index slipped 0.1 percent.

Growth stocks gained while value fell. Sector performance reflected the factor moves with healthcare and telecommunication services advancing while energy and financials fell. Trading throughout Asia was subdued as Covid cases spiked sharply across the region, and ahead of the main economic catalysts of the week including US non-farm payrolls and Chinese manufacturing PMIs. The yuan was flat against the dollar.

Japanese markets were mixed with Covid back in focus as the government warned of a new emergency declaration for Tokyo in response to rising cases. The Nikkei eased 0.1 percent and the broader Topix rose 0.2 percent, with tech stocks soft and value stocks better. Best were iron & steel, shipping, and retail stocks, along with banks and transportation equipment. Chipmakers paced declines in tech stocks. Mining stocks also lagged.

Australia was mixed to weaker as the market traded on wider anti-Covid lockdowns, including an extended lockdown in Greater Sydney, and in several other states, after an uptick in cases. The All Ordinaries index declined 0.1 percent. Stay-at-home stocks outperformed while reopening plays suffered. Best were online retailers, grocery stores, while worst were travel and airline stocks. Tech stocks suffered from declines in buy-now-pay-later stocks. Big banks rebounded, with Commonwealth Bank up 0.6 percent.

Looking ahead*

On Tuesday in Asia/Pacific, Japanese unemployment rate and Japanese retail sales reports are due. In Europe, the following releases are scheduled: French ILO unemployment rate, UK Nationwide House Price Index, UK M4 money supply, Eurozone EC economic sentiment, and German CPI. For North America, US Case Shiller Home Price Index, US FHFA House Price Index, and US consumer confidence reports are on the calendar.

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