Daily market review

United States

Unexpectedly strong US retail sales figures boosted equities early Friday but gains were short-lived and value/cyclicals led the market lower. The Dow Jones industrial average fell 0.9 percent, the S&P 500 declined 0.8 percent, and the NASDAQ was also down 0.8 percent.

Energy stocks extended the week's selloff. Industrial metals and precious metals added to the week's losses. Banks gave up Thursday's gains; consumer discretionary was a notable decliner, paced by weakness in gaming, apparel, cruise lines, and autos. Cyclicals fell prey to concern that the pandemic has not been vanquished, and that growth and inflation may be peaking.

FAANGs were also weaker despite a pullback in bond yields after an initial uptick after the retail sales report. Facebook fell 1.0 percent and Apple was off 1.4 percent. Holding up best were defensive sectors, including real estate and utilities, plus consumer staples, especially grocery stores.

Among companies in focus, Moderna, the vaccine maker, jumped 10 percent on news it will be added to the S&P 500 index. Alcoa, the aluminum giant, topped expectations but traded lower, down 4.5 percent, along with the rest of the sector. Intel declined 1.5 percent after reports it may buy GlobalFoundries, formerly AMD's chipmaking business. Among big Dow stocks, Dow Inc., the chemicals giant, fell 3.0 percent after a downgrade at Bank of America. JP Morgan declined 2.3 percent to relinquish the week's gains.

In US economic data, retail sales surprised on the upside in June, closing the second quarter on a 0.6 percent rebound, while analysts had expected a 0.4 percent decline from May. However, the upside surprise was partially offset by a downward revision to May's estimate, now showing a 1.7 percent decrease, larger than the 1.3 percent decrease initially reported. Meanwhile, the preliminary University of Michigan consumer sentiment index for July indicated confidence fell early in the month. The index was down 4.7 points to 80.8 in July from 85.5 in June, although it remained well above the 72.5 in July 2020.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil eased 7 cents to US$73.27 while spot gold fell US$18.63 to US$1,810.73. The US dollar rose vs. most major currencies. The US Treasury 30-year bond yield rose one basis point to 1.93 percent and the 10-year note yield was up 1 basis point at 1.31 percent.


Rising virus cases and the threat of more restrictions hurt European equities Friday. The Europe-wide STOXX 600 declined 0.3 percent, the German DAX slipped 0.6 percent, the French CAC fell 0.5 percent, and the UK FTSE 100 was down 0.1 percent.

News that new Covid cases in the European Union jumped by 64 percent in the latest week captured the market's attention, along with news that most cases were among young adults, who are less likely to die than older adults, where increases have been limited.

Travel stocks rose after President Biden suggested travel restrictions from Europe may be lifted. Scandic Hotels rose 5.6 percent after upbeat quarterly earnings. On the downside, basic resources suffered after Rio Tinto, down 3.4 percent, reported bad quarterly production numbers after storms in Australia hit iron shipments.

Earnings updates were mixed. Among notable companies reporting, Handelsbanken, the Swedish bank, fell 1.4 percent after disappointing results. On the positive side, Atlas Copco, the Swedish industrial conglomerate, rose 2.0 percent after topping expectations. Swedbank, another Swedish bank, rose 2.9 percent on an earnings beat.

Among sectors, best were real estate, utilities, health care, food & beverage, and travel & leisure. Hardest hit were basic resources, banks, autos & arts, oil & gas, insurance, technology, and construction.

Asia Pacific

Risk aversion spurred by surging Covid-19 case counts across Southeast Asia hit equities Friday and worries mounted over slowing growth.

Chinese equities slipped on slowdown fears, with value/cyclicals lagging and growth stocks down too. Focus on renewed US-China conflict added to negative sentiment as reports suggested the US is ready to impose new sanctions on Chinese officials over Beijing's actions in Hong Kong. The CSI 300 fell 1.0 percent and the Shanghai composite slipped 0.7 percent. Worst hit were utilities and consumer staples while financials and technology held up better but still declined.

Hong Kong held up slightly better with the Hang Seng bolstered by financials and real estate. Taiwan tracked mainland markets lower with the Taiex off 0.8 percent. Korea's KOSPI eased 0.3 percent as big tech stocks followed US tech stocks lower. Chip giant SK Hynix declined 1.6 percent.

Weakness in US tech stocks also undercut Japanese markets as growth stocks lagged again. The Nikkei declined 1.0 percent and the broader Topix eased 0.4 percent. News that the Bank of Japan left policy steady matched expectations. Meanwhile, more bad news on Covid case counts remained a major overhang for risk assets. Worst performing were pharma, precision instruments, mining and land transportation. Holding up better were shipping, banks, and transportation equipment.

Australian markets managed modest gains as health care and consumer discretionary stocks bounced back after recent losses. Most sectors were higher as the All Ordinaries index firmed 0.2 percent. Airlines rebounded too. Lagging were energy, on more oil price weakness, along with utilities and telecom.

Among companies in focus, China Evergrande, the massive Chinese property developer, rallied 10 percent as it pressed forward with plans to issue special dividends, despite regulatory trouble. On the downside, Taiwan Semiconductor fell 4.1 percent after its earnings miss. Fast Retailing, the Japanese retail giant, slipped 2.6 percent after lowering its guidance.

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