Daily market review

United States

Dip-buying continued for a second day Wednesday after Monday's sharp selloff, with value/cyclicals leading the advance. The Dow Jones industrial average and the S&P 500 both rose 0.8 percent, and the NASDAQ gained 0.9 percent.

US Treasuries came under selling pressure and yields perked up as the narrative took hold that worries about the Delta variant undercutting the recovery have been excessive. Comments from corporate executives after positive quarterly results from United Airlines (up 3.8 percent) and Chipotle (up 12 percent) specifically downplayed Covid as a factor.

Best performers were value stocks including energy, as oil prices continued higher, plus financials, paced by banks. Other leaders included materials, industrials, and consumer discretionary. Technology rose as chipmakers bounced back.

Disappointing guidance from Netflix, down 3.2 percent, depressed communications services, as megacaps were mixed. Also lagging were consumer staples with weakness in food and discount retail. Utilities and real estate lagged with interest rates rising, and health care trailed.

Among Dow stocks, earnings beats and raised guidance came from Verizon, up 0.7 percent, Coca-Cola, up 1.3 percent, and Johnson & Johnson, up 0.6 percent.

In the energy sector, Occidental Petroleum rallied 7 percent after a series of positive analyst and media mentions. Among consumer discretionary stocks, retailer Lands End surged 17 percent after raising its guidance. Comerica, the bank, rose 4.2 percent on an earnings beat.

On the downside, Healthcare Services Group dropped 12 percent and Sleep Number, the bed retailer, lost 13 percent after both missed on sales and earnings.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$2.60 to US$72.22 while spot gold fell US$5.98 to US$1,804.07. The US dollar fell vs. most major currencies but rose vs. the Japanese yen. The US Treasury 30-year bond yield rose 6 basis points to 1.94 percent and the 10-year note yield gained 7 basis points at 1.29 percent.


Favorable company results and dip-buying in beat-up reopening plays gave equities a lift Wednesday. The Europe-wide STOXX 600 gained 1.7 percent, the German DAX gained 1.4 percent, the French CAC gained 1.9 percent, and the UK FTSE 100 was up 1.7 percent.

Expectations for another dovish statement from the European Central Bank after its governing council meeting Thursday added to risk appetite, as investors generally expect the bank to signal expanded asset purchases and spell out the terms of its willingness to let inflation overshoot.

Among cyclicals, travel & leisure fared best after a long stretch of weakness spurred by Covid worries, as reopening continues despite escalating case counts. Swedish gaming company Evolution rose 1.8 percent to lead gambling stocks higher. Retail stocks got a boost from an earnings beat at NEXT, the UK clothing retailer, which rose 8 percent. Banks also perked up, with help from a quarterly earnings and revenues beat at Nordea, which rose 3.7 percent.

Technology stocks saw gains too, with ASML, the Dutch chipmaker, up 3.1 percent after reporting an earnings beat and raising its sales guidance. On the downside, SAP, the German software giant, fell 3.1 percent despite higher guidance, and Novartis declined 0.3 percent.

Asia Pacific

Asian equities were mixed Wednesday, with new restrictions and Covid-19 worries on the negative side, but a rebound Tuesday on Wall Street providing support.

Bargain hunting after recent losses helped mainland Chinese markets recover with the CSI 300 and the Shanghai composite both up 0.7 percent. Value lagged growth, with energy and utilities off and materials and industrials outperforming.

Hong Kong lagged other Chinese markets as the Hang Seng slipped 0.1 percent on weakness in internet giants and tech stocks more generally. Meituan, the e-commerce giant, slipped 1.8 percent and Tencent fell 0.8 percent.

South Korea's KOSPI declined 0.5 percent as the Delta variant fueled worries about the global recovery. Among the day's movers, Naver, the internet leader, slipped 2.5 percent, and LG Chemical was off 0.6 percent.

Tuesday's rebound on Wall Street gave Japanese markets a boost in the face of rising Covid-19 case counts. The Nikkei rose 0.6 percent and the broader Topix gained 0.8 percent. Most sectors rose, with airlines, chemicals, transportation equipment, and banks leading. Miners lagged. Trading was limited heading into a four-day weekend with the scheduled start of the Olympics.

Australian markets retreated from early highs after Australian retail sales proved weak and a government warning that tight anti-Covid restrictions could remain in place into the fall. The All Ordinaries index advanced by 0.7 percent. Most sectors rose, with iron miners leading materials, financials paced by banks, natural gas lifting energy stocks, and consumer discretionary better on a rebound in travel and retailers. Lagging were industrials.

In economic data, retail sales in Australia fell a sharper-than-expected 1.8 percent on the month in June after advancing 0.4 percent in May. Public health restrictions were in force for much of June in Australia's two most populous states, New South Wales and Victoria.

Among companies in focus, Great Wall Motor jumped 16 percent after a first-half earnings beat and Anhui Gujing Distillery gained 8 percent after raising capital to add capacity. Korea Aerospace gained 2 percent on news of a big order from Indonesia. On the downside, Wuxi Biologics declined 4.5 percent after a share placement. Doosan Heavy Industries slipped 2.8 percent after announcing it will increase its investment in NuScale Power. China Evergrande eased 1.8 percent amid ongoing problems with bank financing for the troubled developer.

Looking ahead*

In Asia/Pacific, the Hong Kong CPI report is due. In Europe, the ECB policy announcement, plus reports on France's business climate, UK CBI industrial trends, and Eurozone EC consumer confidence are scheduled. In North America, US jobless claims, the Chicago Fed national activity index, US existing home sales, US leading indicators, and Kansas City Fed manufacturing reports are on tap.

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