Daily market review

United States

Equity markets were mixed Wednesday with value/cyclicals outperforming while growth and tech stocks lagged. The Dow Jones industrial average gained 0.6 percent, the S&P 500 rose 0.3 percent, and the NASDAQ eased 0.2 percent.

The market held slim ranges near recent highs, with little impetus or leadership in either direction. Sentiment was supported by relief that US consumer price figures did not deliver another upside surprise as occurred in recent months. Investors saw the CPI news as supporting the Federal Reserve's view that inflation is peaking and will return to the 2 percent target range as the reopening proceeds, but market reaction was muted as uncertainty remained.

Meanwhile, comments from Fed speakers suggested the central bank is preparing to taper its asset purchases but remains in no rush to begin.

Among equity sectors, a rally in precious metals miners helped materials top the winners. Transports and building materials boosted industrials. Other outperformers included banks, energy, and consumer staples. Lagging were tech, communications, and consumer discretionary. Health care trailed as selected Covid-19 vaccine makers retreated from recent highs. Moderna fell 16 percent and BioNTech lost 14 percent after reports EU regulators are looking into reports of bad side effects from their vaccines.

Among companies in focus, Southwest Air recovered late to gain 1.4 percent despite cutting its guidance. Among the day's tech losers, Nvidia slipped 1.2 percent, and Applied Materials declined 2.4 percent. On the positive side, Wendy's rose 3.7 percent after a big earnings beat.

In US economic news, consumer prices rose 0.5 percent in July, in line with Econoday's consensus, and marking a slowdown from 0.9 percent in June. The 12-month rate stabilized at 5.4 percent for the second consecutive month, within the consensus range. Core inflation, excluding food and energy, also slowed to a gain of 0.3 percent in July, down from 0.9 percent in June, and the lowest rate since February. The 12-month pace came in at 4.3 percent, as expected, down from 4.5 percent in June.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 75 cents to US$71.52 while spot gold rose US$27.55 to US$1,751.97. The US dollar declined vs. most major currencies. The US Treasury 30-year bond yield fell 1 basis point to 1.99 percent and the 10-year note yield fell 2 basis points at 1.32 percent.


Equities edged up Wednesday to extend the week's gains on positive earnings news, with cyclicals/value stocks outperforming. The Europe-wide STOXX 600 and the German DAX both rose 0.4 percent, the French CAC gained 0.6 percent, and the UK FTSE 100 was up 0.8 percent.

Investors reacted favorably as US CPI figures generally matched expectations after several months of upside surprises.

Among the day's best performers were banks, media, real estate, industrials, and construction and materials. Lagging were travel & leisure and food & beverage shares.

Among the day's big gainers, ABN Amro, the Dutch bank, rose 9 percent on revenues and earnings beats and resuming its dividend. Admiral Group, the UK financial services firm, rose 1.2 percent on upbeat results and a bigger dividend. Ahold Delhaize, the Dutch food retailer, rose 3.5 percent after topping expectations for the quarter.

Asia Pacific

Asian markets were mixed Wednesday in cautious trading ahead of US CPI figures. South Korea extended the week's selloff on rising Covid-19 cases. Chinese markets were split while earnings bolstered Japan.

Chinese markets were divided and ended well off the day's best levels with the CSI 300 off 0.6 percent and the Shanghai composite up 0.1 percent. Investors focused on rising Covid cases in China and signs that high-frequency data are showing business slowing.

Chinese growth stocks struggled as buyers were sidelined before the US CPI report. Value stocks outperformed with energy and financials leading while consumer staples and health care lagged.

Hong Kong also saw a split showing as the Hang Seng ended up 0.2 percent. Bank shares rallied and property got a lift while health care and biotech stocks lagged. China Evergrande jumped 8 percent after confirming it will liquidate assets to raise case and address its financial woes.

Worries over Covid case counts and a lagging vaccination effort depressed South Korea with the KOSPI down 0.7 percent. Separately, Taiwan's benchmark Taiex ended down 0.6 percent as tech stocks remained under pressure.

More positive earnings helped Japan's Nikkei gain 0.7 percent while the broader Topix rose 0.9 percent. Among companies in focus, Bridgestone, the auto parts maker, rose 5.4 percent on an earnings beat and better guidance. Bank stocks advanced on rising US bond yields, with Sumitomo Mitsui up 2.8 percent. On the downside, Softbank fell 1.8 percent after announcing it will pause its China tech investments over China's crackdown on big tech.

Positive company news helped Australian markets edge up with the All Ordinaries index up 0.3 percent despite extended lockdowns to counter the coronavirus. Investors focused on a share buyback from Commonwealth Bank of Australia, which rose 1.5 percent, and positive news from Origin Energy, up 3.8 percent. Rising iron ore prices bolstered miners. Lagging were information technology, biotechs, and industrials, with Transurban, the toll road operator, down 1.6 percent.

Looking ahead*

In Asia/Pacific, the Japanese PPI report, Indian CPI, and Indian industrial production figures are due. In Europe, UK quarterly and monthly GDP, UK industrial production, UK merchandise trade, Italian merchandise trade, and Eurozone industrial production reports are scheduled. In North America, US jobless claims and US reports are on tap.

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