Daily market review

United States

Cyclicals/value stocks outperformed Tuesday as the market focused on reports suggesting the Delta variant may be peaking, and on hopes for more vaccine takeup. Despite the better tone, the major stock averages weakened into the close. The Dow Jones industrial average rose 0.1 percent, the S&P 500 gained 0.1 percent, and the NASDAQ was up 0.5 percent.

Energy and commodity-based stocks tacked on more gains after rallying Monday. Other leaders included consumer discretionary, financials, industrials, and materials. Defensive sectors lagged, including health care, utilities, consumer staples, and real estate.

Strong-ish US new home sales figures added to the better risk appetite. Home builders traded better with other cyclicals, with Lennar up 2.5 percent, and Pulte up 2.2 percent. Auto and auto parts stocks outperformed, with Ford up 2.8 percent after raising its output target for its new electric light truck.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$2.63 to US$71.19 while spot gold eased 90 cents to US$1,803.43. The US dollar fell vs. most major currencies but gained vs. the Swiss franc. The US Treasury 30-year bond yield was up 4 basis points at 1.91 percent and the 10-year note yield rose 4 basis points at 1.29 percent.

In US economic news, sales of new single-family homes rose 1.0 percent to 708,000 after a revised 701,000 in June. This was generally in line with market expectations and shows that the pace of sales remains quite strong.


A divided showing among sectors left equities narrowly mixed Tuesday. The Europe-wide STOXX 600 was flat, the German DAX rose 0.3 percent, and the French CAC declined 0.3 percent. The UK FTSE 100 firmed 0.2 percent.

Among sectors, travel & leisure and basic resources fared best on the return of the reopening trade after the US gave final approval to the Pfizer vaccine, which is expected to lead to more vaccine mandates. Rising oil and commodities prices powered oil & gas and basic resources stocks.

On the negative side, banks lagged, with Santander down 0.2 percent after announcing it will put more money into its US consumer lending unit. Health care lagged as Novartis, the Swiss pharma, declined 1.7 percent after disappointing results in a cancer drug trial.

In economic news, the German economy performed a little better than originally reported for the April-June period. Quarterly growth was revised up a tick to a final 1.6 percent, in turn lifting the annual workday adjusted rate from its 9.2 percent flash estimate to 9.4 percent. Unadjusted, the yearly rate now stands at 9.8 percent, up from the 9.6 percent reported last month.

Asia Pacific

Monday's recovery in risk appetite continued Tuesday, paced by a rebound in big Chinese tech and healthcare stocks that sold off the most last week. Reopening plays, including travel stocks, got a boost from better vaccine news, while commodities extended gains on relief that China appeared successful in limiting the spread of the virus.

Chinese markets were bolstered by a strong showing Monday on Wall Street after formal US approval of the Pfizer/BioNTech vaccine, a share buyback at Tencent, and the People's Bank of China pledge to keep monetary policy stable and to boost credit growth for small business. Plus, container port operations at Ningbo resumed after a two-week closure due to virus problems.

The CSI 300 and the Shanghai composite both rose 1.1 percent. Hong Kong's Hang Seng outperformed with a gain of 2.5 percent. JD.com was the day's big winner, up 15 percent, after an earnings beat and positive guidance, plus news that US-based ARK Investments was buying into the e-commerce giant. Wuxi Biologics, the vaccine maker, rose 7.7 percent after an earnings beat.

A tech stock rally lifted South Korea, with the KOSPI up 1.6 percent. Chip stocks led the way after a strong showing in US semiconductors on Monday. Samsung Electronics rose 3.1 percent, and Naver, the big internet company, gained 1.9 percent.

Wall Street's gains helped Japanese markets, with the Nikkei up 0.9 percent and the broader Topix up 1.0 percent. Growth stocks outperformed value for a second day. Most sectors rose, with marine and air transportation up strongly, along with iron & steel, and transportation equipment. Lagging were banks and pharma stocks. Airlines were among the day's top performers on the reopening trade, with Japan Airlines up 3.5 percent and ANA up 2.9 percent.

Better news on vaccines helped Australia improve but the market ended well below the day's highs. The All Ordinaries index firmed 0.2 percent. Reopening plays outperformed on a better outlook for Australian vaccine supplies, and as the government said reopening plans would proceed. Energy was the day's leader as oil prices rebounded. Materials stocks outperformed too as metals prices perked up. Qantas, the airline, was a notable winner, up 5.5 percent. Consumer stocks lagged on relative weakness in work-from-home plays, including Temple & Webster, the online furniture retailer, down 4.0 percent.

Looking ahead*

In Asia/Pacific, New Zealand merchandise trade figures are due. In Europe, the German Ifo report is scheduled. In North America, US durable goods report is on tap.

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