Daily market review

United States

Financials and other cyclicals outperformed growth stocks Wednesday as US Treasury yields rose, but trading lacked conviction after recent gains. The Dow Jones industrial average firmed 0.1 percent, the S&P 500 rose 0.2 percent, and the NASDAQ was up 0.1 percent.

The recovery trade remained in focus as investors keyed on hopes for wider take-up of anti-Covid vaccines after the US formally approved the Pfizer/BioNTech vaccine. Best performers Wednesday included banks, construction, travel & leisure, airlines, and homebuilders. Lagging were pharma, consumer staples, telecom, and miners.

Among companies in the news, retailer Dick's Sporting Goods gained 13 percent after an earnings and revenues beat. Meanwhile, Western Digital, a computer equipment maker, gained 7.8 percent on a report it may be acquired. Toll Brothers, the homebuilder, rose 4.1 percent on an earnings beat and plans to raise prices.

On the downside, luxury retailer Nordstrom dropped 18 percent after a downgrade at JP Morgan, despite an earnings beat. Boston Beer, maker of Sam Adams beer, fell 3.5 percent after analyst downgrades.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.05 to US$72.24 while spot gold declined US$12.49 to US$1,790.94. The US dollar was mixed vs. major currencies. The US Treasury 30-year bond yield was up 4 basis points at 1.96 percent and the 10-year note yield rose 5 basis points to 1.34 percent.


A split showing among sectors left equities narrowly mixed Wednesday, with reopening plays faring best. The Europe-wide STOXX 600 was flat, the German DAX slipped 0.3 percent, and the French CAC rose 0.2 percent. The UK FTSE 100 gained 0.3 percent.

Reopening and cyclicals stocks continued to get a lift from expectations that formal US approval of the Pfizer vaccine would lead to higher vaccinations, along with speculation that the Delta variant may be peaking in parts of the US and Europe.

Banks benefited from rising yields on recovery hopes, along with comments from ECB Vice President Luis de Guindos, who said the ECB may revise its macroeconomic forecasts upwards.

Retail, travel & leisure, and bank stocks outperformed while health care, utilities, and chemicals lagged. Utilities suffered after a downgrade at RBC, with Italgas, the Italian utility, down 2.3 percent.

In economic news, a big drop in expectations depressed Germany's Ifo business climate index to 99.4 from 100.7 in July, well below the Econoday consensus forecast of 100.4, amid supply bottlenecks for intermediate goods and worries about rising infection numbers.

Asia Pacific

Equities held slim ranges with sectors mixed Wednesday as investors awaited Federal Reserve President Jerome Powell's speech scheduled Friday in Jackson Hole, Wyoming.

Chinese markets ended slightly higher with support from a generous reserve provision from the People's Bank of China. Sectors were split, with industrials and energy stocks outperforming while financials, real estate, and telecom lagged. The CSI 300 firmed 0.2 percent, and the Shanghai composite gained 0.7 percent. Hong Kong's Hang Seng eased 0.1 percent, with tech stocks consolidating after their rebound on Monday and Tuesday.

South Korea edged up with the KOSPI up 0.3 percent, with support from selected tech stocks. Separately, Taiwan's benchmark Taiex rose 1.4 percent to outperform the region after TSMC, the big chipmaker (up 2.3 percent) raised prices.

Japanese stocks were mixed, leaving the Nikkei unchanged and the broader Topix up 0.1 percent. Investors eyed reports suggesting the government was considering expanding Covid restrictions to more prefectures. Value stocks edged up while growth stocks were flat to lower, with tech stocks facing profit-taking after two days of gains.

Strength in miners and tech stocks helped Australian equities improve with the All Ordinaries index up 0.5 percent. Rising iron ore prices helped BHP gain 1.3 percent, and Fortescue rise 2.6 percent. Defensive stocks lagged, including utilities, telecom, and grocery stores.

Looking ahead*

In Asia/Pacific, the Bank of Korea policy announcement, Hong Kong merchandise trade, Singapore industrial production, and Australian capital spending figures are due. In Europe, German Gfk consumer climate, Swiss employment, French business climate indicator, Eurozone M3 money supply, and ECB policy meeting minutes are scheduled. In North America, US GDP, jobless claims, and Kansas City Fed manufacturing reports are on tap.

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