Daily market review

United States

Weakness in megacap technology and internet stocks offset modest gains elsewhere to leave equities flat to weaker in quiet trading Tuesday. The Dow Jones industrial average declined 0.3 percent, the S&P 500 eased 0.2 percent, and the NASDAQ was off 0.1percent.

Markets were cautious awaiting the start of US earnings season Wednesday with results due for JP Morgan and BlackRock, along with the US consumer price index data. Comments Tuesday from Federal Reserve officials included Atlanta Fed President Raphael Bostic, who was regarded as dovish until recently, repeating that the Fed needs to scale back asset purchases soon. Vice Chair Richard Clarida repeated that the Fed has seen most of the progress it needs on employment to start its taper.

Declines in big tech stocks including Apple, down 0.9 percent, and Intel, down 2.4 percent, plus losses in internets including Google, down 1.5 percent, and Facebook, down 0.5 percent, weighed on the averages. Holding up better were utilities, real estate, and consumer discretionary, along with small cap stocks generally, Among consumer discretionary shares, Lennar, the homebuilder, gained 1.1 percent, and Ford Motor rose 3.6 percent. Real estate investment trusts outperformed, with Simon Property Group up 1.6 percent and American Tower up 1.1 percent.

Among companies in focus, Tesla rose 1.7 percent after reporting strong Chinese sales in September. MGM Resorts gained 9.7 percent after an analyst said the company is undervalued. Airbnb rose 3.7 percent on another analyst upgrade. On the downside, Coinbase, the crypto asset exchange, fell 2.8 percent despite news it will introduce trading in non-fungible tokens, as crypto fell back. Trex, the decking materials maker, fell 10.8 percent after an analyst downgrade.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil declined 37 cents to US$83.20 while spot gold rose US$7.94 to US$1,761.75. The US dollar was mixed vs. major currencies. Yields on the US Treasury 30-year bond fell 8 basis points to 2.09 percent, and the 10-year note fell 4 basis points to 1.57 percent.


Fallout from rising fuel prices depressed equities, along with negative economic readings. The Europe-wide STOXX 600 declined 0.1 percent, the German DAX and French CAC both fell 0.3 percent, and the UK FTSE 100 eased 0.2 percent.

Market sentiment was hurt by an unexpectedly large decline in the ZEW measure of German economic sentiment. Meanwhile, company earnings expectations have been eroded by rising input prices and shortages that have disrupted production worldwide. Autos lagged Tuesday on news of weaker Chinese auto sales in September as component shortages limited deliveries.

On the positive side, utilities outperformed Tuesday after reports that UK Prime Minister Boris Johnson was considering loans to industries struggling with rising fuel prices, a development that could ease regulatory pressure on utilities.

Among companies in the news, EasyJet fell 3.6 percent after reducing its guidance. Givaudan, the Swiss fragrance maker, fell 2.4 percent despite topping sales expectations. On the positive side, Outokumpu, the Finnish steel company, rose 4.6 percent after raising its guidance. Cancom, the UK technology services firm, gained 4.3 percent on news of a share buyback.

In economic news, the German ZEW index of economic sentiment fell 4.2 points to 22.3 in October, below the 24.0 median of an Econoday survey of economists' forecasts. Current conditions also declined in October, down 10.3 points to 21.6, and well below the 29.5 median forecast.

Asia Pacific

Asian markets retreated on stagflation worries reflecting fear that surging fuel prices will undercut global growth even as inflation and interest rates rise.

Another jump in Chinese coal prices after flooding caused more mine closures added to negatives for China. Investors reacted badly to uncertainty over more missed debt payments by China Evergrande and other property developers, and to reports that China would expand its anti-monopoly bureau and step up scrutiny of ties between state-owned Chinese banks and private firms.

China's CSI 300 index fell 1.1 percent and the Shanghai composite lost 1.3 percent, with materials and utilities stocks lagging. Hong Kong's Hang Seng index declined by 1.4 percent with big internet and technology stocks off the most, along with energy stocks.

South Korea's KOSPI fell 1.4 percent after the Bank of Korea held rates steady but appeared to telegraph a rate increase later this year. Taiwan's Taiex benchmark declined 1.1 percent on spillover from Chinese market weakness.

Concern that rising commodities prices will undercut the global recovery left Australian equities weaker, with the All Ordinaries down 0.3 percent. Most sectors retreated, with information technology and energy stocks off the most. Health care and consumer staples held up best.

Weakness on Wall Street along with rising US bond yields and higher oil prices undercut Japanese equities. The Nikkei 225 index slipped 0.9 percent and the broader Topix was off 0.7 percent. Inflation concerns were fanned by rising costs for oil and other fossil fuels, and by a larger-than-expected rise in Japanese producer prices which jumped 6.3 percent on the year in September, the seventh consecutive gain after rising 5.8 percent in August and the largest gain since September 2008.

Looking ahead*

In Asia/Pacific, the Japanese machinery orders report is scheduled. In Europe, German CPI, UK industrial production, UK merchandise trade, UK monthly GDP, and Eurozone industrial production releases are due. In North America, the US CPI, US Treasury statement, and Federal Open Market Committee minutes are on tap.

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