Daily market review

United States

Equities were mixed, with growth stocks lagging value/cyclicals, and bond yields up sharply for a second day. The Dow Jones industrial average gained 0.6 percent, the S&P 500 rose 0.2 percent, but the NASDAQ lost 0.5 percent.

Rotation continued into value/cyclicals -- especially energy, materials, and financials -- and out of highly valued growth stocks, which remained under pressure as long-term interest rates rose again. The US Treasury yield curve continued to steepen as the market prices in faster Federal Reserve tightening following President Biden's reappointment of Fed Chair Jerome Powell. Markets also noted hawkish comments from other policy-makers, including Atlanta Fed President Raphael Bostic who said hotter economic data may oblige the Fed to accelerate its taper which would allow the bank to raise rates sooner if needed.

Bank stocks advanced for a second day on rising rates, with Bank of America up 2.6 percent and JP Morgan up 2.4 percent. Energy stocks were notable winners as oil prices continued higher despite the US release of 50 million barrels of oil from its oil reserves, alongside other oil importers. Consumer staples and materials advanced too, with industrial metals and chemicals outperforming.

On the downside, technology and communications services lagged on the rotation out of megacaps and growth stocks generally. Consumer discretionary sagged too with Abercrombie & Fitch off 13 percent after it warned on rising costs. Bed Bath & Beyond slipped 7.3 percent as it gave back some recent gains.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$3.18 to US$82.57 while spot gold dropped US$15.12 to US$1,790.39. The US dollar was mixed vs. major currencies. The US Treasury 30-year bond yield rose 8 basis points to 2.04 percent, and the 10-year note yield rose 7 basis points to 1.68 percent.


Worrisome coronavirus news hit equities again Tuesday, with investors expecting growth to slow. The Europe-wide STOXX 600 slipped 1.3 percent, the French CAC fell 0.9 percent, the German DAX lost 1.1percent, and the UK FTSE 100 rose 0.2 percent.

Travel & leisure stocks suffered from Covid worries and expectations for wider restrictions in Europe, aggravated by the US Centers for Disease Control warning against travel to Germany and Denmark. Hungary, Iceland, the Czech Republic, and Guernsey were added to the list last week. Britain has been on the list for months.

Tech stocks lagged in response to Monday's selloff in US tech stocks. On the positive side, basic resources outperformed as commodities prices bounced back. BHP, the giant miner, rose 2.6 percent. Energy stocks tracked oil prices higher as markets were not impressed with the magnitude of the US tap of its strategic petroleum reserves. Banks outperformed with a boost from M&A news after a private equity bid for Aareal Bank, up 4.0 percent.

Asia Pacific

Asian equities were mixed to lower with rising bond yields and the selloff in US tech stocks undercutting risk appetite. Mainland Chinese markets outperformed on hopes for more official support for the economy.

In mainland Chinese markets, market sentiment improved after Chinese Premier Li Keqiang was quoted as saying the government should step up efforts to stabilize key sectors. Property stocks got a boost from reports that Chinese authorities are pressing banks to increase lending to developers. Tech stocks lagged in line with US losses. China's CSI 300 index and the Shanghai composite both firmed by 0.2 percent.

Hong Kong was a notable laggard on a selloff in tech, health care, and biotech, while property stocks fared better. Heavily weighted internet giants Alibaba, down 3.0 percent and Baidu, down 2.4 percent, were among the day's worst performers.

South Korea's KOSPI declined 0.5 percent and the Taiwan Taiex fell 0.8 percent with big chipmakers and other tech stocks tracking US tech stock losses.

Australia's All Ordinaries index rose 0.7 percent with support from rising commodities prices. Most sectors rose, paced by energy, materials, utilities, and industrials. Consumer discretionary lagged on weakness in travel operators. Tech stocks lagged on rising bond yields.

Japanese markets were on holiday.

Looking ahead*

In Asia/Pacific, Japanese PMI composite flash and the Reserve Bank of New Zealand policy announcement are scheduled. In Europe, French business climate indicator, German Ifo survey, and UK CBI Industrial Trends reports are due. In North America, the following are due: US durable goods, US GDP, US international trade in goods, US jobless claims, US retail and wholesale inventories, US new home sales, US personal income and outlays, and US consumer sentiment.

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