Daily market review

United States

Equities ended mixed with value stocks better on an improving economic outlook while growth stocks including megacaps faltered. The Dow Jones industrial average rose 0.6 percent, the S&P 500 declined 0.1 percent and the NASDAQ slipped 1.3 percent.

Cyclical/value stocks including energy, financials, industrials, and materials were in demand as investors are looking past the near-term impact of surging Omicron variant cases to see a strong economic outlook, as reflected in another jump in US Treasury yields, with the 10-year note yield up about 16 basis points in two days. Many investors apparently think Omicron's prevalence will leave behind wider immunity to other Covid variants.

Energy stocks gained with rising oil prices after OPEC and other oil exporters agreed to maintain planned output increases on the view that pandemic effects are fading. Higher interest rates boosted financials, and the better economic outlook supported industrials and materials.

On the downside, corrective pressure and rising bond yields weighed on highly-valued megacaps, which are vulnerable to higher financing costs. Technology stocks lagged, with Nvidia down 2.8 percent and Apple off 1.3 percent. Stay-at-home favorites sagged, including Amazon, off 1.7 percent, and Netflix down 1.0 percent. Health care stocks retreated, with Novovax off 3.1 percent and Pfizer down 3.7 percent.

Among other companies in focus, Ford rose 11.7 percent after announcing it would raise production of its F-150 electric truck. Haliburton, the giant oilfield servicer, rose 6.0 percent and General Electric gained 3.3 percent on analyst upgrades. On the downside, Tesla slipped 4.2 percent as it appeared due for a pullback.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.11 to US$80.05 while spot gold rose US$12.48 to US$1,816.98. The US dollar was mixed vs. major currencies. Yields on the US Treasury 30-year bond rose 3 basis points to 2.06 percent, and the 10-year note gained 2 basis points at 1.65 percent.


Equities rose with a boost from the reopening trade as investors focused on the Omicron variant's apparently mild symptoms. The Europe-wide STOXX 600 and the German DAX both gained 0.8 percent, the French CAC rose 1.4 percent, and the UK FTSE was up 1.6 percent.

Travel & leisure stocks topped the winners with airlines rallying as the market hopes for limited travel restrictions from Omicron. IAG, owner of British Airways, soared by 12 percent, and Air France KLM ascended 8.1 percent to lead the sector. Autos & parts outperformed with Daimler up 5.2 percent despite reported comments from the company warning of ongoing chip shortages. Banks advanced with Barclays PLC up 5.2 percent as bond yields continued to rise in 2022.

On the downside, stay-at-home stocks were out of favor, including Just Eat Takeaway, down 5.9 percent, and Delivery Hero, down 6.4 percent. Health care sagged including Sanofi, down 1.4 percent, after the pharma projected lower vaccine sales in the fourth quarter from a year ago.

Asia Pacific

Equities were mixed but mostly better on carry-over strength following Wall Street's Monday advance to record highs.

Japan's Nikkei 225 jumped 1.8 percent and the Topix rallied 1.9 percent with a boost from US equities. The soft yen helped exporters, with Toyota Motor up 6.1 percent and Sony Group up 3.4 percent. Banks and marine transportation stocks outperformed too.

China's CSI 300 index lost 0.5 percent and the Shanghai composite slipped 0.2 percent in a mixed showing among sectors. Lagging were health care and industrials while telecom services and property held up best. Stocks pegged to electric vehicles slipped on reports China may phase out subsidies for EVs.

Hong Kong's Hang Seng recovered from early declines to end up 0.1 percent. Sectors that suffered in 2021 lagged again, including technology, internets, and health care. Property stocks recovered a bit from Monday's losses as China Evergrande rose 1.3 percent as it resumed trading.

South Korea's KOSPI was unchanged and the Taiwan Taiex rose 0.1 percent, with sectors mixed.

Australian equities surged with commodities leading and the All Ordinaries up 1.9 percent. The gains were propelled by Tesla's surprisingly strong EV deliveries in the fourth quarter, which underlined the appeal of companies like lithium-ion battery leader Novonix, up 11.2 percent, and Pilbara Materials, a lithium miner, up 9.1 percent.

Looking ahead*

In Asia/Pacific, Hong Kong PMI, Australian retail sales, Indian PMI, and Singapore PMI reports are scheduled for release. In Europe, the following are on tap: Italian CPI and PMI composite final reports from France, Germany, and the Eurozone. In North America, the following are due: US ADP employment, US PMI composite final, and US FOMC minutes.

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