United States
Weakness in megacaps and other growth stocks weighed on equities in a mixed showing while value/cyclicals outperformed in volatile, uncertain trading. The Dow Jones industrial average fell 0.5 percent while the S&P 500 and the NASDAQ both eased by 0.1 percent.
The predictable rebound after a deep selloff failed to materialize Thursday. Investors remained focused on Wednesday's surprisingly hawkish minutes from the December Federal Open Market Committee meeting, which raised expectations for more aggressive rate increases, starting in March, to be followed by a quick runoff of the Fed's huge bond holdings. The Fed appears keen to squeeze interest rates higher at the short end through raising the federal funds rate, and at the long end by quantitative tightening.
Rising market interest rates continued to depress many growth stocks as dip-buying faltered and heavyweights like Apple, down 1.7 percent, and Microsoft, down 0.8 percent, faded into the close. Facebook/Meta was the day's big gainer among megacaps, up 2.6 percent, after an upgrade at UBS. Consumer discretionary faced pressure with homebuilders off and Amazon down 0.7 percent. Electric vehicles slipped with Tesla off 2.2 percent and Rivian down 3.0 percent. Health care sagged with Humana off 19 percent on disappointing guidance and results.
On the positive side, value stocks including energy, industrials, financials, food, and tobacco fared best, as many investors see the Fed's stance as a vote of confidence in relatively inexpensive stock sectors that are pegged to an actual economic expansion. Energy stocks were among the day's leaders as crude prices broke higher.
Among companies in focus, Bed Bath & Beyond rose 8.0 percent after it reported rising margins despite a revenues miss. Avis Budget Group gained 2.6 percent after an upgrade at Deutsche Bank.
These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$1.73 to US$81.90 while spot gold fell US$21.80 to US$1,788.48. The US dollar firmed slightly vs. major currencies. Yield on the US Treasury 30-year bond fell 1 basis point to 2.08 percent while the 10-year note gained 3 basis points to 1.73 percent.
Europe
Equities weakened with growth stocks lagging as markets digested the Fed's policy minutes and bond yields marched higher. The Europe-wide STOXX 600 fell 1.3 percent, the German DAX lost 1.4 percent, the French CAC dropped 1.7 percent, and the UK FTSE 100 was down 0.9 percent.
Among sectors, technology and media stocks lagged. On the positive side, some cyclicals improved including autos & parts, which have been in favor after automakers posted positive sales results and amid expectations for easing supply constraints. Banks outperformed too on rising bond yields.
Among companies in focus, Societe Generale gained 1.9 percent after a big investment in the car leasing business. Carrefour, the retailer, rose 6.3 percent on takeover speculation. On the downside, Next, the retailer, fell 3.6 percent after disappointing guidance.
Asia Pacific
Hawkish minutes from the December Federal Open Market Committee meeting and rising bond yields hit Asian equities, with growth/technology stocks leading the way down. Some markets bounced back from initial heavy losses.
A 3 percent selloff Wednesday in the tech-heavy NASDAQ carried over to Japanese markets where the Nikkei 225 dropped 2.9 percent and the Topix lost 2.1 percent. The Bank of Japan reportedly intervened aggressively to ensure liquidity and offset rising bond yields. Equity losses were nearly across the board with tech and other growth stocks lagging. Among sectors, instruments, services, and electric appliances suffered the most, followed by automakers. Holding up best were banks and iron & steel.
Chinese markets weakened on fallout from Fed minutes with China's CSI 300 index down 1.0 percent and the Shanghai composite off 0.3 percent. Property stocks took a hit on contagion fears after Shimao Group Holdings Ltd., another embattled property developer, reportedly failed to make a yuan debt payment.
Dip-buying helped Hong Kong's tech stocks bounce back from early losses with the Hang Seng index closing up 0.7 percent. Investors evidently see value in internet giants like Tencent, up 1.5 percent, and Alibaba, up 5.7 percent, after huge losses over the last year amid China's regulatory crackdown.
South Korea's KOSPI fell 1.1 percent and the Taiwan Taiex declined 0.7 percent on read-through from Wall Street's technology stock losses.
Australian equities dropped across the board with the All Ordinaries down 2.8 percent. Worst hit were tech and real estate, followed by health care and consumer discretionary. Investors reacted badly to rising yields and the tech-led selloff.
Looking ahead*
In Asia/Pacific, the Japanese household spending report is scheduled for release. In Europe, the following are on tap: Swiss unemployment rate, German industrial production, German merchandise trade, UK Halifax house prices, Swiss retail sales, French consumer manufactured goods consumption, French industrial production, French merchandise trade, UK PMI construction, Eurozone EC economic sentiment, Eurozone HICP flash, and Eurozone retail sales. In North America, the following are due: US employment, Canadian Labour Force Survey, Canadian Ivey PMI, and US consumer credit.
