Daily market review

US, Europe rebound on dip buying; Asia weaker

United States

Bargain hunting after a week of losses lifted equities Tuesday with beaten-up growth stocks leading, and most sectors higher. The Dow Jones industrial average rose 0.5 percent, the S&P 500 gained 0.9 percent and the NASDAQ advanced by 1.4 percent.

Oversold conditions largely accounted for the price action, along with a lack of bearish news from appearances by Federal Reserve Chair Jerome Powell and other Fed officials that left bond yields mostly lower, and left intact expectations for a relatively quick withdrawal of Fed accommodation. Some saw a dovish signal in Powell's cautious response to questions about the timing of a drawdown in the Fed's huge balance sheet. Some said Fed fears have peaked for the moment; others warned the market remains vulnerable to more inflation shocks, perhaps from US or China's consumer and producer price reports due Wednesday.

The FANMAG stocks led the winners, with Amazon a notable winner, up 2.4 percent, and Apple up 1.7 percent. Nvidia, another tech leader under pressure since Jan. 1, rose 1.5 percent. Energy stocks outperformed with rising oil prices. Homebuilders, airlines, retailers, and automakers advanced. Boeing advanced 3.2 percent to lift the Dow industrials.

On the downside, consumer staples including grocery stores lagged, along with managed care, pharma, and other defensive stocks including real estate investment trusts and utilities. Procter & Gamble, the pandemic favorite, slipped 1.2 percent, and Moderna dropped 5.3 percent, along with Novovax down 3.2 percent, as the vaccine makers corrected recent sharp gains.

Among companies in focus, many retail/restaurant stocks reported staff shortages and supply constraints owing to pandemic effects. Big Lots, the retailer, fell 1.5 percent after warning of slowing sales, and McDonalds was off 0.9 percent. On the positive side, Urban Outfitters rose 1.8 percent and Shake Shack, the fast food chain, rallied 13 percent after strong trading updates.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil jumped US$2.73 to US$83.65 while spot gold rose US$21.22 to US$1,822.55. The US dollar fell vs. major currencies. Yields on the US Treasury 30-year bond fell 2 basis points to 2.07 percent, and the 10-year note was down 3 basis points at 1.74 percent.

Europe

The bounce in US stocks gave European equities a trigger to rebound too. The Europe-wide STOXX 600 rose 0.8 percent, the German DAX gained 1.1 percent, the French CAC rose 1.0 percent. The UK FTSE 100 was up 0.6 percent.

Hard-hit technology stocks led the recovery after steep losses on Monday. Darktrace, the cybersecurity company, gained 7.1 percent after raising its guidance. Micro Focus, the software company, rose 11 percent after an analyst upgrade. Delivery Hero rose 5.0 percent after raising its guidance.

Reopening stocks improved, including retail and travel & leisure as investors expect an easing in restrictions as Omicron effects appear mild, despite overwhelming case numbers. Marks & Spencer rose 1.2 percent after posting strong holiday sales. Henkel, the consumer goods maker, rose 3.8 percent after an upgrade at BankAmerica.

On the downside, banks lagged, with Commerzbank off 2.8 percent after a private equity player cut its position in the bank. Autos & parts lagged with Daimler off 0.9 percent and Continental down 1.3 percent on supply chain trouble, including lockdowns in China.

Among companies in focus, Robert Walters, the recruiter, rose 2.0 percent after raising its guidance. Pandora, the jeweler, rose 1.3 percent after topping revenues expectations.

Asia Pacific

Equities weakened on coronavirus worries and expectations for faster Federal Reserve tightening. Trading was tentative as markets awaited inflation reports and Fed Chair Jerome Powell's appearance Tuesday.

Chinese equities came under pressure as more regions imposed restrictions to limit the spread of the Omicron variant. On the positive side, China's state council said it would step up infrastructure spending. China's CSI 300 index lost 1.0 percent and the Shanghai composite slipped 0.7 percent. Among sectors, technology and consumer discretionary lagged while banks and utilities fared best.

Hong Kong gave up early gains to end mixed with the Hang Seng index unchanged. Tech stocks were split with Alibaba off 1.6 percent on regulatory worries. Biotech outperformed while consumer goods lagged.

Rising domestic Covid-19 cases dented Japanese market sentiment along with pressure on tech stocks flowing from rising US bond yields. The Nikkei 225 fell 0.9 percent and the Topix was off 0.4 percent. Value stocks, especially automakers and banks, held up better than growth.

South Korea's KOSPI ended flat with tech stocks under pressure. Taiwan Taiex firmed 0.3 percent with Taiwan Semiconductor, the huge contract chipmaker, recovering to end 1.2 percent higher.

Australian equities weakened on rising rates with the All Ordinaries down 0.7 percent. Losses were nearly across the board with real estate and consumer staples lagging the most, along with banks. Materials held up best, followed by technology which saw dip buying following a similar pattern on the NASDAQ where many tech stocks recovered from Monday's lows.

Looking ahead*

In Asia/Pacific, the following are scheduled for release: Chinese CPI, Chinese PPI, Indian CPI, and Indian industrial production. In Europe, the Eurozone industrial production report is on tap. In North America, the US CPI report is due.

Global Stock Market Recap

Global Bond Market Recap

Global Currency Recap

Commodities and currencies

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