Daily market review

United States

Value/cyclicals slipped along with growth stocks Wednesday as the market's attempt at a rebound faltered and losses accumulated into the close. The Dow Jones industrial average and the S&P 500 both fell 1.0 percent, and the NASDAQ slipped by 1.2 percent.

A respite in the recent uptrend in market interest rates provided little support as the US 10-year note yield fell back from recent highs. Risk appetite remained depressed by worry over the Federal Reserve's hawkish turn. Some investors go so far as to argue the Fed may end its asset purchases immediately at its policy meeting next week, the cold-turkey taper.

Financials, consumer discretionary, industrials, and energy lagged to lead the market lower, with energy stocks off despite another uptick in oil prices. Among S&P 500 stocks, Ford fell 7.9 percent and US Bancorp lost 7.8 percent. Amazon fell 1.7 percent with a late selloff to add to losses in consumer discretionary.

Highly valued growth stocks sold off too, including Tesla, down 3.4 percent, and chipmaker Nvidia, down 3.2 percent. Communications services and technology stocks saw bargain hunting through much of the day but the bid faltered, with Apple ending down 2.1 percent, at the day's low. Defensive stocks held up best, including utilities and real estate investment trusts, but still ended on a soft note.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose 10 cents to US$88.01 while spot gold rose US$28.55 to US$1,842.42. The US dollar fell vs. most major currencies. Yields on the US Treasury 30-year bond fell 3 basis points to 2.16 percent, and the 10-year note fell 3 basis points at 1.85 percent.


European equities ended slightly higher as positive company news lifted basic resources and retailers. The Europe-wide STOXX 600 and the German DAX both rose 0.2 percent, the French CAC gained 0.6 percent, and the UK FTSE 100 firmed 0.4 percent.

UK stocks reacted badly to higher-than-expected UK inflation figures, and a rising pound after Bank of England Governor Andrew Bailey warned of a wage-price spiral flowing from rising cost pressures. Rising bond yields, and volatility on US markets weighed on European markets.

Among sectors, grocery stores, chemicals, and real estate held up well, while lagging were tech, banks, insurance, and food & beverage.

Notable winners included Richemont, the luxury goods maker, up 5.2 percent after topping sales expectations and an upgrade at Citigroup. Burberry Group, the luxury clothing company, gained 6.3 percent after strong results and raising its profits guidance. Antofagasta, the miner, rose 3.0 percent despite a lower copper production forecast.

On the negative side, ASML Holdings, the chipmaker, fell 2.4 percent despite a profits beat. GlaxoSmithKline fell 2.0 percent on news its chief scientist was leaving.

In economic news, UK consumer prices again beat expectations in December. A 0.5 percent monthly increase was nearly double the market consensus and large enough to lift the annual inflation rate from 5.1 percent to 5.4 percent, its highest mark since March 1992.

Asia Pacific

Equities extended Wall Street's Tuesday selloff with growth stocks hit hardest on the Federal Reserve's hawkish tilt, and expectations for other central banks to follow with near-term rate increases.

Japanese stocks suffered from the US losses, with additional fallout from concern over spreading coronavirus, and disappointing company news. The Nikkei 225 dropped 2.8 percent and the Topix was down 3.0 percent. Expectations that several Japanese prefectures would resume anti-Covid restrictions weighed on sentiment. Gloomy production guidance hit Toyota, which fell 5.0 percent. Sony plunged 13 percent on concern over competition in the gaming console business from Microsoft after its acquisition of Activision Blizzard.

South Korea's KOSPI and the Taiwan Taiex both declined 0.8 percent as growth stocks were hurt by rising market interest rates and expectations for more rate increases from regional central banks that tend to follow the Fed.

Chinese equities also tracked US growth stock weakness with China's CSI 300 index down 0.7 percent and the Shanghai composite off 0.3 percent. Losses were somewhat muted by expectations for more easing from the Peoples Bank of China. Industrials and health care lagged while financials and real estate fared better.

Strength in properties stocks helped Hong Kong's Hang Seng index edge up by 0.1 percent. Alibaba slipped 1.7 percent in Hong Kong trading after a report the Biden administration is probing whether its cloud business threatens US national security.

Rising bond yields weighed on Australian equities with the All Ordinaries off 1.0 percent. Supply chain disruptions and worker shortages due to spreading coronavirus and inflation fears linked to rising oil prices added to negative sentiment. Health care, tech, financials, and materials stocks led the selloff while energy stocks, utilities, and consumer staples held up best.

Looking ahead*

In Asia/Pacific, Japanese merchandise trade and Australian employment figures are scheduled. In Europe, German PPI, French business climate, European HICP, and ECB meeting minutes are on tap. In North America, US jobless claims, Philadelphia Fed manufacturing survey, and US existing home sales reports are due.

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