Daily market review

United States

A selloff in megacap growth stocks snowballed into a widespread rout Tuesday as investors dumped stocks amid fear of rising interest rates, slowing growth, supply chain trouble, and nasty earnings surprises. The Dow Jones industrial average lost 2.4 percent, the S&P 500 dropped 2.8 percent while the NASDAQ plunged 4.0 percent.

Worries about the Chinese economy weighed on sentiment as authorities widened Covid testing in Beijing and investors braced for more weakness in China. Russian threats of wider conflict flowing from the Ukraine crisis added to the market's worries. Investors increasingly discussed prospects for a hard landing as central banks respond to scary inflation readings.

Communications services, technology, and consumer discretionary shares that popped up Monday led the way down Tuesday despite falling bond yields. Investors were concerned that earnings due after the close from Google, down 3.0 percent, and Microsoft, down 3.7 percent, may add to the list of recent megacap disappointments. Earnings posted during the session spurred selloffs for General Electric, down 10 percent, UPS, down 3.6 percent, 3M, down 3.0 percent, and Zions Bancorporation, down 8.6 percent.

JetBlue fell 11 percent on poor earnings. Automakers sank, with General Motors down 4.5 percent as profits were hit by supply chain trouble. Industrials suffered from slowdown worries with Boeing off 5 percent. On the somewhat positive side, energy stocks outperformed as oil prices rebounded, but the gains faded too going into the close. Reopening stocks dropped, including airlines, restaurants, gaming, and cruise lines. Defensives including utilities and pharma held up relatively well.

Among companies in focus, Tesla dropped 12 percent on fallout from Elon Musk's deal to buy Twitter. Warner Brothers fell 8 percent on disappointing guidance. On the positive side, Sherwin Williams rose 9 percent after positive guidance, and Waste Management gained 5.3 percent.

These price data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil rose US$2.65 to US$105.56 while spot gold rose US$4.23 to US$1,902.74. The US dollar rose vs. most major currencies but weakened vs. the yen and RMB. The US Treasury 30-year bond yield declined 6 basis points at 2.84 percent, and the 10-year note yield lost 9 basis points to 2.74 percent.


Equities sagged with growth stocks off the most as traders sold into early strength. The Europe-wide STOXX declined 0.8 percent, the German DAX lost 1.2 percent, the French CAC dipped 0.5 percent, and UK FTSE 100 was up 0.1 percent.

Risk appetite was dampened by more hawkish comments from European Central Bank officials, including Latvian central bank governor Martins Kazaks who said the ECB has room for 2-3 rate increases this year, with July the best option to start.

Among sectors, worst were technology, autos & parts, banks, retail, and financial services. Holding up best were oil & gas and basic resources as they rebounded after Monday's drop spurred by China slowdown fears.

Among companies in focus, Getinge, the medical technology company, dropped 15 percent after a sales miss. HSBC, the bank, fell 5.7 percent in London trading as it warned share buybacks were unlikely. Associated British Foods fell 2.8 percent despite earnings and revenues beats. On the positive side, Kesko, the food conglomerate, gained 6.6 percent after raising its guidance. Maersk, the shipper, rose 3.2 percent after posting an earnings beat and better guidance. Novartis, the pharma, firmed 0.4 percent on an earnings beat.

Asia Pacific

Equities were mixed Tuesday with China in focus after a new pledge of support from the People's Bank of China, offset by concern that Beijing is headed toward Covid lockdowns.

Chinese markets recovered early from Monday's big selloff after the People's Bank of China cut banks' foreign currency reserve requirements and promised new support to the economy. Many stocks failed to retain the gains, however, as investors appeared unimpressed by the PBoC move and refocused on underlying negatives including concern that Beijing may end up with strict lockdowns after authorities ordered wider testing along with the Federal Reserve's policy stance. China's CSI 300 lost 0.8 percent, the Shanghai index fell 1.4 percent, and Hong Kong's Hang Seng index edged up 0.3 percent.

Japanese equities edged up with growth stocks outperforming value in line with Monday's US market action. Japan's Nikkei 225 rose 0.4 percent and the TOPIX was up 0.1 percent. Among sectors, best were land transportation, information services, and rubber products while lagging were mining and metals.

Tech stocks supported South Korean equities with the KOSPI up 0.4 percent and the Taiwan Taiex up 0.1 percent. The BSE Sensex rebounded by 1.4 percent after two days of declines with strong gains in energy, banking, and autos.

Worries over Chinese demand hit commodities prices to sink Australian equities with the All Ordinaries index down 2.1 percent. Australian equities returned from a day off to catch up with global risk aversion flowing from perceptions that major central banks are planning more aggressive rate increases. Materials stocks dropped about 5 percent, energy stocks fell by roughly 4 percent, and information technology shares fell nearly 2 percent to lead the selloff.

Looking ahead*

In Asia/Pacific, Chinese industrial profits and Australian CPI figures are due. In Europe, Germany Gfk consumer climate and UK CBI Distributive Trades reports are on the schedule. In North America, US international trade in goods, US retail and wholesale inventories, and US pending home sales reports are on tap.

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