US stocks retreat while Dow logs new record close

The Dow Jones industrial average posted the sixth straight record close on Tuesday while the broad stock market edged lower on weak earnings reports. The dollar strengthened on revived expectations of a rate hike this year after strong economic data following disappointing May jobs report: the live dollar index data indicate the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, rose 0.53% to 97.028. The Dow Jones industrial average added 0.1% to 18559.01, advancing for the eighth straight session, longest winning streak in more than three years. The blue chip index was led by McDonald’s and Johnson & Johnson which offset losses in Microsoft and Goldman Sachs shares. Goldman Sachs shares slipped 1.2% after the firm reported lower revenues, $7.93 billion against $9.07 billion the previous quarter. The S&P 500 slipped 0.1% to 2163.78, led by energy and materials stocks. The Nasdaq index fell 0.4% to 5036.3, still up 0.6% year-to-date. The benchmark 10-year Treasury yield fell 3.8 basis points to 1.547%. Investors’ confidence was undermined by weaker corporate reports and 13% slump in Netflix shares on slower than expected growth for streaming service. The economic data were positive: housing starts rose 4.8% in June indicating continued improvement in the market for newly constructed homes. Together with strong June nonfarm payroll report and increase in June retail sales, recent data revived expectations of a rate hike this year with the fed fund futures market pricing in a 47.1% likelihood for at least one rate hike, according to the CME Group’s FedWatch tool. Today at 13:00 CET Mortgage applications will be released by the Mortgage Bankers’ Associations in US.

European stocks retreated from three week highs on disappointing corporate reports and worsened economic sentiment in Germany. The euro and British Pound weakened against the dollar after German ZEW economic sentiment fell to minus 6.8 in July on Brexit concerns, the lowest level since 2012. The Stoxx Europe 600 index closed 0.4% lower. Mining stocks fell after Rio Tinto reported weaker than expected iron-ore shipments for the second quarter: Rio Tinto and Glencore slumped 3.5% each, and BHP Billiton dropped 2.9%. Germany’s DAX lost 0.8% falling below 10000 to 9981.24. France’s CAC 40 index was 0.6% lower while UK’s FTSE 100 edged higher to 697.37. The 0.5% inflation in June was higher than expected after 0.3% recorded in May. While the data do not fully reflect consumer price changes after Brexit vote, lower Pound is expected to boost prices in coming months and bring inflation closer to Bank of England’s target of 2%. The pound is expected to weaken further as Bank of England officials suggested that they will ease monetary policy in August. Today at 10:30 CET May Current Account will be released in euro-zone. The tentative outlook is negative. At 10:30 CET Unemployment Rate for three months ending in May and Average Earnings Index will be published in UK, the tentative outlook is positive for Pound.

Asian stocks are mixed today with Hong Kong’s Hang Seng Index up 0.9% with Shanghai Composite Index 0.1% lower, and Australia’s S&P ASX 200 up 0.58%. Nikkei fell for the first time in seven days ending 0.3% lower as investors took profits today while yen was essentially unchanged against the dollar. Nintendo shares fell 12.6% after a reported delay for Pokemon GO's introduction in Japan. Financial stocks underperformed: Mitsubishi UFJ fell 2% and Nomura Holdings dropped 2.56%.

Oil futures prices are mixed today as investors are concerned slower global demand growth outlook compared with ample supply lowers global oil market rebalancing pace and weighs on prices. The International Monetary Fund on Tuesday cut its global economic outlook for 2016 and 2017 citing increased uncertainty following the UK’s decision last month to exit the European Union. The American Petroleum Institute report late Tuesday said US crude stockpiles fell by 2.3 million barrels last week. The report also showed an unexpected gasoline build of 805 thousand barrels. At 16:30 CET today US Crude Oil Inventories will be released by the Energy Information Administration. September Brent crude fell 0.6% to $46.66 a barrel on London’s ICE Futures exchange on Tuesday.