Wall Street sagged yesterday, pulling back further from recent records as investors found few reasons to buy, but the euro was supported by datathat showed a surge in factory output in Britain and Germany.
With the US earnings season winding down, a dearth of domestic economic data and the focus on Federal Reserve policy, trading in US stocks has been muted. Monday marked the lightest volume for a full session this year.
The sole US economic report of the day showed the trade deficit narrowed sharply in June, suggesting an upward revision to second-quarter growth. Stocks took no direction from the data, though it did weigh on Treasuries prices.
“We’re in a post-earnings season environment, and it would take a pretty major catalyst to move us significantly higher from here,” said Art Hogan, managing director at Lazard Capital Markets in New York.
“Still, that we’ve been drifting higher without any major pullback augurs that there’s really support for the levels we’re at now. The only thing that could really take us lower would have to be something unexpected.”
European shares cut gains to trade lower, though economic data overseas was supportive.
The strong growth at factories in Germany, Europe’s largest economy, and in Britain, the euro zone’s biggest trade partner, in June extended a run of recent upbeat data that points to an early end to the currency bloc’s 18-month recession.
Still, analysts were quick to stress that the region was far from seeing the kind of recovery under way in the United States.
“We think that austerity as well as a financial system that is not willing to lend money to companies will still suppress growth for a longer time,” said Ronald Doeswijk, chief strategist at fund managers Robecco.
Despite the data, Europe’s broad FTSEurofirst 300 index broke a six-day winning streak, provisionally closing down 0.4 per cent. World stocks fell 0.3 per cent.
The Dow Jones industrial average fell 91.76 points, or 0.59 per cent, at 15,520.37. The Standard & Poor’s 500 Index was down 9.30 points, or 0.54 per cent, at 1,697.84. The Nasdaq Composite Index was down 24.96 points, or 0.68 per cent, at 3,667.99.
The euro climbed as high as $1.3316 and last traded at $1.3304, up 0.4 per cent on the day.
Germany said industrial orders at its factories surged by a surprisingly strong 3.8 per cent in June, their largest monthly rise since October as contracts for big-ticket items jumped and euro zone demand rebounded.
Britain’s manufacturers reported their biggest annual rise in industrial production in over two years, adding to growth already seen in service sector activity, the housing market and in retail sales.
“The broad-based improvement seems to suggest that the current improvement in activity has good foundations and further progress is likely in the coming months,” said Annalisa Piazza, a senior economist at Newedge Strategy.
US Treasuries prices slipped as investors pared their bond positions before a $32 billion auction of new three-year debt. Benchmark 10-year Treasury notes were 5/32 lower in price to yield 2.659 per cent.
Oil prices tumbled after Iran’s President Hassan Rouhani said he was ready to enter “serious and substantive” negotiations over Tehran’s nuclear program, reducing the geopolitical risk potential.
Brent Crude down 77 cents to $107.93, while US crude dropped $1.20 to $105.36.