Wall Street Wraps Up July in Retreat Ahead of Fed, ECB
FOX Business: The Power to Prosper
Wall Street suffered modest losses on Tuesday but stayed in positive territory for the month as traders grew less confident help will be arriving later this week in the form of new emergency measures from the Federal Reserve and European Central Bank.
Today's Markets
The Dow Jones Industrial Average fell 64.33 points, or 0.49%, to 13008.68, the S&P 500 declined 5.98 points, or 0.43%, to 1379.32 and the Nasdaq Composite slid 6.32 points, or 0.21%, to 2939.52. The FOX50 dipped 0.51 points, or 0.05%, to 1038.70.
U.S. markets have largely been in limbo this week, anxiously awaiting the conclusion to crucial meetings of central bankers who could unveil bold steps aimed at easing economic strains.
Even with a modest two-day decline to start the week, the blue chips advanced more than 100 points in July, marking their second consecutive monthly gain and ninth of the last 10.
Still, the slide eats a bit into the S&P 500's best two-day rally of the year, one that was fueled largely by hopes the ECB will come to the eurozone's rescue.
Most of the Dow's 30 stocks retreated on Tuesday, led by Caterpillar (NYSE:CAT) and Home Depot (NYSE:HD). The index's best performers were AT&T (NYSE:T) and Pfizer (NYSE:PFE), which beat the Street with second-quarter earnings.
Traders remain attentive to the latest chatter out of Europe, especially after ECB President Mario Draghi pledged to do whatever it takes to save the euro. Expectations have risen that the ECB will announce new moves on Thursday, including potentially expanded bond buying, slashing interest rates or boosting the amount of cheap loans to European banks.
Others are hoping the ECB deploys a bigger "bazooka," such as providing the European Stability Mechanism a banking license that would allow this permanent bailout fund to use leverage to bolster its resources. However, the German Finance Ministry sees no need to give the ESM a banking license and is not in talks on this matter, Bloomberg News reported Tuesday morning.
Meanwhile, Wall Street continues to play wait-and-see ahead of the Fed decision on monetary policy on Wednesday. The central bank kicks off a two-day meeting on Tuesday, but hopes for a second round of quantitative easing, or QE2, may not be met.
According to a new survey by Bloomberg, 88% of economists polled believe the Fed will hold off on unveiling QE2 during this month's meeting, while 48% say the central bank will unleash a program of about $600 billion at its mid-September meeting.
Mixed Economic Picture
Traders received some fresh evidence of the world's economic strains on Tuesday as the Commerce Department said consumer spending flatlined in June from May, missing forecasts from economists for a tiny increase of 0.1%. Also, the government said May consumer spending contracted 0.1%, compared with an earlier call for flat spending.
The disappointing spending news helped drive down consumer discretionary stocks, which retreated more than 1% as a sector. Shares of luxury retailer Saks (NYSE:SKS) and online giant Amazon.com (NASDAQ:AMZN) experienced selling pressure. The Commerce Department also said personal incomes rose 0.5% in June, narrowly topping forecasts for a rise of 0.4%.
On the other hand, the Conference Board said U.S. consumer confidence unexpectedly jumped in July to a 65.9 reading, easily beating forecasts for a slide to 61.5 from June’s upwardly-revised 62.7 reading. The July report marks the strongest level for consumer confidence since April.
Also on the positive side, the S&P/Case-Shiller said home prices in 20 major U.S. metro areas rose 2.2% in May from April on a non-seasonally adjusted basis, besting forecasts for a rise of 1.5%. Prices slipped 0.7% year-over-year, lighter than an expected 1.5% decline.
Separately, the Institute for Supply Management’s Chicago regional index rose to a stronger-than-expected 53.7 in July, signaling an acceleration in U.S. Midwest manufacturing activity.
In the commodities complex, selling in crude oil picked up steam late in the day, leaving it down $1.72 a barrel, or 1.92%, to $88.06. Still, crude gained 3.7% in June, its first monthly gain in three months. Gold also felt selling pressure on Tuesday, snapping a four-day slide. Gold closed down $9.20 a troy ounce, or 0.57%, to $1,610.65.
Corporate Movers
Lowe's (NYSE:LOW) bid $1.8 billion to acquire retailer Rona, but the Canadian company rebuffed the offer, saying it isn't in shareholders' best interests. The attempted takeover represents a 36.7% premium on Rona's Friday closing price.
Coach (NYSE:COH) tumbled almost 19% after the upscale leather goods company said quarterly same-store sales inched up just 1.7% in North America, badly missing the Street's view of 6.7%. Coach's revenue rose 12% to $1.16 billion, also trailing consensus calls for $1.2 billion.
Pfizer (NYSE:PFE) hit 52-week highs after the drug giant reported a stronger-than-expected 25% rise in second-quarter profits. Sales retreated 9% to $15.06 billion, but that topped the Street's view for $14.87 billion.
Deutsche Bank (NYSE:DB) disclosed plans to axe 1,900 jobs as part of an effort to slash about $3.67 billion in annual costs. The German bank also revealed a 46% tumble in first half earnings and an 8% slide in revenue to 8 billion euros.
Global Markets
London's FTSE 100 retreated 1.02% to 5635.28, Germany's DAX slipped 0.03% to 6772.26 and France's CAC 40 slumped 0.87% to 3291.66.
In Asia, Japan's Nikkei 225 advanced 0.69% to 8695.06 and Hong Kong's Hang Seng rallied 1.08% to 19796.81.