investingLive Americas FX news wrap 11 Aug: Stocks /yields Slip as markets await US CPI
U.S. markets are wrapping up Tuesday with stocks mostly lower, Treasury yields modestly lower across most of the curve, and the U.S. dollar little changed against the major currencies. The session was marked by fading optimism surrounding a potential U.S.-Iran agreement, continued uncertainty around the Strait of Hormuz, and some notable weakness in technology shares. Traders are also increasingly turning their attention toward Wednesday’s U.S. CPI report, which will be the next major test for markets and expectations surrounding the Fed’s September meeting.
US stocks close mostly lower; Nasdaq leads declines
U.S. equities finished mostly lower, with the NASDAQ the weakest major index, while small-cap stocks bucked the trend. Technology and growth shares were among the notable laggards, helping weigh on both the NASDAQ and S&P 500.
- Dow industrial average: -184.02 points or -0.34% at 53,797.39
- S&P 500: -24.94 points or -0.32% at 7,728.18
- NASDAQ composite: -159.91 points or -0.60% at 26,445.45
- Russell 2000: +9.73 points or +0.32% at 3,027.13
The weakness was particularly evident in selected technology and growth names. On Holding plunged 20.29%, while AppLovin fell 6.01%, Datadog lost 5.37%, and Alphabet declined 3.84%. Dell, Oracle and Adobe were each down more than 3%.
There were pockets of strength. Consolidated Water gained 6.85%, Nebius rose 4.95%, Alcoa added 4.75%, and Vertiv climbed 4.34%. ASML, Arista Networks, Emerson Electric and Eaton were also solidly higher. The gains showed continued interest in AI infrastructure, data-center and industrial names, even as the broader technology sector struggled.
European equities closed mixed Tuesday, although Germany’s DAX and Spain’s Ibex continued their record-setting runs. The DAX gained 0.26% and the Ibex rose 0.20%, with both closing at fresh all-time highs. Strong corporate earnings and optimism surrounding U.S.-Iran negotiations helped support sentiment, although gains were not broad-based.
- German DAX: +0.26% at 26,391.43 — record close
- France CAC 40: -0.13% at 8,714.95
- UK FTSE 100: -0.17% at 10,844.20
- Spain Ibex: +0.20% at 20,213.61 — record close
- Italy FTSE MIB: +0.08% at 53,706.20
Treasury yields edge lower
Treasury yields were mostly lower on the day, although the declines were relatively modest and the very long end was little changed. The yield curve steepened slightly as shorter maturities outperformed.
- 2-year: 4.220%, -1.9 bps
- 3-year: 4.2876%, -1.7 bps
- 5-year: 4.3906%, -1.4 bps
- 7-year: 4.5372%, -1.1 bps
- 10-year: 4.6924%, -0.6 bp
- 20-year: 5.2529%, unchanged
- 30-year: 5.2445%, +0.2 bp
US dollar little changed
The dollar was relatively subdued against the major currencies, with most pairs seeing only modest changes.
The EURUSD was little changed (-0.02%) near 1.1540, while USDJPY traded near 159.29 and was virtually unchanged on the day. The GBPUSD was marginally higher near 1.3504, and the Swiss franc weakened modestly with USDCHF near 0.8108 up 0.07%.
The commodity currencies were mixed. The USDCAD traded around 1.3925, with the Canadian dollar slightly stronger by 0.10%, while the AUD gained about 0.11% to 0.7060. The NZD was near unchanged -0.03% near 0.5879.
US housing remains subdued; Goolsbee focuses on inflation
On the economic front, July existing-home sales came in at a 4.06 million annualized pace, marginally above the 4.05 million estimate. Sales nevertheless fell 1.7% from the prior month. The June pace was revised higher to 4.13 million from 4.09 million.
Home prices increased 2.0% year over year, with the median existing-home price at $434,100, while inventory remained at 4.6 months of supply. The report continues to point toward a housing market constrained by elevated borrowing costs and affordability issues.
Chicago Fed President Austan Goolsbee also kept attention on inflation, saying that prices and affordability are the biggest problem facing the economy. He characterized the labor market as stable, although not particularly good.
CPI takes center stage Wednesday
Markets now turn their attention toward Wednesday’s CPI report at 8:30 AM ET. Headline CPI is expected to rise 0.1% month over month, while core CPI is expected to increase 0.2%. On a year-over-year basis, headline inflation is expected at 3.4%, while core inflation is forecast to ease to 2.5% from 2.6%.
With inflation still elevated and crude oil volatility adding another potential source of price pressure, the report could have an outsized influence on Treasury yields, the U.S. dollar and expectations for the Fed’s September decision. A reading even modestly above expectations would likely increase expectations for further Fed tightening, while a softer report could provide some relief to bonds and equities.
For now, the markets head into CPI with stocks mostly lower, yields modestly lower and the dollar largely confined to narrow ranges—but Wednesday’s inflation report has the potential to shake things up.
This article was written by Greg Michalowski at investinglive.com.