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Dow Snaps Six-Day Winning Streak After Choppy Session

wallstreet july16 11jun19 lt

Stocks failed to sustain an initial move to the upside and spent the better part of Tuesday's trading showing a lack of direction. The major averages bounced back and forth across the unchanged line before closing slightly lower.

After closing higher for six consecutive sessions, the Dow slipped 14.17 points or 0.1 percent to 26,048.51. The Nasdaq edged down 0.60 points or less than a tenth of a percent to 7,822.57, while the S&P 500 dipped 1.01 points or less than a tenth of a percent to 2,885.72.

The initial strength on Wall Street partly reflected recent upward momentum, which has helped stocks bounce well off the multi-month lows set last month.

Optimism about a potential interest rate cut by the Federal Reserve has contributed to the recent rebound on Wall Street, with the central bank due to make its latest monetary policy decision next week.

The Fed is widely expected to leave interest rates unchanged next week, although the chances for a rate cut next month have spiked since Fed Chairman Jerome Powell pledged to act "as appropriate" to support the economic expansion.

Buying interest waned shortly after the start of trading, however, inspiring some traders to cash in on the recent strength in the markets.

The choppy trading seen thereafter came as traders await further developments regarding the ongoing trade dispute between the U.S. and China.

The U.S.-China trade conflict largely took a back seat to President Donald Trump's threatened tariffs on Mexico but may move back into the spotlight ahead of the G20 summit later this month.

Trump and Chinese President Xi Jinping are expected to meet at the summit, with the U.S. president warning that he will impose new tariffs on Chinese goods if his counterpart does not attend.

On the U.S. economic front, the Labor Department said its producer price index for final demand inched up by 0.2 percent in May after rising by 0.2 percent in April. The uptick in prices matched economist estimates.

Excluding food and energy prices, core producer prices rose by 0.2 percent in May after edging up by 0.1 percent in the previous month. The increase in core prices also met expectations.

The report also said the annual rate of growth in producer prices slowed to 1.8 percent from 2.2 percent in April, coming in below estimates for an increase of 2.0 percent.

The annual rate of core producer price growth also dipped to 2.3 percent in May from 2.4 percent in April, matching expectations.

Sector News

Most of the major sectors ended the day showing only modest moves, although substantial strength remained visible among steel stocks. The NYSE Arca Steel Index surged up by 3.1 percent, ending the session at its best closing level in a month.

The rally by steel stocks came amid optimism about Chinese demand following news Beijing will allow local governments to use proceeds from special bonds as capital for major infrastructure projects.

Oil service stocks also turned in a strong performance on the day, as reflected by the 1.3 percent gain posted by the Philadelphia Oil Service Index.

The strength among oil service stocks came even though the price of crude oil for July delivery ended the day nearly unchanged, inching up just $0.01 to $53.27 a barrel.

On the other hand, housing stocks came under pressure over the course of the trading session, dragging the Philadelphia Housing Sector Index down by 1.1 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan's Nikkei 225 Index rose by 0.3 percent, while China's Shanghai Composite Index spiked by 2.6 percent.

The major European markets also moved to the upside on the day. While the German DAX Index advanced by 0.9 percent, the French CAC 40 Index climbed by 0.5 percent and the U.K.'s FTSE 100 Index rose by 0.3 percent.

In the bond market, treasuries have climbed off their worst levels but continue to see modest weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 1.1 basis points at 2.154 percent.

Looking Ahead

Trading on Wednesday may be impacted by reaction to the Labor Department's report on consumer price inflation in the month of May.

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