The S&P 500 and Dow Jones Industrial Average edged lower as losses in energy and industrial shares offset a rebound in technology stocks. Shares of industrial companies lost ground after reports said administration advisers were urging President Trump to sharply increase tariffs against China, renewing fears among investors that global trade frictions could hit the markets. Heavy-equipment maker Caterpillar lost $5.26, or 3.7%, to $138.54, while Boeing fell 3.54, or 1%, to 352.76.
The Dow industrials lost 81.37 points, or 0.3%, to 25333.82, erasing gains after rising as much as 75 points earlier in the session. The S&P 500 fell 2.93 points, or 0.1%, to 2813.36, notching its fourth loss in five trading days, and the Nasdaq Composite added 35.50 points, or 0.5%, to 7707.29. Despite renewed trade worries, strong U.S. economic data and corporate earnings have helped many U.S. investors remain cautiously optimistic. The S&P 500 technology sector gained 1% Wednesday on the heels of a strong earnings report from Apple. The iPhone maker’s shares rose 11.21, or 5.9%, to a fresh high of 201.50 after the company reported resilient demand for high-price iPhones and record revenue from its services business. Still, other tech companies have posted disappointing earnings, and concerns over future user growth have weighed down the sector, sending Facebook and Twitter shares tumbling recently. While many investors are still attracted to the growth potential of technology companies, others are beginning to rotate into other areas of the stock market, said Bryan Keller, managing partner at Dakota Wealth Management. Meanwhile, declines in the energy sector also weighed on stocks, with shares of energy firms in the S&P 500 falling 1.3% after data showed an unexpected rise in U.S. crude stockpiles.
In other commodity news, gold prices. August contracts slid 0.5% to $1,217.90 per troy ounce, the lowest close in over 12 months. The gold market was pressured in part by a higher U.S. dollar. The WSJ Dollar Index rose 0.1% on Wednesday. Commodities priced in the currency become more expensive for global buyers when the greenback rises, making them a less attractive investment. Oil prices dropped to their lowest level in almost six weeks after government data showed an unexpected increase in U.S. inventories of crude, reigniting worries about oversupply.
IRON ORE: 66.66s -1.01 (August contract)
Light, sweet crude for September delivery ended down $1.10, or 1.6%, at $67.66 a barrel on the New York Mercantile Exchange, its lowest close since June 21. U.S. oil prices are now 8.8% below their June multiyear high. Brent crude, the global benchmark, shed $1.82, or 2.5%, to $72.39 a barrel. Prices have been volatilite in recent weeks with some traders expecting higher supply among some of the world’s largest producers including Saudi Arabia and Russia to cool a monthslong rally. U.S.government data showing steady production has also hurt prices. The Energy Information Administration said Wednesday that U.S. commercial stockpiles of crude oil rose by 3.8 million barrels last week, to 409 million barrels. The increase means inventories are now just 1% below the five-year average for this time of year, compared with nearly 5% below that average about a month ago. The weekly rise was unexpected. Traders and analysts surveyed by The Wall Street Journal had projected a 2.2-million-barrel decline, on average. The third surprise increase in inventories in the last five weeks has hurt sentiment because the U.S. is in the middle of peak driving season and refineries are in many cases consuming as much crude oil as their plants allow, analysts said. The report also showed U.S. crude oil exports were cut by more than half to 1.3 million barrels a day last week compared to 2.7 million barrels a day the previous week. Analysts said the weekly change isn’t overly worrisome, but said any trend toward further declines in exports could suggest U.S. producers are having a tougher time selling American crude to global buyers such as China. Signs of surging production from Saudi Arabia — the de facto head of the Organization of the Petroleum Exporting Countries — and Russia also pressured prices Wednesday. A stronger dollar, partly due to tensions between the U.S. and its global trading partners over tariffs, has also weighed on oil, which becomes more expensive for overseas buyers when the U.S. currency rises. Although oil has fallen recently, some analysts expect prices to bounce back on signs of further supply disruptions. Wednesday’s EIA report showed production dipped from a week earlier, a sign to some that pipeline shortages could lower U.S. supply and boost prices. Some traders have also said bullish speculative bets falling in recent weeks has left the market poised to rebound if sentiment reverses again.
The U.S. dollar remained slightly stronger versus its rivals after the Federal Reserve stood pat on rates but affirmed more increases are likely on the way, while concerns about a trade war between the U.S. and China flared up again. The ICE U.S. Dollar Index was 0.1% stronger at 94.628, having traded slightly higher ahead of the Fed’s statement. The broader WSJ Dollar Index was up 0.1% at 88.39. The Fed remained on its clearly communicated path to policy normalization on Wednesday, as market participants had expected. In its statement, the central bank upgraded the U.S. economic growth from “solid” to “strong”. Chairman Jerome Powell has already attracted the ire of President Donald Trump by raising rates. This political interference is clearly unhelpful but may return as September approaches. Trump complained about tighter monetary policy in a July television interview, but “was letting them do what they feel is best.” The Bank of England’s policy meeting on Thursday concludes this week’s major central bank action. Trade negotiations to avoid a fully fledged trade war between the U.S. and China were back in focus after advisers to President Donald Trump urged him late Tuesday to up proposed tariffs on $200 billion of Chinese imports to 25% from an initially proposed 10%. A final decision on this won’t be made until late August, leaving a window for negotiations between the two countries. The Australian dollar-Japanese yen pair , an expression of risk in this scenario as Japan is considered a haven currency and Australia’s commodity-driven economy is highly reliant on Chinese demand, weakened in response late Tuesday. On Wednesday, the Aussie was down 0.6% versus its Japanese counterpart, and last bought Yen 82.59. Meanwhile, the People’s Bank of China changed its reference rate for the U.S. dollar versus the yuan at the highest rate since May 2017. One dollar last bought 6.8232 yuan in Beijing, up 0.2%, and 6.8380 in the offshore market , up 0.5%.
China’s environmental cleanup has widened the spread between high and lower grades of iron ore back toward multimonth highs amid greater demand for less-polluting steel manufacturing. But demand for even high grades of ore is likely to cool along with the nation’s stronger-than-expected housing market. “This momentum is likely to ebb soon,” says Konstantinos Venetis, senior economist at TS Lombard. The firm is predicting Chinese property-investment growth slowing to around 5% in 2H from 1H’s 9.7%. Currently, 66%-grade iron ore grade is at $93.90/ton while 62% is at $61.38.