Wall St dips as US confidence remains low

Trader Gregory Rowe, left, and specialist Peter Giacchi work on the floor of the New York Stock Exchange. Photo / AP

Wall Street was mixed overnight as investors awaited a fresh catalyst from central banks in the US, Europe and the UK. Meanwhile, US corporate earnings and economic data were a mixed bag.

Consumer confidence unexpectedly increased in July. The Conference Board said its index of consumer attitudes rose to 65.9 from an upwardly revised 62.7 in June. Economists polled by Reuters had predicted a slide to 61.5.

While positive, the level of confidence is low and unlikely to improve markedly.

"While consumers expressed greater optimism about short-term business and employment prospects, they have grown more pessimistic about their earnings," according to Lynn Franco, director of economic indicators at the Conference Board, in a statement. "Given the current economic environment - in particular the weak labour market - consumer confidence is not likely to gain any significant momentum in the coming months."

Indeed, a separate report by the Commerce Department today showed that household purchases, which make up 70 per cent of the economy, were unchanged in June after a 0.1 per cent drop in May.

"Consumers are afraid," Matthew Lifson, an analyst at Cambridge Mercantile Group in Princeton, New Jersey, told Reuters. "This data suggests that the US economy is stagnant overall and it's just muddling."

That has hit companies like Coach, which posted revenue that fell short of expectations, sending the stock of the handbag maker 18 per cent lower.

To be sure, other data showed not all was bleak: home prices fell less than expected in the year ended in May, while a gauge of business activity unexpectedly rose in July.

The Federal Open Market Committee's two-day meeting began today.

Eighty-eight per cent of economists say the FOMC will refrain from starting new large-scale asset purchases, while 48 per cent say it will announce fresh buying at its September 12-13 meeting, according to a July 25-27 survey of 58 economists by Bloomberg.

In late afternoon trading in New York, the Dow Jones Industrial Average fell 0.17 per cent and the Standard & Poor's 500 Index declined 0.31 per cent. The Nasdaq Composite Index eked out a 0.04 per cent gain.

Facebook shares continued to take a beating. The stock fell more than 6 per cent to a record low, falling for a third consecutive session after its second-quarter results indicated growth was slowing. Swiss bank UBS said it lost more than US$350 million on Facebook's IPO and it will sue the Nasdaq to recoup those losses.

In Europe, the Stoxx 600 Index ended the day with a 1 per cent drop from the previous session. Corporate earnings did little to inspire confidence as those of BP and UBS fell short of estimates, sending shares of both companies lower.

Even so, the Stoxx 600 Index ended the month of July 4.1 per cent higher.

The euro, however, suffered in July, shedding nearly 3 per cent against the greenback during the month. It hit US$1.2043 on July 24, the lowest level since June 2010, according to Bloomberg.

August isn't looking much better for the single currency.

"It will be a continuous grind lower from here," Adam Cole, global head of foreign-exchange strategy at Royal Bank of Canada's RBC Capital Markets unit, told Bloomberg. "We think it trades down to and through US$1.20, and that's the story for several months rather than weeks into the future."