Equities edge down, US dollar dips with tariffs; earnings, economic data in focus
U.S. consumer sentiment improved in July and inflation expectations declined, but households still saw substantial risk of price pressures increasing in the future, the University of Michigan's Surveys of Consumers released on Friday showed.
Another report showed U.S. single-family homebuilding dropped to an 11-month low in June as high mortgage rates and economic uncertainty hampered home purchases, suggesting residential investment contracted again in the second quarter.
On Thursday, news of stronger-than-expected U.S. retail sales and jobless claims data suggested modest improvements in economic activity, helping to push equities higher.
On Friday, the mood dimmed after the Financial Times reported that U.S. President Donald Trump is pushing for a minimum tariff of 15 per cent to 20 per cent in any deal with the European Union, was unmoved by the latest EU offer to reduce car tariffs, and would keep duties there at 25 per cent as planned.
"Tariff headlines this afternoon reminded investors that volatility is likely to persist through the start of August." said Lindsey Bell, Chief Investment Strategist at 248 Ventures. "Investors may be taking some money off the table going into the weekend given lingering tariff uncertainty and a market that has a premium valuation after reaching new highs."
She noted that these concerns were on display in shares of American Express and Netflix, which both fell after solid earnings reports and forecasts as both companies had extended valuations ahead of the results.
Still, many investors had high hopes for upcoming earnings and were making bullish bets ahead of July equity option expirations, said Bruce Zaro, managing director at Granite Wealth Management in Plymouth, Massachusetts.
"Today's action is all about option expiration as investors make bets on the meat of earnings season, which comes in the next few weeks when all the growth and technology companies report," said Zaro, noting that beyond earnings, investors want to benefit from a strong performance trend in megacap names. "There's a fear of missing out."
On Wall Street at 02:32 p.m. the Dow Jones Industrial Average fell 218.65 points, or 0.49 per cent, to 44,265.84, the S&P 500 fell 5.42 points, or 0.09 per cent, to 6,291.94 and the Nasdaq Composite rose 1.58 points, or 0.01 per cent, to 20,887.80.
MSCI's gauge of stocks across the globe rose 0.74 points, or 0.08 per cent, to 927.03.
Earlier, Europe's STOXX 600 index closed down 0.01 per cent, and was off 0.06 per cent for the week.
In currencies, the U.S. dollar slipped on the day but was still angling for a weekly gain, as investors weighed signs that tariffs may be starting to fuel inflation pressures and monitored Federal Reserve policy as Trump increases pressure on Chair Jerome Powell.
The euro pared some gains after the FT report on a toughening U.S. stance on European import tariffs.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.04 per cent to 98.47. The euro was up 0.24 per cent at $1.1623 versus a $1.1671 high for the session so far.
Against the Japanese yen, the dollar strengthened 0.1 per cent to 148.75 as polls showed Japanese Prime Minister Shigeru Ishiba's coalition was in danger of losing its majority in an election on Sunday.
U.S. Treasuries prices rose, dragging their yields lower, after comments from Federal Reserve Governor Christopher Waller pushed for a rate cut later this month, while technical buying also contributed to the move higher.
In contrast, most officials who have spoken publicly have indicated a desire to hold rates steady and traders are betting on a 95.3 per cent probability that rates will stay where they are after the month-end meeting, according to CME Group's FedWatch tool.
The yield on benchmark U.S. 10-year notes fell 3.7 basis points to 4.426 per cent, from 4.463 per cent late on Thursday while the 30-year bond yield fell 1.9 basis points to 4.9947 per cent from 5.014 per cent.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell 4.6 basis points to 3.871 per cent, from 3.917 per cent late on Thursday.
In commodities, crude oil futures held steady as mixed U.S. economic news offset worries the European Union's latest sanctions against Russia for its war in Ukraine could reduce oil supplies.
U.S. crude settled down 0.3 per cent, or 20 cents at $67.34 a barrel while Brent ended at $69.28 per barrel, down 0.35 per cent or 24 cents on the day.
Gold prices rose on Friday as a weaker U.S. dollar and ongoing geopolitical and economic uncertainty boosted demand for the safe-haven metal, while platinum prices eased after reaching their highest level since 2014. Spot gold rose 0.41 per cent to $3,352.13 an ounce and spot.
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