NEW YORK :Global shares edged lower and U.S. Treasury yields rose on Tuesday as investors weighed a host of U.S. economic data and comments from Federal Reserve Chair Jerome Powell to gauge the timing of any interest rate cuts.
Powell, speaking at a central banking conference in Sintra, Portugal, said he could not say if July was too early for a rate cut, but it “is going to depend on the data, and we are going meeting by meeting.”
Market expectations for a July cut inched up to 21.2 per cent from 18.6 per cent in the prior session, according to CME’s FedWatch Tool.
On Wall Street, the Dow climbed nearly 1 per cent but the S&P 500 and Nasdaq were held in check after closing at record levels on Monday, in part due to a 4 per cent fall in Tesla after U.S. President Donald Trump threatened to cut off the billions of dollars in subsidies that Elon Musk’s companies receive from the federal government.
The Dow Jones Industrial Average rose 400.17 points, or 0.91 per cent, to 44,494.94, the S&P 500 fell 6.94 points, or 0.11 per cent, to 6,198.01 and the Nasdaq Composite fell 166.84 points, or 0.82 per cent, to 20,202.89.
MSCI’s gauge of stocks across the globe shed 0.47 point, or 0.05 per cent, to 917.42 while the pan-European STOXX 600 index closed down 0.21 per cent as concerns over the impact of tariffs on global growth were rekindled as a July 9 deadline by Trump draws closer.
On the economic front, U.S. data showed manufacturing remained in contraction territory in June, according to the Institute for Supply Management (ISM).
In the first reading of the week on the labor market, the Job Openings and Labor Turnover Survey, or JOLTS report, showed openings were up 374,000 to 7.769 million by the last day of May, but a decline in hiring indicated the market may have slowed.
“Despite a large jump in job openings in May, the economy continues to be stuck in Powell’s ‘no hire, no fire’ equilibrium,” said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin. “It’s not a stable equilibrium, and considering the ISM Manufacturing data, things may tilt towards a weaker job market over the summer.”
Investors will closely watch Thursday’s key government payrolls report, expected a day earlier than usual due to the Independence Day holiday on July 4, to help shape expectations for rate cuts from the Fed.
U.S. Treasury yields reversed course and turned higher after the data, with the yield on benchmark U.S. 10-year notes up 2.3 basis points to 4.25 per cent.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, climbed 5.8 basis points to 3.779 per cent.
Trump’s tax-cut and spending legislation continued its advance, as the U.S. Senate passed it by the thinnest of margins, and now heads back to the House of Representatives for final approval. Both chambers of Congress are controlled by Trump’s fellow Republicans.
“The market assumed it was ultimately going to happen,” said Robert Phipps, Director at Per Stirling Capital Management in Austin, Texas.
“I’m hoping that more reasonable heads will prevail and that they come up with something that’s not so onerous to the outlook for the deficit and the U.S. debt load,” Phipps said. ” … This is a very potentially damaging bill because of what it does to the deficit and the debt.”
The dollar index, which measures the greenback against a basket of currencies and is coming off its biggest first half drop since 1973, was last down 0.02 per cent to 96.74, putting it on pace for a ninth straight session of declines.
The euro was up 0.06 per cent at $1.1793 while Sterling strengthened 0.04 per cent to $1.3739.
Against the Japanese yen, the dollar weakened 0.27 per cent to 143.62. Earlier readings from the Bank of Japan’s Tankan index of business sentiment indicated the biggest economies in the region were likely holding up in the face of tariffs, while a separate private sector survey showed the country’s manufacturing sector expanded in June for the first time in 13 months.
U.S. crude settled up 0.52 per cent to $65.45 a barrel and Brent settled at $67.11 per barrel, up 0.55 per cent on the day.
