Dow witnesses sharpest daily reversal in nearly two years
US stocks rocketed to new records early on Tuesday, 16 January 2018 but ran out of gas soon thereafter as the new year rally showed signs of fatigue. The major stock indices finished lower across the board. The Dow Jones Industrial Average closed marginally lower on Tuesday after the blue-chip index relinquished all its early gains in the sharpest daily reversal in nearly two years.
In early trade, Dow industrials were up more than 1% and set an intraday all-time high above 26,000. But the rally petered out as investors weighed political developments against quarterly earnings reports and economic data both presently underpinning Wall Street's optimism.
The Dow Jones Industrial Average rose as much as 265 points, but closed off 10.33 points, or less than 0.1%, to 25,792. The S&P 500 closed down 9.82 points, or 0.4%, to 2,776, with eight of the 11 main sectors finishing in negative territory. The Nasdaq Composite declined 37.38 points, or 0.5%, to 7,223.69. .
Real estate, health care and consumer staples sectors were the only ones attracting investors, while energy and materials sold off, down more than 1% following a drop in oil prices.
Merck & Co and UnitedHelath Group were leading gainers, up 5.8% and 1.9% respectively. General Electric was down more than 2.9%.
In the bond market, U.S. Treasuries finished mixed in a curve-flattening trade. The yield on the benchmark 10-yr Treasury note slipped one basis point to 2.54% while the 2-yr yield climbed one basis point to 2.01%. Yields move inversely to prices.
Elsewhere, equity indices in the Asia-Pacific region finished Tuesday mostly higher. Japan's Nikkei climbed 1.0%, closing at a fresh 26-year high, while Hong Kong's Hang Seng rallied 1.8%, bouncing back from Monday's decline--which broke a 14-session winning streak.
Reviewing Tuesday's economic data, which was limited to the Empire State Manufacturing Index for January. The Empire Manufacturing Survey for January declined to 17.7 (consensus 19.0) from the prior month's revised reading of 19.6 (from 18.0).
Bullion prices ended higher at Comex on Tuesday, 16 January 2018. Gold futures gained Tuesday to mark the highest finish since early September, even as a closely watched U.S. dollar index tried to end its streak of declines.
February gold rose $2.20, or nearly 0.2%, to settle at $1,337.10 an ounce. Prices had climbed in electronic trading on Monday, which was a U.S. holiday. Gold, which returned to levels last seen in mid-September in recent trading sessions, last week tallied a fifth week of consecutive gains, the longest such stretch since April. Month to date, the metal has climbed roughly 2%.
March silver rose 0.3% to $17.189 an ounce
Meanwhile, the dollar tried to break a four-session losing run on Tuesday, edging up as U.S. traders returned from the Martin Luther King Jr. holiday. The ICE U.S. Dollar Index added nearly 0.1% from Friday to 90.51, just north of its lowest level in three years. The dollar was flat against the euro, having hit a three-year low near $1.22 against the single currency on Monday as traders shifted their attention from the Federal Reserve to the European Central Bank. A weaker dollar can boost the appeal of gold as an investment, as most commodities are priced in dollars. Conversely when the dollar gains, gold tends to drop.
Crude oil prices finished lower on Tuesday, 16 January 2018 at Nymex pulling back from three-year highs as traders awaited data due later this week on U.S. crude supplies and production.
February West Texas Intermediate crude fell 57 cents, or 0.9%, to settle at $63.73 a barrel On the New York Mercantile Exchange. Prices had settled Friday at $64.30, the highest close since early December 2014. Price had moved lower in electronic trading on Monday, which was a U.S. holiday.
March Brent crude, the global benchmark, dropped $1.11, or 1.6%, to end at $69.15 a barrel on ICE Futures Europe, suffering the biggest single session dollar and percentage decline year to date. It closed Monday above $70 a barrel for the first time since December 2014, helped by a depreciating U.S. dollar.
On Wednesday, investors will receive a slew of economic reports, including the weekly MBA Mortgage Applications Index at 7:00 AM ET, Industrial Production (consensus +0.4%) and Capacity Utilization (consensus 77.3%) for December at 9:15 AM ET, the NAHB Housing Market Index (consensus 73) at 10:00 AM ET, the Fed's Beige Book at 2:00 PM ET, and Net Long-Term TIC Flows for January at 4:00 PM ET. In addition, there will be earning reports before the opening bell.
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