US close: Dollar gains dampen stocks despite strong slate of data

Wall Street shifted sideways on Tuesday, with profit taking and a stronger dollar preventing any gains amid a slate of better-than-expected readings on the economy and abating geopolitical tension.

By the close the Dow Jones had added 5.28 points to 21,998.99, while the S&P and Nasdaq both dipped, by 1.23 and 7.22 points respectively.

Meanwhile, December 2017 gold futures on COMEX were 1% lower at $1,277.50/oz and the dollar gained 0.97% on the yen, as both safe haven assets were dented.

The US dollar spot index added 0.42% to 93.86, with the dollar also up 0.38% on the euro and 0.73% on sterling.

The mixed performance for stocks came as traders and analysts felt were more conciliatory remarks from Pyongyang and Washington overnight, though the VIX volatility index was little changed, ticking down by just 0.57% to 12.26, in a possible display of caution.

A statement from North Korea on Tuesday that it will wait to see what the US does before taking a decision over Guam followed a more conciliatory tone from the US administration the prior day, "may help to de-escalate the threat of conflict and reassure investors after a nervous few days. An outbreak of calm may be something to build on in terms of creating space for dialogue," said analysts at Exotix Capital.

However, they said while the world is used to "colourful and bellicose statements" from Pyongyang, they acknowledged there are reasons why the situation is now more concerning than perhaps at any other time over the past 20 years or so - namely recent weapons developments and the addition of an equally unpredictable leader on the other side of the North Pacific ocean.

David Madden at CMC Markets said the flat Wall Street stock gauges were the result of profit taking after strong finishes in the previous session. "If the political tensions surrounding North Korea continue to cool off, we could see the US markets continue their upward trends higher," he said.

Looking at the much better than expected raft of economic data out from the US, he added: "The robust economic indicators are encouraging to see, and it tells us the US economy is still ticking along nicely. Traders are not expecting another interest rate hike from the Federal Reserve this year, but today’s data is a step in the right direct."

Retail sales volumes sped ahead by 0.6% on the month in July to reach $478.9bn, according to the Department of Commerce (consensus: 0.4%), following an upwardly revised gain of 0.3% in the month before.

The Federal Reserve bank of New York's regional manufacturing sector gauge rocketed from a reading of 9.8 in July to 25.2 for August (consensus: 10.0) a three-year high.

The NAHB's homebuilders' confidence index improved from the eight-month low of 64 hit in July to a reading of 68 in August (consensus: 65).

Yields on the benchmark 10-year US Treasury note rose by four basis points to 2.26% on the back of Tuesday's data.

On a related note, overnight the president of the Federal Reserve bank of New York, William Dudley, told AP another interest rate hike in 2017 was likely, so long as the economy behaved as he expected.

On the corporate front, Home Depot was in the spotlight after the DIY specialist bumped up its full-year guidance for sales and profits, projecting that they will increase by 5.3% and 13%, respectively.

Shares in Dick's Sporting Goods on the other hand crashed after the retailer posted second quarter earnings per share of 96 cents (consensus: $1.0) alongside a full-year outlook for earnings per share and same-store sales that fell short of analysts' forecasts.

TJX Companies was also trading on the front foot after reporting better-than-expected second quarter earnings and sales.

Camera maker GoPro was benefitting from an upgrade out of Goldman Sachs from 'sell' to 'neutral'.