US stocks pull back ahead of Fed meeting

US stocks closed lower on Monday pulling back ahead of earnings reports and central bank meetings after hitting record highs last week. The dollar weakened slightly. According to the live dollar index data the ICE US Dollar Index, a measure of the dollar’s value against a basket of six major currencies, slipped 0.14% to 97.224. The Dow Jones industrial average lost 0.4% settling at 18493.06 led by Chevron and ExxonMobil as oil fell. The S&P 500 ended 0.3% lower at 2168.48 with nine sectors out of ten finishing in negative territory and only consumer discretionary edging higher. The Nasdaq composite index dipped 0.1% closing at 5097.63. Investors are cautious ahead of the Federal Open Market Committee two-day meeting which starts today followed by the Bank of Japan’s policy meeting on July 28-29. The Federal Reserve is widely expected to leave the interest rates unchanged but investors will be focusing on the Fed’s policy statement for clues about the timing of next rate hike. The yield on the benchmark 10-year Treasury note inched higher less than a basis point to 1.571%. In case the statement highlights improved US economic data and reduction in uncertainty in financial markets the Treasury yields may rise further as investors sell them off in anticipation of an expected rate hike. Today at 15:00 CET May S&P/Case-Shiller House Price Index will be released. The tentative outlook is positive for dollar. At 15:45 CET July Services PMI will be published, the outlook is negative. And at 16:00 CET July consumer Confidence will be released by Conference Board, the tentative outlook is negative. At the same time June New Home Sales will come out, sales of new homes are expected to rise.

European stocks inched higher on positive earnings reports with losses in energy stocks limiting gains as oil prices fell. The euro and the Pound edged higher against the dollar. The Stoxx Europe 600 gained 0.2%, its firs rise in three sessions. Morgan Stanley said the results of 130 earnings reports so far are fractionally more positive with 35% of companies beating consensus estimates by 5% or more, while 28% missing, giving a net beat of 8% of companies. In the first quarter the net beat was 6% of companies. Germany’s DAX 30 index rose 0.5% to 10198.24 after the decline in closely watched Ifo business climate index was less than expected: the Ifo business climate index fell to 108.3 from 108.7 in June instead of expected 107.5. France’s CAC 40 gained 0.2% to 4388.00. The UK’s FTSE 100 lost 0.3% closing at 6710.13. No important economic data are expected today in euro-zone.

Asian stocks are mixed today: Hong Kong’s Hang Seng Index is up 1.1% with Shanghai Composite Index 0.8% higher. Australia’s All Ordinaries Index is up 0.09%. But Nikkei fell 1.4% to two week low as yen strengthened against the dollar after a report Shinzo Abe’s government planned a direct fiscal stimulus of around 6 trillion yen ($56 billion) over the next few years fell short of investors’ expectations. Exporters underperformed, Toyota fell 2.5% and Honda lost 1.89%.

Oil futures prices are recovering today after falling to three month lows on global crude oversupply concerns on Monday. September Brent crude on London’s ICE Futures exchange fell 2.1% to $44.72 a barrel on Monday as the number of active oil rigs rose by 14 to 371 last week, the largest weekly gain so far this year, indicating likelihood of higher US output.

Gold is steady today after spot gold fell 0.59% on Monday ahead of Federal Reserve’s policy meeting starting today. A bullish Federal Reserve statement indicating an increased likelihood of a rate hike later this year will add to pressure on safe haven gold after recent rally in equities.