U.S. stocks finished the trading session lower amid lingering uneasiness in regard to global trade, monetary policy and European political issues. A larger-than-expected decline in regional manufacturing activity added to the somber sentiment, though additional reads from the economic docket showed weekly jobless claims declined and leading indicators continued to rise. Treasuries advanced and the U.S. dollar reversed to the downside in the wake of the data and as the Bank of England’s monetary policy decision sounded a bit of a hawkish tone. Crude oil prices declined ahead of this week’s potential OPEC production adjustment and gold dipped.

The Dow Jones Industrial Average (DJIA) declined 196 points (0.8%) to 24,462, the S&P 500 Index lost 18 points (0.6%) to 2,750, and the NASDAQ Composite fell 69 points (0.9%) to 7,713. In moderately-heavy volume, 791 million shares were traded on the NYSE and 2.3 billion shares changed hands on the NASDAQ. WTI crude oil traded $0.17 lower to $65.54 per barrel and wholesale gasoline was down $0.01 at $2.01 per gallon. Elsewhere, the Bloomberg gold spot price ticked $0.36 lower to $1,267.50 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 94.81.

The Conference Board’s Index of Leading Economic Indicators (LEI) for May rose 0.2% month-over-month (m/m), below the Bloomberg projection to match April’s unrevised 0.4% rise. The index has not seen a decline since May 2016. ISM new orders, the yield curve, and consumer expectations were positive, while average workweek, building permits and jobless claims were negative.

Weekly initial jobless claims declined by 3,000 to 218,000, versus estimates calling for 220,000, with the prior week’s figure revised higher by 3,000 to 221,000. The four-week moving average fell by 4,000 to 221,000, while continuing claims rose by 22,000 to 1,723,000, north of estimates of 1,710,000.

The Philly Fed Manufacturing Index in June fell more than expected but remained solidly in expansion territory (a reading above zero), dropping to 19.9 from 34.4 in May, compared to estimates of a decline to 29.0.

Treasuries were higher, with the yield on the 2-year note declining 3 basis points (bps) to 2.54% and the yields on the 10-year note and the 30-year bond decreasing 4 bps to 2.90% and 3.04%, respectively.

Treasury yields and the U.S. dollar turned lower in the wake of the regional manufacturing data and a hawkish takeaway from the Bank of England’s (BoE) monetary policy decision, while the markets continued to grapple with elevated global trade uncertainty.

Schwab Center for Financial Research – Market Analysis Group

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