U.S. equities finished lower, as early gains that came amid cooled trade tensions between the U.S. and China fell victim to worries surrounding the persistent decline in bond rates with the inversion between the 2-year and 10-year Treasury notes widening to heighten recession concerns. The U.S. dollar ticked lower, trimming some of yesterday’s advance, even as Consumer Confidence came in well above expectations and another read on regional manufacturing activity unexpectedly moved back into expansion territory. Crude oil prices finished higher in choppy trading, and gold rallied on the upped recession worries. In equity news, Dow member Johnson & Johnson gained ground after a District court yesterday imposed a smaller-than-expected penalty in regard to the company’s alleged role in the opioid epidemic, J.M. Smucker disappointed with its quarterly report and guidance, and Altria and Philip Morris confirmed merger talks.

The Dow Jones Industrial Average (DJIA) declined 121 points (0.5%) to 25,778, the S&P 500 Index shed 9 points (0.3%) to 2,869 and the Nasdaq Composite lost 27 points (0.3%) to 7,827. In moderate volume, 889 million shares were traded on the NYSE and 1.9 billion shares changed hands on the Nasdaq. WTI crude oil moved $1.29 higher to $54.93 per barrel and wholesale gasoline was up $0.03 at $1.54 per gallon. Elsewhere, the Bloomberg gold spot price rose $14.58 to $1,541.89 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.1% lower to 98.02.

The Consumer Confidence Index dipped to 135.1 in August, from July’s upwardly-revised 135.8 level, well above the Bloomberg estimate of 129.0. The index retreated slightly from the highest level since November 2018, as the Present Situation Index improved solidly month-over-month (m/m), while the Expectations Index of business conditions for the next six months decreased. On employment, the labor differential—consumers’ appraisal of jobs being “plentiful” minus being “hard to get”—rose to 39.4 from the 33.1 level posted in July.

The Richmond Fed Manufacturing Activity Index for August surprisingly moved back to a level depicting expansion (a reading above zero), rising to 1, versus forecasts calling for the figure to increase to -4 from July’s unrevised level of -12.

The 20-city composite S&P CoreLogic Case-Shiller Home Price Index showed a 2.1% y/y gain in home prices in June, versus expectations of a 2.3% increase. M/M, home prices were little changed on a seasonally adjusted basis, compared to forecasts of a 0.1% rise.

Treasuries were higher, as the yield on the 2-year note fell 2 basis points (bps) to 1.52%, the yield on the 10-year note declined 7 bps to 1.48%, and the 30-year bond rate dropped 8 bps to 1.96%.

©2019 Charles Schwab & Co., Inc., Member SIPC. All rights reserved.

Schwab Center for Financial Research (“SCFR”) is a division of Charles Schwab & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.