Wall Street retreats from record closing high

US shares dipped a little today, with disappointing earnings from Dow-components AT&T and Caterpillar dragging the DJIA lower.

The stock market has had a remarkable run of late, with the S&P 500 and Dow setting multiple fresh highs this week, and so a trading session here and there where the buying relents for a while is perfectly understandable. During the recent rally, the technology sector has been underperforming, with some of the more high-profile earnings misses we’ve seen stemming from this sector.

Today that’s been turned on it head a little, with Apple’s strong results last night helping to push the NASDAQ higher today, while weaker-than-expected quarterly earnings from Caterpillar and AT&T have dragged the Dow down.

Apple beat analyst estimates on both the earnings and revenue front, which has led to its share price gaining 5.5% today. Being the highest-capitalised stock in the NASDAQ 100, means that Apple holds a big sway on the tech-oriented index. The NASDAQ rose by 0.16% by early afternoon in New York, while the Dow lost 0.38% and the S&P 500 fell 0.47%.

Caterpillar, which is the largest maker of mining and construction machinery, is often seen as a bellwether for the industrial sector. Unfortunately it not only missed expectations with both its earnings and sales, but it lowered its outlook for full-year earnings. Caterpillar’s disappointing earnings and pessimistic outlook points to a global slowdown in the mining sector. There was a glimmer of light with sales rising in China in the second quarter, and CEO Doug Oberhelm says he thinks China has bottomed out.

US macroeconomic data was fairly solid today, with further indications of strength in the housing sector in the form of rising sales of new homes, which rose to an annualised 497,000 in June from May’s downwardly-revised 459,000. This is especially good considering how mortgage rates have been rising in the States.

Markit’s Purchasin Managers Index for the manufacturing sector increased to 53.2 in July from June’s 52.2. Anything higher than 50 shows expansion, so this is suggesting the pace of expansion is picking up, with new orders an area of particular strength. Combined with falling inventories, this suggests re-stocking is likely to follow, which bodes well for the economy. We have the ISM manufacturing report next week, but the indications so far are that manufacturing is progressing nicely this summer after a forgettable spring.

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