Wall Street edges higher, dollar bounces back amid tariff talks, economic data

NEW YORK :Wall Street edged higher and the dollar rebounded on Tuesday as market participants looked past ongoing tariff wrangling and lowered economic expectations ahead of Friday’s crucial U.S. employment report.

All three major U.S. stock indexes were up modestly while gold backed down from a near four-week high in opposition to the strengthening greenback.

“Today is a day with no big drivers,” said Tim Ghriskey, senior portfolio strategist Ingalls & Snyder in New York. “The market is becoming more comfortable with Trump’s negotiation style. He comes out with guns blazing and then is, you know, very happy to, you know, put his guns away, having made his point.

“He expects a reasonable settlement at least, which he’ll call a huge win, of course,” Ghriskey added. “But in reality he’s not looking to punish our trading partners; he’s looking for incremental adjustments to tariffs.”

The Organization for Economic Cooperation and Development (OECD) said the global economy is on course for a more drastic slowdown than it expected only a few months ago. It cited the fallout from Trump’s trade war, and warned that growth will be even weaker as protectionism increases, fuelling inflation and disrupting supply chains. 

That sentiment was shared by the United Nations’ International Labor Organization (ILO), which downgraded its global employment forecast due to worsening economic conditions arising from trade tensions.

In economic data, a report from the U.S. Labor Department showed the number of unfilled U.S. jobs unexpectedly rose in April, while new orders for factory-made goods posted a steeper drop than analysts anticipated.

Investors are now training their focus on the May employment report, expected on Friday. Economists polled by Reuters expect the U.S. economy added 130,000 jobs last month, with the unemployment rate standing pat at 4.2 per cent.

The Dow Jones Industrial Average rose 30.12 points, or 0.07 per cent, to 42,334.83, the S&P 500 rose 12.36 points, or 0.21 per cent, to 5,948.30 and the Nasdaq Composite rose 100.78 points, or 0.52 per cent, to 19,343.39. 

European stocks were moderately lower as investors exercised caution while awaiting further developments in tariff negotiations, but pared losses in the wake of a report that Euro Zone inflation has eased below the European Central Bank’s (ECB) target, paving the way for further policy easing.

MSCI’s gauge of stocks across the globe rose 0.37 points, or 0.04 per cent, to 883.25. The pan-European STOXX 600 index fell 0.13 per cent, while Europe’s broad FTSEurofirst 300 index fell 1.85 points, or 0.09 per cent.

Emerging market stocks rose 3.26 points, or 0.28 per cent, to 1,157.03. MSCI’s broadest index of Asia-Pacific shares outside Japan closed higher by 0.37 per cent to 609.76, while Japan’s Nikkei fell 23.86 points, or 0.06 per cent, to 37,446.81.

The dollar bounced back from a six-week low, even as concerns persisted over potential economic damage in the wake of Trump’s trade war. 

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.58 per cent to 99.15, with the euro down 0.49 per cent at $1.1386.

Against the Japanese yen, the dollar strengthened 0.74 per cent to 143.75.

Yields on 10-year U.S. Treasuries dipped but were off their lows in the wake of weaker than expected U.S. economic data.

The yield on benchmark U.S. 10-year notes fell 2.2 basis points to 4.44 per cent, from 4.462 per cent late on Monday.

The 30-year bond yield  fell 3.3 basis points to 4.9614 per cent from 4.995 per cent late on Monday.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 0.8 basis points to 3.953 per cent, from 3.945 per cent late on Monday.

Crude prices extended their gains, supported by roiling geopolitical concerns as the war in Ukraine intensified and Iran appeared poised to reject a U.S. nuclear deal proposal. 

U.S. crude rose 1.87 per cent to $63.69 a barrel and Brent rose to $65.68 per barrel, up 1.62 per cent on the day.

Gold prices retreated from a near four-week high amid profit-taking and in opposition to the strengthening dollar. 

Spot gold fell 0.97 per cent to $3,346.06 an ounce. U.S. gold futures fell 0.75 per cent to $3,345.20 an ounce.