U.S. Markets Slip on Mixed Economic Data; Asia-Pacific Gains, Europe Mixed

Wall Street ended mixed as retail sales rose but consumer sentiment weakened, inflation expectations jumped and sectoral stocks showed sharp divergences.

The Dow inched up 34.86 points (0.1%) to 44,946.12, the S&P 500 fell 18.74 points (0.3%) to 6,449.80 and the Nasdaq slid 87.69 points (0.4%) to 21,622.98.

The broader markets weakened after a mixed batch of U.S. economic data created uncertainty around the economic outlook and interest rates. The Commerce Department reported that retail sales rose 0.5% in July, matching expectations, following an upwardly revised 0.9% gain in June. However, sentiment took a hit as the University of Michigan reported an unexpected deterioration in consumer confidence for August. This contrast between steady retail activity and weakening sentiment has added to market caution.

Excluding sales by motor vehicle and parts dealers, retail sales rose by 0.3% in July after growing by 0.8% in June. The increase in ex-auto sales also matched expectations. Meanwhile, the University of Michigan said its consumer sentiment index fell to 58.6 in August from 61.7 in July.

The year-ahead inflation expectations jumped to 4.9% in August from 4.5 in July, reflecting increases across multiple demographic groups and all three political affiliations. Long-run inflation expectations also surged to 3.9% in August from 3.4% in July, rebounding following three straight months of decreases. Labor Department released a separate report showing import prices in the U.S. increased by more than expected in the month of July, while the Federal Reserve released a report showing a slight pullback by industrial production in July.

Semiconductor stocks turned in some of the market's worst performances on the day, with the Philadelphia Semiconductor Index tumbling by 2.3%. Banking stocks were considerably weak, as reflected by the 2% slump by the KBW Bank Index. Oil service and steel stocks too became notably weak while healthcare, pharmaceutical and biotechnology stocks strong moved to the upwards.

Asia-Pacific stocks moved mostly higher. Japan's Nikkei 225 Index surged by 1.7% to a record closing high while China's Shanghai Composite Index advanced by 0.8%. The major European markets turned in a mixed performance on the day while the French CAC 40 Index climbed by 0.7%, the German DAX Index edged down by 0.1% and the U.K.'s FTSE 100 Index fell by 0.4%.

In the bond market, treasuries are extending the downward move seen in the previous session. As a result, the yield on the benchmark ten-year note which moves opposite of its price, rose 3.5 bps to 4.32%.

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