U.S. stocks slid Tuesday as investors continued to sell phone company and utility shares. Energy companies rose with the price of oil, but those stocks have been locked in an up-and-down pattern for more than a week.
ON WALL STREET: At the markets’ close, the Dow Jones industrial average was down 84 points, about 0.5 percent, at 18,552. The Standard & Poor’s 500 index slipped 12 points, about 0.6 percent, to 2,178.2, and the Nasdaq composite was off 34.9 points, about 0.7 percent, at 5,227.1.
OIL PRICES: About the same time, benchmark U.S. crude oil was up 67 cents at $46.41 per barrel on the New York Mercantile Exchange. The contract jumped $1.25 on Monday after Russia said it would work with Saudi Arabia to achieve market stability. In London, Brent crude, a benchmark used to price international oils, was 50 cents higher at $48.85 a barrel.
OIL AND THE DOLLAR: As the dollar weakened, the price of oil rose for the fourth day in a row to sustain a recent recovery and metals prices also rose. The Labor Department said inflation remains low, as prices paid by consumers were unchanged in July. Most stocks were down, but for the second day in a row, the biggest losses went to traditionally safe investments like telecom and utility companies. Bond prices also inched lower.
The dollar has been very strong over the last few years compared to other currencies. Early this year it looked like the dollar would stay at those elevated levels because the Federal Reserve was raising interest rates while other global central banks were cutting them to stimulate their economies. John Cannally, chief economic strategist for LPL Financial, said the Fed has changed course. By leaving interest rates where they are, it has allowed the currency to weaken a bit, aiding U.S. manufacturing and energy companies and other exporters.
“The Fed is using the dollar as sort of a tool of monetary policy,” he said. “The Fed wants to give China and emerging markets time to heal and get their houses in order.”
CONSUMER PRICES: The Labor Department said prices paid by consumers were unchanged in July as gas and other energy prices kept inflation down. Core inflation, which leaves out food and fuel prices, inched up just 0.1 percent for the month. Overall, inflation is up just 0.8 percent over the last year. That’s far below the 2-percent target set by the Federal Reserve, and investors concluded that means the Fed is less likely to raise interest rates soon.
ECONOMIC DATA: Also on Tuesday the Federal Reserve said U.S. factories cranked out more autos, machinery and chemicals in July, which suggests manufacturers might be recovering, though growth remains little changed from a year ago and manufacturers aren’t adding many jobs. Meanwhile the Commerce Department said the pace of home construction grew by the most since February.