While you were sleeping: Fed’s Brainard eyes ‘softness’

Wall Street swung between gains and losses as investors awaited a key US jobs report for clues on a potential interest rate increase, while also monitoring the negotiations between Greece and its international creditors ahead of a debt payment.

"The focus is on Friday's big employment number, and there's a lot of indecision," Matt Maley, an equity strategist at Miller Tabak & Co in Newton, Massachusetts, told Bloomberg. "If the situation in Greece deteriorates, it leaves a lot of downside potential for the US stock market."

In late trading in New York, the Dow Jones Industrial Average slipped 0.08%, the Standard & Poor's 500 Index weakened 0.05%, while the Nasdaq Composite Index inched 0.1% lower.

New orders for US factory goods unexpectedly declined in April, down 0.4% following a 2.2% increase in March. Also, orders for durable goods, products meant to last at least three years, declined 1% in April.

Recent reports casting doubt on the US economy's recovery from a contraction in the first quarter have pushed back the timing of a Fed rate hike.

"Interest rates are not going to matter if they're rising because of the strong economy and earnings growth, and we're not seeing evidence of either," said Warren West, head trader at Greentree Brokerage Services in Philadelphia, told Reuters.

Investors and Fed officials alike are eyeing Friday's nonfarm payrolls report which is expected to show the economy added 227,000 jobs in May, up from April's 223,000, while the unemployment rate is expected to hold at 5.4%.

"Given the softness in the data we have seen so far this year and some uncertainty about how much to attribute to temporary or statistical factors, I think there is value in watchful waiting, while additional data help clarify the economy's underlying momentum in the face of the headwinds from abroad," Fed board member Lael Brainard said in a speech on Tuesday.

"If continued labour market strengthening is confirmed and inflation readings continue to improve, liftoff could come before the end of the year," Ms Brainard said.

In the Dow, losses in shares of UnitedHealth and those of Intel, down 2% and 1.9% respectively, outweighed gains in shares of Boeing and those of Caterpillar, recently 1.4% and 0.9% stronger respectively.

"Based on today's picture of moderate underlying momentum in the domestic economy and the likelihood of continued crosscurrents from abroad, the process of normalising monetary policy is likely to be gradual," Ms Brainard noted. "But while the case for liftoff may not be immediate, it is coming into clearer view."

The US dollar fell as a result of both Ms Brainard's comments and the disappointing factory orders, as well as a gain in the euro amid stronger-than-expected euro-zone inflation data and optimism for a deal between Greece and its international creditors.

The greenback's weakness, in turn, fuelled commodity prices including for oil, nickel and copper.

In Europe, the Stoxx 600 Index ended the day with a 1% drop from the previous close. Germany's DAX dropped 0.9%, while France's CAC 40 Index and the UK's FTSE 100 Index fell 0.4%.

Reuters is reporting that the ECB, IMF and EC have agreed a cash-for-reforms proposal to put to Greece on Wednesday.

(BusinessDesk)