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Stocks move lower led down by consumer stocks

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Stocks move lower led down by consumer stocks

Stocks in the US opened slightly lower on Tuesday, as traders continue to look for clues on futures tapering of the FOMC’s bond purchase program.  Earnings data has been slightly better than expected with nearly 68% of the companies that have reported, beating expectations.  The Russell 2000 continues to be the leader, touching new all–time highs on Monday.  The June Trade deficit was smaller than expected showing that growth in the US is increasing.

The 10-year yield remains stubbornly high near the 2.64% level which is off the recent highs near 2.75%.  New data is likely to drive yields higher which will act as a headwind for stock prices.  Recall that higher yields make discounted future cash flows higher which erodes the value of stocks.

Investors will continue to look for clues and today’s speeches by Fed officials did little to help investors read the tea leaves. Chicago Fed President Charles Evans made remarks at 1 p.m. He followed Dallas Fed President Richard Fisher, who on Monday said the Fed should start to pare its easy-money policies in September.

UK Services numbers helped lift the FTSE which in turn buoyed the US market. Data firm Markit showed that the monthly PMI services index rose to 60.2 in July from 56.9 in June. The index grew for the seventh consecutive month reflecting strong growth prospects for the UK economy.

Stocks accelerated their losses during afternoon trading with small and midcap stocks leading the broader indexes lower.  Mining stocks were the biggest losers led down by gold prices which closed below 1300 per ounce.  Consumer stocks were also on the ropes, as many stores missed their same store comps.

The Dow Industrials was the best performing major index in a down tape.  Support is seen near 15,400 while resistance is seen near 15,700.  Momentum is flat while the RSI is showing consolidation by printing near 57.

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