Mixed US economic signals dampen Wall Street's record week

While jobless claims and consumer sentiment impressed, the inflation level remained elevated

Traders wearing Mickey Mouse ear caps are seen on the floor of the New York Stock Exchange. Reuters

Wall Street ended a record-breaking week with a whimper after investors digested mixed signals from US economic data and President Donald Trump's threat to impose higher tariffs on the EU.

Both the benchmark S&P 500 and tech-heavy Nasdaq Composite rose to record highs in recent weeks, with the former hitting another new high on Thursday on the back of solid corporate earnings and strong economic reports.

On Thursday, the Labour Department reported that jobless claims for the week ended July 12 declined from the previous week, with June retail sales data stronger than forecast and economic sentiment rising in early July.

However, expectations for inflation targets continued to drop, as America's consumer price index rose to 2.7 per cent in June, from 2.4 per cent.

While inflation levels are below peak levels recorded about three years ago, it is still above the goal of 2 per cent.

Lower inflation also makes it easier to lower interest rates – a key sticking point in Mr Trump's frustrations with Federal Reserve boss Jerome Powell.

Mr Trump has long and repeatedly criticised and insulted Mr Powell, threatening, then denying, to fire the Fed chairman – which is another episode being closely watched by investors and economists, who widely agree that such a move would have a negative effect on Wall Street.

Also, the producer price index retreated to 2.3 per cent in June, from 2.5 per cent a month earlier. In addition, homebuilding, home purchases and residential investment all dropped in June, amid uncertainty in the world's top economy.

Mr Trump has also threatened to impose new tariffs of at least 15 per cent to 20 per cent on products from the EU, which is another concern investors have to digest.

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Mr Trump’s comments on Powell "caused some sell-off across major US indices, but the S&P 500 still managed to close with gains. Softer-than-expected PPI data helped cool mounting inflation fears after the previous day’s CPI print surprised on the upside", said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.

"We’ll see if Mr Trump chickens out – and whether this triggers a market correction."

Major markets mostly down

On Wall Street, the S&P 500 closed flat, the Dow Jones Industrial Average shed 0.3 per cent and the Nasdaq inched up 0.1 per cent.

For the week, the S&P 500 gained 0.6 per cent, the Dow retreated 0.1 per cent and the Nasdaq added 1.5 per cent. Year-to-date, the indices are up 7.1 per cent, 4.2 per cent and 8.2 per cent, respectively.

In Europe, London's FTSE 100 settled 0.2 per cent higher, as European shares tracked corporate earnings reports and the situation on US tariffs.

Frankfurt's DAX slid 0.3 per cent, while Paris' CAC 40 ended flat.

Earlier in Asia, stocks in China and Hong Kong stocks closed higher, after Beijing vowed to rein in Chinese companies' aggressive price cutting in an effort to tackle deflation.

The Shanghai Composite settled 0.5 per cent higher and Hong Kong's Hang Seng index jumped 1.3 per cent.

Tokyo's Nikkei 225, however, declined 0.2 per cent, as investors await Sunday's upper house elections in Japan, which may give a hint of economic direction moving forward.

In commodities, oil prices jumped on Friday but retreated to settle lower as mixed US economic data offset concerns over drone attacks against Opec member Iraq that raised supply concerns and after the EU approved more sanctions against Russia.

Brent closed 0.35 per cent lower at $69.28 a barrel, while West Texas Intermediate retreated 0.30 per cent to $67.34 a barrel. Intraday gains peaked at about 1.5 per cent.

Gold, meanwhile, closed the week higher as economic uncertainty and a weaker dollar boosted the safe-haven asset's appeal.

The precious metal, widely viewed as a hedge against inflation, added 0.3 per cent to $3,350.53 an ounce.

Gold remained "steady amid uncertainty over Fed rate cuts and resilient US data", said Soojin Kim, a research analyst at MUFG.