US open: Markets mixed as December Fed rate hike seems likely

US equities were mixed on Tuesday as oil prices surged over 3%, while data pointed to firmer household spending, which could increase the likelihood of a rate hike from the Federal Reserve.

The Dow Jones Industrial Average dropped 0.29% to 18,814.59 points, but the S&P 500 increased 0.14% to 2,167.24 points and the Nasdaq was up 0.53% to 5,246.26 points at 1457 GMT.

Spreadex’s Connor Campbell said the Dow Jones fell due to a combination of rate hike-fears, questions over whether the economy really needs president-elect Donald Trump’s suggested fiscal stimulus and general exhaustion, as it had risen by between 900 to 1,000 points in around 11 days.

In commodity markets, gold retreated as rising rate hike expectations turned investors’ attention away from the zero-yielding metal.

Gold on Comex declined 0.06% to $1,221.00 per troy ounce at 1435 GMT.

Oil prices advanced amid expectations that OPEC members will agree to a cut in production when they meet in late November.

Brent crude rose 3.24% to $45.91 per barrel and West Texas Intermediate jumped 3.41% to $44.85 at 1439 GMT.

In currency markets, the dollar was up 0.38% against the yen to 108.83, rose 0.01% versus the euro to 0.9315, and edged higher by 0.62% against sterling to 0.8056.

On the macroeconomic front, the Empire State manufacturing index rose to 1.5 in November from -6.8 in the previous month, and above the -2.5 consensus forecast.

According to the Department of Commerce, retail sales volumes grew by 0.8% month-on-month in October to $465.9bn, 4.3% higher than last year, and above the 0.6% forecast.

Naeem Aslam, chief market analyst at ThinkMarkets, said: “The US economic data released today has painted a better picture for the economy. Most of the strength was in the retail sales data which came on the heels of higher wage growth. The dollar has ticked higher and further away from its lows.

“The December interest rate hike is very much a done deal now and what matters most is to listen to the Fed statement carefully, as this will provide enough clues for future interest rate hike trajectory.”

In corporate news, Home Depot’s shares fell 2.36% despite the DIY store posting higher than expected third quarter sales and earnings.

Sales rose 6.3% to $23.2bn, compared to last year, and earned $1.60 a diluted share, up from £1.36. Analysts had expected earnings of $1.58 a share on $23.05bn in revenue.

Shares in Dick’s Sporting Goods also declined 1.74% as the fortune 500 company reported better than expected results and boosted its forecast for the year.

Third quarter revenue rose 10% to $1.81bn, above expectations of $1.77bn.

At 1630 GMT the Treasury is to sell four-week bills and the Fed's Stanley Fischer is to speak at the Brookings Institution on market liquidity at 1830 GMT.