While you were sleeping: Wall St lifts on US consumer data

Trader Edward Landi works on the floor of the New York Stock Exchange. Photo / AP

Wall Street advanced, recovering from losses earlier in the day prompted by North Korea's firing of a missile over Japan, as investors opted to focus on the strength of the US economy.

Investors initially piled into US Treasuries, sending yields on the 10-year note as low as 2.08 per cent. Concern about geopoliticial tensions faded as the day progressed and the outlook for inflation remains the key driver for fixed-income securities.

"For the bond market, it's really about the inflation prospects," Kathy Jones, chief fixed-income strategist at Charles Schwab, told Bloomberg.

For 10-year yields, "we've been saying all year a 2-2.5 per cent range-it's going to be tough to get much lower unless we get evidence of weaker growth and less inflation than we think."

Wall Street rebounded. In 3.29pm trading in New York, the Dow Jones Industrial Average rose 0.3 per cent, while the Nasdaq Composite Index gained 0.4 per cent. In 3.14pm trading, the Standard & Poor's 500 Index added 0.1 per cent. Wall Street's fear gauge-the CBOE Volatility Index or the VIX-traded 1.9 per cent higher at 11.53, after climbing as high as 14.34 earlier in the day.

"This (North Korea) is all sort of tangential to American corporate economy and profitability," Stephen Massocca, senior vice president at Wedbush Securities, told Reuters.

"It is kind of a thin field this week, so it's not tough to move stuff around."

The Dow rose as gains in shares of United Technologies and those of Boeing, up 2.1 per cent and 1.6 per cent respectively recently, outweighed slides in shares of Nike and those of DuPont, down 2.1 per cent and 0.7 per cent respectively.

United Technologies shares rose after the Wall Street Journal reported the company is nearing a deal to buy Rockwell Collins for more than US$20 billion, which would create one of the world's biggest aircraft-equipment makers.

The latest US economic data bolstered sentiment.

A Conference Board report showed its consumer confidence index rose to 122.9 in August, up from 120.0 in July.

"Despite a daily dose of worrying headlines, consumers still have plenty to be confident about right now. Home prices are rising, stocks are just off record highs and the labor market is churning out jobs," Robert Kavcic, a senior economist at BMO Capital Markets in Toronto, told Reuters. "That should continue to support solid consumer spending growth through the rest of the year."

In Europe, the Stoxx 600 Index ended the day with a 1 per cent slide from the previous close. The UK's FTSE 100 Index dropped 0.9 per cent, as did France's CAC 40 Index, while Germany's DAX Index shed 1.5 per cent.

Weighing on equities were gains in the euro, pushing it above US$1.20 and fuelling expectations the currency might strengthen further.

"With the break of this 1.20 psychological barrier, investors now have 1.25 in sight," Pierre Martin, a trader at Saxo Bank in London, told Bloomberg, referring to the euro's level against the US dollar. "It means that traders will continue to worry about exporters. Companies that have a major part of their sales from abroad will struggle more and more."