NEW YORK (Reuters) - U.S. stocks closed mixed and the euro slid on Tuesday as investors waited for clarity on European Central Bank plans to shore up heavily indebted countries, but late gains by Apple Inc (AAPL.O) helped buoy equities off the day’s lows.
Apple, which as the largest U.S. company has an outsized impact on indexes, rose 1.5 percent to $674.97 and helped erode broader losses. Earlier, the tech giant distributed invitations to an event in San Francisco on September 12, setting the stage for what is widely expected to be the release of the iPhone 5.
The Dow Jones industrial average .DJI dropped 54.90 points, or 0.42 percent, to 13,035.94. The Standard & Poor's 500 Index .SPX dropped 1.64 points, or 0.12 percent, to 1,404.94. The Nasdaq Composite Index .IXIC gained 8.09 points, or 0.26 percent, to 3,075.06.
Still, the news came too late in the day to help a number of assets, as global investors watched for signs the ECB would resume bond buying to prop up faltering, debt-laden euro zone states.
Adding fuel to fears about the slowing global economy, U.S. manufacturing shrank at its sharpest clip in more than three years last month, data showed on Tuesday, the latest sign that the slowing global economy is weighing on an already weak U.S. recovery.
“What people saw with today’s U.S. ISM and the manufacturing data in Asia and Europe yesterday is that the global economy is still slowing down. In particular, cyclical stocks are pretty weak today,” said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.
The disappointing data come just days before Friday’s nonfarm payrolls report, which could shed light on the state of the faltering U.S. job market.
Friday’s payrolls data are key to any Fed decision on whether they will follow through with a third round of bond purchases, known as quantitative easing or QE3, said Kevin Giddis, head of fixed income capital markets at Morgan Keegan in Memphis, Tennessee.
“In my opinion, this is the number that creates a ‘go/no go’ decision from the Fed on QE3,” he said.
Those expectations got a boost last week when Fed Chairman Ben Bernanke left the door wide open to a further easing of monetary policy, saying the stagnation in the U.S. labor market was a “grave concern,” though he stopped short of immediate promises.
The euro slid against the dollar, dropping to $1.2564, having risen as high as $1.2627 earlier in the session.
Spanish two-year yields dropped to 3.038 percent, the lowest since early April, on hopes for ECB action, while their Italian counterparts fell to 2.43 percent, the lowest since late March.
The benchmark 10-year U.S. Treasury note was down 8/32 in price, with the yield at 1.5756 percent.
The ECB is expected to unveil a new debt-purchasing plan to tackle the region’s debt crisis at a policy meeting on Thursday, when it may also cut interest rates as the 17-nation euro area heads toward a recession.
Spanish & Italian bonds: link.reuters.com/vur47s
Gold price Fed assets & QE: link.reuters.com/byw79s
ECB in graphics: link.reuters.com/neg32s
Mario Draghi, the ECB’s president, told European lawmakers on Monday that buying short-term sovereign debt did not breach any European Union rules, which investors took as a sign the bank would resume buying short-dated Spanish and Italian bonds.
“Markets are taking a bit of confidence from Draghi, who apparently indicated that purchases of up to three years maturity wouldn’t be in contravention of EU policies on financing of sovereigns,” said Brian Barry, a strategist at Investec.
Still, European equity investors have turned more cautious over the impact of the ECB plan, having enjoyed a strong rally since Draghi pledged on July 26 to do “whatever it takes” to protect the euro.
The weak U.S. data also knocked European shares, adding to market uncertainty.
The FTSEurofirst 300 .FTEU3 ended down 1.1 percent at 1,079.12, albeit in thin trading volume of just 62 percent of the 90-day daily average.
“If the ECB disappoints, the reaction would be on the negative side. But I don’t expect a dramatic sell-off as focus will shift to other events,” said Christian Stocker, equity strategist at UniCredit.
The MSCI world equity index .MIWD00000PUS, which gained late last week on renewed hopes of more monetary stimulus by the Federal Reserve, was down 0.5 percent at 321.13.
Oil prices fell as concerns about slowing economic growth and curbed demand for petroleum countered hopes for more monetary stimulus from central banks in the United States and Europe.
Brent October crude fell $1.60, or 1.38 percent, to settle at $114.18 a barrel, having traded from $113.93 to $116.65.
U.S. October crude fell $1.17, or 1.21 percent, to settle at $95.30 a barrel, ending well below the 200-day moving average of $96.65, after trading from $94.97 to $97.37.
“You need to see demand coming through,” said Michael Hewson, a markets analyst at CMC Markets in London. “And the only way you are going to get demand growth is if oil prices fall. Any upside in oil is going to be limited.”
Additional reporting by Richard Hubbard in London and Julie Haviv and Robert Gibbons in New York; Editing by James Dalgleish