The blue-chip Dow Jones industrial average fell 4.41 points, or 0.05%, to 9,200.05. The broader Standard & Poor's 500 index lost 1.61 point, or 0.16%, to 987.67. The tech-heavy Nasdaq composite index was down 9.42 points, or 0.54%, to 1,721.95.
The Fed's Beige Book report said that economic activity "increased a notch" in June through early July. The Fed pointed to "nascent signs" of gains in manufacturing in 10 districts, while some regions were showing increased capital investment planning. Housing remained strong, but consumer spending was "lackluster," with auto sales and tourism mixed. "All in all, the gist of the report was in line with the cautiously optimistic tone expected," said economic research group MMS International.
Investors are bracing for more market-moving economic data on Thursday, including updates on initial jobless claims, preliminary GDP figures for the second quarter, employment cost index, and the Chicago PMI.
Initial jobless claims will be closely watched. The figures should rise 24,000 to the 410,000 level in the week ended July 26. A distortion due to timing of auto industry layoffs could impact the claims figures through the end of the month, but a jump back above the key 400,000 could hurt stocks, MMS says.
Also high on the priority list will be U.S. GDP, which is projected to rise 2.0% in the second quarter. Consumption likely grew at a solid 3.5% rate, while equipment and software spending, and government purchases, grew more than twice this clip, says MMS.
MMS expects the Chicago PMI index, a manufacturing gauge, to improve to 53.0 in July from 52.5 in June. Other regional manufacturing index support that expectation, MMS says.
Second-quarter employment cost index is expected to rise 0.9%, which should correspond to a gain of roughly 3.8% from a year ago. The high-cost of healthcare and increased pension fund contributions are supportive of another strong rise.
An update on employment Friday has gained in importance for the market after Tuesday's confidence report showed weakness in the jobs components.
Earnings will take a backseat to so much data. However, a few Dow industrial companies are set to report Thursday: ExxonMobil (XOM
), Disney (DIS
) and Procter & Gamble (PG
) are all on the docket.
Others reporting Thursday include: Cardinal Health Group (CAH
) and Simon Property Group (SPG
Treasuries finished higher in price amid a large refunding and the release of the Fed's Beige Book report. The breakdown in issuance was consistent with the Treasury's strategy to finance using shorter dated issues, and largely in line with Street expectations, says MMS. The Treasury department reiterated that it does not currently plan to reintroduce the 30-year note.
European stocks finished higher Wednesday, amid reports of optimism across major markets. In London, the Financial Times-Stock Exchange 100 finished up 4.20 points, or 0.10%, to 4,141.20, after surveys showed June U.K. retail sales grew at fastest rate in 15 months and consumer optimism rose to an 8-month high.
In Germany, the DAX Index turned up 0.91 point, or 0.03%, to 3,429.03, as German consumer confidence, bolstered by recently enacted tax cuts, rises for a fifth consecutive month. In France, the CAC 40 ended higher by 30.12 points, or 0.96%, to 3,172.51, as French business confidence rose for first time this year.
In Asia, major stock indexes tumbled. Japan's Nikkei index finished down 201.65 points, or 2.05%, to 9,632.66, as losses increased for high-tech stocks on disappointing earnings. Following Fujitsu's sluggish results on Tuesday, Toshiba reported a steep quarterly loss. Meanwhile, Hong Kong's Hang Seng index fell 77.38 points, or 0.76%, to 10,121.22.