Dawn Chorus: US equities erase early gains to end flat

Wall Street on Tuesday ended little changed in choppy trading after concerns the Federal Reserve may have ruled out large scale asset purchases erased earlier gains made in response to positive consumer spending and housing data.

The Dow Jones industrial average rose five points, or 0.05%, to 10,015. The S&P 500 was up less than a point to 1,049, and the Nasdaq fell six points, or 0.28%, to 2,114.

However, the three major indexes finished lower for August as investors fled to safer assets amid growing evidence the economic recovery is sputtering. The Dow fell 4.3% during the last month, the S&P declined 4.7% and the Nasdaq fell 6.2%.

US equities made early gains on Tuesday in response to mixed economic data. While the Conference Board’s consumer confidence index and the S&P/Case Shiller home prices index slightly exceeded expectations, the Chicago purchasing manager’s index missed forecasts. US consumer confidence rose more than expected in August.

However, a negative sentiment gripped investors after the minutes from the Fed’s Open Committee showed members would only consider large-scale asset purchases if the outlook for the economy worsened “appreciably”. Fuelling further worries over the health of global economy, China suggested that its economy was slowing and the Bank of England cut its outlook for the UK economy.

In company news, Morgan Stanley surged 1.1% after the Fed approved China Investment Corp.’s plan to buy as much as 10% of the Wall Street bank. AT&T Inc., JPMorgan Chase & Co. and Merck & Co. gained at least 1.2%.

In Europe, shares inched higher on Tuesday in response to a rise in the US consumer confidence data. The FTSEurofirst 300 index closed up 0.1%, the FTSE 100 index was 0.5% higher and Germany's DAX was up 0.2%.