U.S. dollar, yields climb on retail data, North Korea lull

By Sinead Carew

NEW YORK (Reuters) - The U.S. dollar and U.S. Treasury yields climbed on Tuesday after solid U.S. retail data and an easing in U.S.-North Korean rhetoric, but Wall Street was held down by weakness in retail stocks.

After last week's market jitters from escalating U.S.-North Korea tensions, investors were relieved to be able to look beyond geopolitics at least temporarily after North Korean leader Kim Jong Un said he would watch the United States' actions for a while longer before deciding whether to fire missiles toward the U.S. island territory of Guam.

Data for July showed the biggest increase in U.S. retail sales in seven months as consumers ramped up discretionary spending and boosted purchases of motor vehicles, suggesting the economy continued to gain momentum.

While the data was strong, however, worries about retailers' earnings and the outlook for home improvement stores dragged on the S&P, with Home Depot (NYSE: HD) and Lowes Companies (NYSE: LOW) representing the biggest drags on the benchmark.

"Retail's the interesting sector, starting out with the economic retail numbers, which were much better than expected. But then this morning we'd some pretty bad retail company reports," said Janna Sampson, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.

Wall Street's gains from the first apparent relaxation of tensions with North Korea in some time were limited as the benchmark S&P 500 index had already rallied on Monday, when it achieved its third 1 percent gain for 2017 after a weekend without military action or escalating rhetoric.

The Dow Jones Industrial Average <.DJI> rose 5.28 points, or 0.02 percent, to 21,998.99, the S&P 500 <.SPX> lost 1.23 points, or 0.05 percent, to 2,464.61 and the Nasdaq Composite <.IXIC> dropped 7.22 points, or 0.11 percent, to 6,333.01.

MSCI's gauge of stocks across the globe <.MIWD00000PUS> shed 0.16 percent.

Benchmark U.S. Treasury yields hit one-week highs as investors pared low-risk holdings in reaction to the comments from North Korea and the U.S. retail sales and regional factory activity data.

Benchmark 10-year notes last fell 15/32 in price to yield 2.2693 percent, from 2.218 percent late on Monday.

(For a graphic on global currencies vs. Dollar, click http://tmsnrt.rs/2kIQHol)

GREENBACK GAINS

The U.S. dollar rose to its highest in nearly three weeks against a basket of major currencies for two main reasons, according to Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, D.C.

"One was that the consumer had been a no-show in recent months," said Manimbo, adding that "the specter of cooler heads prevailing on the geopolitical front is dollar positive, particularly against safe-haven rivals."

The dollar index <.DXY> rose 0.45 percent, with the euro down 0.36 percent to $1.1736.

The Japanese yen weakened 0.84 percent versus the greenback at 110.57 per dollar, while sterling was last trading at $1.2865, down 0.76 percent on the day.

Spot gold dropped 0.7 percent to $1,272.46 an ounce.

Oil prices held steady after Monday's heavy sell-off, weighed by the strong U.S. dollar - which makes oil more expensive for overseas buyers - and signs of weaker demand in China, the world's second-largest consumer.

U.S. crude settled down 0.08 percent, though in late trade it rose 0.02 percent to $47.60 per barrel. Brent settled up 0.14 percent at $50.80 and was last at $50.83, up 0.2 percent on the day.

(For a graphic on gold, yen and German debt, click http://reut.rs/2uLppS5)

(For a graphic on global assets in 2017, click http://reut.rs/2kD4BGA)

(For a graphic on global bonds dashboard, click http://tmsnrt.rs/2lmwqHC)

(For a graphic on world market cap, click http://reut.rs/2pHTxif)

(Additional reporting by Dion Rabouin and Richard Leong in New York; Nigel Stephenson, John Geddie and Kit Rees in London, Lisa Twaronite in Tokyo; Editing by Bernadette Baum and Dan Grebler)

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