THE local market retreated for the second straight day as investors braced themselves for key economic indicators coming out of the United States and China.

With the Federal Reserve's latest meeting minutes and China's manufacturing purchasing managers' index (PMI) set to be released back to back this week, investors here are staying on the sidelines.

The Fed's minutes - offering a possible clue to interest rate hikes - are due out today, while China's PMI will be released tomorrow.

As a result, the benchmark Straits Times Index ended 5.53 points or 0.16 per cent lower at 3,454.04, following Monday's 0.1 per cent dip. Only $921.5 million worth of shares changed hands on another slow trading day.

The two-day slip came despite a strong showing on Wall Street, where the Dow Jones Industrial Average rose 0.14 per cent to a new high amid market hopes that interest rate hikes will be delayed.

The local bourse is also being held back by low trading volumes as Greater China's bullrun keeps drawing capital, IG market strategist Bernard Aw said.

Shanghai jumped 3.13 per cent - the biggest one-day gain in four months - as investors welcomed Beijing's latest guidelines for economic reform. Hong Kong added 0.37 per cent, boosted by speculation over its stock connection with Shenzhen.

"Meanwhile, corporate earnings in Singapore are not encouraging, with less than half of companies announced so far beating analysts' forecasts. I really don't see a lot of upside in the local market now as its consolidation continues," Mr Aw cautioned.

Against this sluggish backdrop, the most actively traded play was Sino Construction, which closed 0.2 cent or 5.88 per cent up at 3.6 cents.

Energy and marine penny stocks also remained the market's focus with EMS Energy ending 0.1 cent or 4.17 per cent higher at 2.5 cents, as Jaya Holdings added 0.1 cent or 2.22 per cent.

But the sector is set for more volatility, as Brent oil futures fell by almost 1 per cent overnight on near-record Saudi exports.

CapitaLand stood out as the top-performing blue chip, closing seven cents or 1.98 per cent higher at $3.60. It has been gaining ground since Friday, when it issued $650 million worth of convertible bonds to reduce debt.

CapitaMall Trust also rose two cents or 0.91 per cent to $2.21, while Singapore Technologies Engineering added four cents or 1.12 per cent to $3.60.

Genting Singapore fared poorly after announcing a 73 per cent plunge in first-quarter net profit. The gaming company dropped the most on STI yesterday, closing two cents or 2.07 per cent down at 94.5 cents.

Singapore Airlines slid 14 cents or 1.19 per cent to $11.58. But the carrier's outlook is brighter with lower fuel costs.