The US markets slipped on Thursday, as investors turned risk-averse amid concerns of stalling growth in the euro zone and mixed domestic economic data, including reports on housing and industrial production. Federal Reserve Chairwoman Janet Yellen stated that the US economy has come far since the depths of the financial crisis but we have further to go to achieve a healthy economy. In brief remarks at a National Small Business Week event at the US Chamber of Commerce, Yellen paid tribute to the important role small firms have played in the recovery. Yellen added that a little more than half of the net number of jobs created since employment began growing in 2010 has been generated by firms with fewer than 250 employees. On the economy front, consumer prices posted the biggest increase in April since last summer as the cost of many staples rose, making it harder for Americans to stretch their paychecks to pay for typical household expenses. The consumer price index jumped a seasonally adjusted 0.3% last month to mark the largest gain since June. As a result, real inflation-adjusted hourly wages decreased 0.3% in April to mark the biggest decline in 14 months. The core rate has risen 1.8% in the past 12 months, and it’s been stuck between 1.6% and 1.8% for more than a year. The core rate is viewed as a more useful gauge of underlying inflationary trends, but it remains well below the level the Federal Reserve considers harmful to the economy.
Meanwhile, home builders are the most pessimistic they’ve been in a year, with makers of new single-family homes reporting fewer sales. The housing-market index for builder confidence declined to 45 this month - the lowest reading since May 2013 - from 46 in April. However, manufacturing activity appears to be growing at a moderate pace in the second quarter. The most upbeat indicator was a survey of manufacturers in the New York, which hinting that business owners were less melancholy about the outlook. After barely expanding in April, the Empire state index shot up to 19.0 in May, its highest level since mid-2010. The Philadelphia Fed’s manufacturing index retreated slightly to a reading of 15.4 in May from a 16.6 reading in April. The drop in the Philly Fed index retraces only a small part of the sharp gain in April. The index was 9.0 in March. The Empire State and Philly Fed data are closely watched because they are one of the first readings of the health of the manufacturing sector in May. Separately, industrial production dropped 0.6% in April, as utilities output tumbled during the month, while March’s growth was revised up to show a 0.9% gain from an initially estimated 0.7% gain. Capacity utilization fell to 78.6% from 79.3%.
Moreover, the number of Americans who applied for unemployment benefits fell sharply for the second straight week, touching the lowest level since May 2007, but at least part of the drop probably stemmed from lingering seasonal affects tied to a late Easter holiday. Initial jobless claims declined by 24,000 to a seasonally adjusted 297,000 in the seven days ended May 10. The average of new claims over the past month, meanwhile, fell by a smaller 2,000 to 323,250 and clung near a post recession bottom. The monthly figure smooths out the jumpiness in the weekly data and offers a better look at underlying trends in the labor market.
The Dow Jones Industrial Average was down by 167.16 points or 1.01 percent, to 16,446.81, the Nasdaq Composite lost 31.34 points or 0.76 percent, to 4,069.29 and the S&P 500 dropped 17.68 points or 0.94 percent, to close at 1,870.85.
The Indian ADRs closed mostly in red on Thursday; ICICI Bank was down by 1.57%, Dr. Reddy’s Lab was down 0.92%, Infosys was down 0.66% and HDFC Bank was down 0.20%. On the other hand, Tata Motors was up 0.05%.
