US markets decline amid escalating violence in Iraq

25 Jun 2014 Evaluate

The US markets closed lower on Tuesday, with the Dow Jones Industrial Average falling most in more than a month. Investors were concerned about the growing turmoil in Iraq, where insurgents have been gaining ground in the oil-rich nation. On the economy front, a gauge of consumer confidence rose to 85.2 in June -- the highest level since January 2008 -- from 82.2 in May. Both the present situation and expectations indexes rose in June. Consumers were more optimistic about the labor market. The present-situation gauge rose to 85.1 in June from 80.3 in May, while the expectations barometer rose to 85.2 from 83.5. Sales of new homes surged nearly 19% in May to the highest annual level in six years, though the surprising gain was partly spurred by a big spike in the Northeast that’s unlikely to last. New US homes sold at an annual rate of 504,000 last month to mark the sharpest increase since May 2008. The quicker pace of sales in May compared to April reflected the biggest one-month increase in 22 years.

Besides, home prices rose in April as the spring selling season got underway, even as annual growth skidded, dropping to the slowest year-over-year pace in 13 months. S&P/Case-Shiller’s price barometer tracking 20 cities showed that year-over-year price growth hit 10.8% in April - a fast pace but down sharply from annual growth of 12.4% in March and a recent peak of 13.7% in November. Also, Case-Shiller reported that its monthly gauge of home prices rose 1.1% in April, a second consecutive gain as the spring selling season got underway, with all 20 tracked cities posting higher prices. After seasonal adjustments, home prices among the 20 cities rose 0.2% in April, compared with 1.2% in March. Elsewhere, the Federal Housing Finance Agency, which tracks deals involving mortgages backed by Fannie Mae and Freddie Mac reported that home prices were unchanged in April, while annual growth hit 5.9%.

Meanwhile, Charles Plosser, the president of the Philadelphia Fed stated that several variations of a well-known monetary policy rule uniformly call for the Federal Reserve to lift interest rates in the third quarter of 2014, well before the market now expects the central bank to move. Plosser expects the unemployment rate to slip to 5.8% by the end of the year. He added that concerns about persistent low inflation have been mitigated by recent data. The Philadelphia Fed president is one of the most hawkish Fed members and is a voting member of the Fed’s policy committee this year.

The Dow Jones Industrial Average lost 119.13 points or 0.70 percent to 16,818.13, the Nasdaq dropped 18.32 points or 0.42 percent to 4,350.36 while, the S&P 500 was down by 12.63 points or 0.64 percent at 1,949.98.

Indian ADRs closed mostly in red on Tuesday; Infosys was down by 0.54%, Dr. Reddy’s Lab was down 0.40%, ICICI Bank was down 0.33% and Wipro was down by 0.04%. On the other hand, Tata Motors was up 0.66%.

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