US markets closed lower; Tech leads sell-off

09 Jul 2014 Evaluate

The US markets closed lower on Tuesday, pulling the Dow Jones Industrial Average and S&P 500 further from record levels. Tuesday’s sell-off was most pronounced in the tech world. Investors also had a light load of economic news to digest during the session. On the economy front, small-business optimism dropped in June on a big decline in those who expect the economy to improve. The National Federation of Independent Business stated that its small-business optimism index fell 1.6 points to 95, as six of 10 components fell and only two rose. Those who expect the economy to improve dropped 10 points to a net negative 10 reading, by far the biggest shift. The two jobs components those that plan to increase employment and current job openings both rose on the month.

Separately, job openings at US workplaces rose to 4.64 million in May -- the most since June 2007 -- from 4.46 million in April. Compared with same period in the prior year, May job openings rose 19%, as private-sector openings increased 21% to 4.21 million, and government positions rose to 423,000 from 384,000. US consumer credit growth remained strong in May but not at the fast pace seen in April. US consumers increased their debt in May by a seasonally adjusted $19.6 billion, down from a revised $26.1 billion gain in the prior month. This was close to the market consensus. The monthly debt rose at a 7.4% annual rate in May, compared with a 10.0% rate in the prior month, which was the strongest rate since July 2011.

Meanwhile, Narayana Kocherlakota, the president of the Minneapolis Fed, stated that he expects the price level to stay below the central bank’s target for several more years, possibly even until 2018. He enlightened that while inflation has climbed over the past three months and is now up 1.8% over the past year, many large fluctuations in the personal consumption expenditure index inflation end up being purely transitory. Jeffrey Lacker, president of the Richmond Fed stated that keeping inflation under control will require the Federal Reserve to be pre-emptive. Lacker, who is not a voting member of the Fed policy committee this year, added that the Fed’s most recent forecasts released after its policy committee meeting last month show the first rate hike rising sometime next year while inflation is at or below the Fed’s 2% target.

The Dow Jones Industrial Average lost 117.59 points or 0.69 percent to 16,906.62, the Nasdaq was down 60.07 points or 1.35 percent to 4,391.46, while the S&P 500 dropped by 13.94 points or 0.70 percent at 1,963.71.

Indian ADRs closed in red on Tuesday; Tata Motors was down 0.77%, Dr. Reddy’s Lab was down 0.76%, ICICI Bank was down 0.66%, HDFC Bank was down 0.21% and Wipro was down by 0.20%.

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