US markets closed mostly lower; Dow ekes out some gain

16 Jul 2014 Evaluate

The US markets closed mostly lower on Tuesday, as investors were caught by an explicit warning from the Federal Reserve about valuations on social media and biotechnology stocks. The Federal Reserve may have to raise interest rates sooner and higher than expected if the labor market keeps surprising the central bank. In testimony to the Senate Banking Committee, Chairwoman Janet Yellen stressed, that considerable uncertainty surrounds the economic outlook and the Fed’s decisions about interest rates will depend on the data. Yellen added that if the labor market continues to improve more quickly than anticipated by the Federal Open Market Committee, resulting in faster convergence toward our dual objectives, then increases in the federal funds rate target likely would occur sooner and be more rapid than currently envisioned. Some economists, and Fed regional bank presidents, are pushing the Fed for a sooner lift-off, saying that the central bank risks falling behind the curve on inflation.

On the economy front, the sales at US retailers rose in June by the smallest amount since January, but most stores except for auto dealers and home-improvement outlets boasted an improvement in revenue. Sales were also a bit stronger than previously reported in May and April. That could give an extra pop to the estimate for US growth in the second quarter when the government reports the preliminary figure at the end of the month. In the past year, retail sales have risen 4.3%, about two-thirds as fast as normally is the case. In June, retail sales rose by a seasonally adjusted 0.2%, or by 0.4% excluding the auto sector. The sales in May were revised to show a 0.5% increase instead of 0.3%. And April sales were revised up to 0.6% from 0.5%. Retail sales account for about one-third of consumer spending, the main engine of economic activity, and the report helps determine gross domestic product.

Meanwhile, a poll of New York-area manufacturers surged to its highest level in more than four years. The Empire State manufacturing survey climbed to 25.6 in July, up from 19.3 in June, the highest level since April 2010. The Empire State is the first of the regional manufacturing surveys to be released; the Philadelphia Fed survey comes out on Thursday. The prices paid for goods imported into the US edged up 0.1% in June, largely because of higher fuel costs. Excluding fuel, import prices fell by 0.1% last month. The prices of US-made goods exported to other nations, meanwhile, dropped 0.4% in June.

Separately, Business inventories rose 0.5% in May to a seasonally adjusted $1.34 trillion. Sales advanced 0.4% in May. The ratio of inventories to sales slipped to 1.28 from 1.29 in April. In April, inventory growth was unchanged at 0.6%.

The Nasdaq was down 24.03 points or 0.54 percent to 4,416.39, the S&P 500 lost 3.82 points or 0.19 percent at 1,973.28, while Dow Jones Industrial Average added 5.26 points or 0.03 percent to 17,060.68.

Indian ADRs closed mixed on Tuesday; Dr. Reddy’s Lab was down 1.04%, Infosys was down by 0.30% and Wipro was down 0.02%. On the other hand, ICICI Bank was up 1.73% and HDFC Bank was up 0.44%.

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