US markets slump; Argentina’s debt default worries lingers

01 Aug 2014 Evaluate

The US markets slumped on Thursday, with the Dow Jones Industrial Average experiencing its biggest one-day drop in six months, as a combination of earnings, economic news and a default by Argentina triggered a broad selloff. Standard & Poor’s Ratings Services declared the country in selective default after talks aimed at a settlement between Argentina and holdout creditors fell apart late Wednesday. On the domestic economy front, Chicago PMI dropped sharply in July to its lowest level in over a year. The index fell to 52.6 in July from 62.6 in June. It is the sharpest one month drop in the Chicago PMI since the start of the financial crisis in October 2008. The decline was led by a collapse in production and orders, which had all been strong since last fall. Despite the decline, the index remains over the 50 level which indicates expansion.

Meanwhile, the number of people who applied for US unemployment benefits rose by 23,000 last week to 302,000, one week after falling to a 14-year low. Still, the level of initial claims remains near a post-recession bottom and continue to signal further improvement in the labor market. The average of new claims over the past month, meanwhile, fell by 3,500 to 297,250. It’s the first time the monthly average has fallen below the 300,000 mark since April 2006 and reflects an eight-year low. Also, the continuing claims increased by 31,000 to a seasonally adjusted 2.54 million in the week ended July 19. Continuing claims reflect the number of people already receiving benefits.

Separately, an index that measures the price of US labor rose in the second quarter at the fastest pace since the fall of 2008, largely because of higher retirement and health-care benefits. The employment cost index climbed 0.7% in the second quarter after a 0.3% increase in the first quarter.

The Dow Jones Industrial Average lost 317.06 points or 1.88 percent to 16,563.30, Nasdaq was down by 93.13 points or 2.09 percent to 4,369.77, while the S&P 500 slipped by 39.40 points or 2.00 percent at 1,930.67.

Indian ADRs closed in red on Thursday; Dr. Reddy’s Lab was down 1.89%, Infosys was down by 0.82%, ICICI Bank was down 0.73%, HDFC Bank was down 0.70% and Tata Motors was down 0.39%.

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