US markets closed up; Dow hits record high

18 Sep 2014 Evaluate

The US markets closed higher on Wednesday, with the Dow Jones Industrial Average reaching a record high. The main benchmarks swung higher after the Fed meeting and Fed Chairwoman Janet Yellen’s news conference, but trimmed gains by the end of the session. The Federal Reserve repeated that interest rates are likely to stay low for a considerable time after it ends its bond-buying program in October, but the central bank also took concrete steps to prepare for an increase some time in 2015. The central bank’s vote to stick to its current go-slow approach on raising interest rates drew two dissents, the first time that’s happened since Janet Yellen took over as chairwoman in February. The more hawkish presidents of the Dallas and Philadelphia Federal Reserve banks argued that rates will likely have to rise sooner than the Fed thinks. As expected, the Fed trimmed the size of its bond buying plan by $10 billion to $15 billion. That’s the seventh straight meeting with a $10 billion taper of QE3. A majority of 10 Fed officials expects interest rates to rise to a median rate of 3.75% by the end of 2017 while only four expect rates to be below that threshold. In the statement, the Fed notified that it expects to end the asset purchase program at its next meeting at the end of October if economic data doesn’t surprise over the next six weeks.

On the economy front, the US current account deficit fell by 3.8% to $98.5 billion in the second quarter from a revised $102.2 billion in the first quarter. The decline largely stemmed from a smaller deficit in a category known as secondary income that measures certain transfers between the US and other countries. As a percentage of gross domestic product, the current-account deficit edged down to 2.3% from 2.4%. The deficit is down sharply from the peak of 6.5% of GDP in 2005 and it’s has been trending near the lowest level in five years. The current account is basically a measure of how much a country owes or is owed in its dealings with other nations.

Separately, US consumer prices fell in August for the first time in 16 months, largely because of a decline in the cost of filling up at the gas station. Lower energy costs helped offset another increase in the price of groceries. The consumer price index dropped a seasonally adjusted 0.2% last month. A gauge of confidence among home builders rose in September to the highest level since November 2005, increasing four points to 59, according to National Association of Home Builders/Wells Fargo data released.

Dow Jones Industrial Average added 24.88 points or 0.15 percent to 17,156.85, the Nasdaq was up by 9.43 points or 0.21 percent to 4,562.19, and S&P 500 ended higher by 2.59 points or 0.13 percent to 2,001.57.

The Indian ADRs closed mostly in red on Wednesday; HDFC Bank was down by 0.58%, Infosys was up 0.50% and ICICI Bank was down by 0.06%. On the other hand, Dr. Reddy’s Lab was up 0.64% and Tata Motors was up by 0.12%.

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