US markets closed lower; economic data concern weigh

23 Sep 2014 Evaluate

The US markets closed lower on Monday, with the S&P 500 falling by its largest margin in nearly seven weeks. A decline in economic activity in August, measured by Chicago Federal Reserve as well as a drop in existing-home sales contributed to the fall in the market. The US economic activity was below-trend in August. The Chicago Fed’s national activity index fell to negative 0.21 in August from positive 0.26 in July, and the three-month average slowed to 0.07 from 0.2 in July. The biggest drag came from production-related indicators, as manufacturing production fell 0.4% and manufacturing capacity utilization declined in August. The index, which is a weighted average of 85 different economic indicators, is designed so that negative values indicate below-average growth and positive values indicate above-average growth. Forty-two indicators improved from July to August, while 43 indicators deteriorated. Sales of previously owned homes fell in August, the first drop in five months, as investors paying entirely in cash made fewer deals. The street had expected an annual home-sales rate of 5.2 million in August, compared with an originally reported rate of 5.15 million for July. NAR tweaked July’s home-sales pace to 5.14 million.

Meanwhile, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota stated that policy makers should improve communications by saying how long they expect it will take for price increases to reach their target level. Kocherlakota added that the Federal Open Market Committee should consider articulating a benchmark two-year time horizon for returning inflation to the 2 percent goal. He further stressed that the Fed should detail how financial stability concerns affect policy. Kocherlakota also echoed Yellen’s argument that unemployment, while at its lowest point since 2008, may not be the best indicator of the labor market’s health for policy makers.

Separately, New York Federal Reserve Bank President William Dudley stated that the Federal Reserve doesn’t target the value of the US dollar but is paying attention to the currency’s rally. While the central bank has no target for the value of the currency, a substantial rally would have economic consequences, including weighing on already subdued inflation. Dudley also added that the Fed’s forward guidance remains dictated by economic data and cautioned against reading too much into the central bank’s so-called dot plot of future interest rate expectations.

Moreover, according to a new survey, twenty-two percent of workers laid off in the past five years are still unemployed means 1 in 5 workers laid off in past 5 years are still unemployed. The John J. Heldrich Center for Workforce Development at Rutgers University surveyed more than 1,100 workers, including nearly 400 who are unemployed. A slim majority of laid-off workers in the survey, or 54 percent, stated that they received unemployment insurance when they lost their jobs. However, 83 percent of those who received benefits stated that compensation ran out before they found jobs.

Dow Jones Industrial Average lost 107.06 points or 0.62 percent to 17,172.68, Nasdaq was down by 52.10 points or 1.14 percent to 4,527.69, while S&P 500 ended lower by 16.11 points or 0.80 percent to 1,994.29.

The Indian ADRs closed mixed on Monday; Infosys was down by 0.62%, HDFC Bank was down by 0.19% and ICICI Bank was down by 0.08%. On the other hand, Tata Motors was up by 0.85% and Dr. Reddy’s Lab was up 0.35%.

US markets closed lower; economic data concern weigh

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