US markets climb after Japan boosts economic stimulus

01 Nov 2014 Evaluate

The US markets closed higher on Friday, sending the S&P 500 and Dow Jones Industrial Average into record territory, after a surprise stimulus plan from the Bank of Japan was announced. On the domestic economy front, Chicago PMI rose to a one-year high in October, helped by gains in new orders. Chicago PMI rose to 66.2, a gain of 5.7 points, as the new-orders component leaped to 73.6. The bounce-back in the Chicago Business Barometer marks a solid start to Q4 and suggests that against a backdrop of concerns about weakening growth in Europe and China, the US economy is still growing firmly. The final October reading on the University of Michigan/Thomson Reuters consumer-sentiment index rose to 86.9 -- the highest level since July 2007 -- from a final September reading of 84.6. For context, the consumer-sentiment gauge averaged 86.9 over the year leading up to the recession.

On the other hand, the employment cost index measuring the price of US labor rose 0.7% for the second straight quarter to mark the biggest back-to-back gain since 2008, suggesting that businesses are facing rising labor costs. The larger-than-expected increase, which matches the 0.7% advance in the second quarter, is sure to worry investors. Over the past 12 months employment costs have risen 2.2%, up from 2% in the prior quarter and 1.9% a year earlier. Consumer spending in the US fell in September for the first time in eight months, as Americans bought fewer cars and spent less on energy amid falling oil prices. Personal spending dropped a seasonally adjusted 0.2% last month to mark the first decline since January. Personal income rose 0.2%. Meanwhile, inflation as gauged by the PCE price index edged up 0.1% in September, as did the core rate that excludes food and energy.

Dow Jones Industrial Average added 195.10 points or 1.13 percent to 17,390.52, Nasdaq was up by 64.60 points or 1.41 percent to 4,630.74, while S&P 500 ended higher by 23.40 points or 1.17 percent to 2,018.05.

The Indian ADRs closed in green on Friday; HDFC Bank was up by 1.63%, Infosys was up by 1.62%, Dr. Reddy’s Lab was up 1.36%, ICICI Bank was up 1.35% and Tata Motors was up by 1.34%.

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