US markets closed lower on disappointing data

31 Jan 2015 Evaluate

The US markets closed lower on Friday, as investors grappled with downbeat gross domestic product data, less-than-stellar earnings that overshadowed a bounce in crude-oil futures. On the economic front, the US economy grew by a 2.6% annual pace in the fourth quarter, slowing from a 5.0% pace in the third quarter. Consumer spending, which is a main source of economic activity, rose 4.3% following a 3.2% rise in the third quarter. This is the biggest gain since the first quarter of 2006. But growth slowed because of slower business and government spending and higher imports. The PCE index, the Fed’s preferred inflation gauge, fell at a 0.5% annual rate in the October-to-December period, compared to a 1.2% gain in the third quarter. That’s the biggest drop since the first quarter of 2009.The core PCE that excludes food and energy, rose at a 1.1% clip, down from 1.4%.

Besides, an index that measures the price of US labor moderated in the fourth quarter. The employment cost-index climbed 0.6% in the fourth quarter after a 0.7% increase in both the second and the third quarters. Over the past 12 months, employment costs have risen 2.2%, the same rate as the third quarter. The ECI is a closely followed gauge that reflects how much companies, governments and nonprofit institutions pay their employees in wages and benefits. The final read on the University of Michigan’s consumer sentiment index was 98.1, down a tick from the 98.2 in the preliminary estimate. That’s still above the 93.6 mark in December and the best reading in 11 years. However, Chicago PMI rose in January, helped by growth in new orders and the best reading on employment in 14 months. Chicago PMI rose 0.6 points to 59.4.

Meanwhile, San Francisco Federal Reserve Bank President John Williams stated that the US economy has good momentum. Williams predicted that the US will see real GDP growth around 3 percent in 2015, and that the unemployment rate will touch 5 percent by the end of the year. Still, the central banker notified that he did not see the Fed hitting its inflation target until the end of 2016.

The Dow Jones Industrial Average lost 251.90 points or 1.45 percent to 17,164.95, the Nasdaq Composite was down by 48.17 points or 1.03 percent at 4,635.24 while, the S&P 500 dropped 26.26 points or 1.30 percent, to close at 1,994.99.

Indian ADRs closed mostly in red on Friday; Dr. Reddy’s Lab was down 3.53%, HDFC Bank was down by 3.02%, Tata Motors was down by 1.83%, ICICI Bank was down by 0.67% and Infosys was down 0.54%.

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