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US markets rally as oil surge

04 Feb 2015 Evaluate

The US markets closed higher on Tuesday, rallying for the second-straight session, sending Dow Industrials rocketing more than 300 points, as equities kept pace with surging crude-oil prices. The market reaction to weaker-than-expected factory orders was muted. On the economy front, auto makers stated that their US sales grew in January, typically a slower month for the industry, as strong demand trends appear likely to continue into the New Year. The auto industry is in the midst of a strong run of monthly sales improvements as US consumers, armed with more cash because of lower gasoline prices, are more confident about the economic outlook. Now, the market is looking to see whether the sector can continue its torrid growth this year.

On the other hand, new orders for factory-made goods in the US sank 3.4% in December to mark the fifth straight decline. The latest drop suggests that manufacturers may have scaled back production owing to a stronger dollar and weak economic growth overseas that’s made it harder to sell American-made goods. Inventories also declined for the first time in 19 months, down 0.3%. Excluding transportation, new factory orders fell a smaller 2.3%. Shipments of factory goods retreated 1.1% in December.

Meanwhile, Minneapolis Fed President Narayana Kocherlakota stated that the Federal Reserve should keep interest rates near zero this year, or risk slowing US job growth and inflation’s return to the US central bank’s 2% goal. Kocherlakota’s views mark him as one of the Fed's most dovish policymakers. Federal Reserve Bank of St. Louis President James Bullard repeated that he’d like to see the central bank raise short-term interest rates soon, shrugging off declining inflation expectations as being driven by the shock decline in oil prices. Although he acknowledged that inflation is well below the Fed’s 2% target amid a disconcerting decline in price rise expectations. Bullard noted small rate rises would still leave central bank policy at very supportive levels.

The Dow Jones Industrial Average added 305.36 points or 1.76 percent to 17,666.40, the Nasdaq Composite was up by 51.05 points or 1.09 percent at 4,727.74 while, the S&P 500 gained 29.18 points or 1.44 percent, to close at 2,050.03.

Indian ADRs closed mixed on Tuesday; Tata Motors was up by 0.71%, Wipro was up 0.19% and Infosys was up 0.17%. On the other hand, HDFC Bank was down by 1.15% and ICICI Bank was down by 0.33%. 

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