US markets closed lower on weak GDP data

30 Apr 2015 Evaluate

The US market closed lower on Wednesday, after the Federal Reserve left open the chance of an interest-rate hike as early as June, in a statement following its two-day policy meeting. The Federal Reserve expects the economy will grow at a moderate pace despite the weak first quarter, keeping its options open for the timing of its first interest rate hike since 2006. Although growth in output and employment slowed during the first quarter, the committee continues to expect that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the committee judges consistent with its dual mandate. The Fed noted for the first time that non-energy imports were keeping inflation below its 2% annual target, a veiled reference to the impact of the strong dollar. The Fed statement is consistent with Fed Chairwoman Janet Yellen’s stated intention to be data-dependent in deciding when to raise interest rates and make that decision on a meeting-by-meeting basis. Fed officials added that they want to see further improvement in the labor market and have confidence that low inflation is stabilizing before they raise rates.

On the economy front, the nation’s economic growth slowed to a crawl in the first quarter, a period marked by severe weather, a soaring dollar that curbed American exports and a steep drop in investment by US energy companies after oil prices tanked. Gross domestic product expanded by a meager 0.2% annual pace. By contrast, the economy grew at a 2.2% rate in the final three months of 2014. For the most part, consumers continued to spend at modest clip to keep the economy afloat, helped by a sharp drop in inflation that stretched their dollars a little further. Outlays rose 1.9%, down from an unsustainable 4.4% in the prior quarter but just several ticks below the average gain since a US recovery began in mid-2009.

However, a gauge of pending home sales increased in March for the third consecutive month, hitting the highest level since June 2013, signaling that upcoming deals could pick up. The index from the National Association of Realtors reached a seasonally adjusted 108.6 in March, up 1.1% from 107.4 in February.

The Dow Jones Industrial Average lost 74.61 points or 0.41 percent to 18,035.53, Nasdaq was down by 31.78 points or 0.63 percent to 5,023.64 while, S&P 500 was lower by 7.91 points or 0.37 percent to 2,106.85.

The Indian ADRs closed mostly in red on Wednesday; Dr. Reddy’s Lab was down 0.66%, Tata Motors was down by 0.64% and Infosys was down by 0.13%. On the other hand, Wipro was up 0.05% and ICICI Bank was up 0.01%.

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