US markets closed lower amid bond market volatility

13 May 2015 Evaluate

The US market closed lower on Tuesday, for the second day in a row, as investors weigh bond market volatility. A global slide in bond prices is getting investors worried that borrowing costs could rise. In the meanwhile, San Francisco Federal Reserve President John C. Williams stated that he supports an interest rate hike before inflation rises to the central bank’s 2% target rate, a view that suggests an optimistic forecast for the US economy. Williams stressed, however, that any decision on a rate hike will be data-driven, reiterating the position voiced by his Fed colleagues for months. By suggesting that the Fed should raise rates before inflation rises to 2%, Williams was expressing confidence that the economic recovery is strengthening and will continue to do so despite a weak first quarter.

On the economy front, job openings at US workplaces declined to 4.99 million in March from 5.14 million in February. Compared with same period in the prior year, March’s job openings rose 19%, as private-sector openings increased 19% to 4.51 million, and government positions rose to 488,000 from 415,000. With 8.58 million unemployed people in March, there were about 1.72 potential job seekers per opening, above February’s ratio of 1.69. The number of separations, such as quits and layoffs, rose to 4.98 million in March from 4.79 million in February. Meanwhile, the total number of hires inched up to 5.07 million from 5.01 million. The level of hires was about 5.04 million when the recession began. After a difficult March, small-business sentiment improved in April. The National Federation of Independent Business stated that its small-business optimism index rose 1.7 points to 96.9. Optimism may have seen a slight jump from last month’s weak numbers, but there was not an especially large gain in any area except for an improvement in profit trends.

Meanwhile, the federal government ran a budget surplus of $157 billion in April. That’s an increase of $50 billion from last April. Receipts in April totaled $472 billion, up $58 billion or 14% from last April. Most of the increase in receipts was from individuals’ taxes including income and payroll taxes. The government spent $315 billion in April, $8 billion or 3% more than a year ago. For the fiscal year to date, the government’s budget deficit is $283 billion, 8% smaller than the first seven months of fiscal 2014. April is usually a surplus month since the government receives tax payments from individuals ahead of the tax-filing deadline. The federal government’s budget year runs from October through September.

The Dow Jones Industrial Average lost 36.94 points or 0.20 percent to 18,068.23, Nasdaq was down by 17.38 points or 0.35 percent to 4,976.19 while, S&P 500 was lower by 6.21 points or 0.29 percent to 2,099.12.

The Indian ADRs closed mostly in red on Tuesday; Tata Motors was down by 0.63%, Infosys was down 0.62%, HDFC Bank was down 0.49% and ICICI Bank was down by 0.35%. On the other hand, Dr. Reddy’s Lab was up by 1.11%.

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