US markets closed higher on strong GDP data

28 Aug 2015 Evaluate

The US markets closed higher on Thursday, for a second straight session as China showed signs that measures to stabilize its economy. The weekend will bring the Federal Reserve’s annual conference in Jackson Hole, Wyo., where the central bank might offer fresh clues about a possible interest-rate hike. On the economy front, The US economy looks much more vigorous in the second quarter than previously thought, as a report released showed businesses got off the sidelines and spent some money. The acceleration in business investment, if it’s sustained, could add to the economy’s momentum in the months ahead. The data show why the Federal Reserve is considering hiking interest rates at its next meeting in September. The US economy grew at a faster 3.7% annual pace in the second quarter, up from the initial estimate of growth at a 2.3% clip. The government estimated last month that gross domestic product expanded at a seasonally adjusted 2.3% clip from April to June. Pending home sales rose 0.5% in July after an upward revision to June’s numbers. The pending home sales index was 7.4% above July 2014 levels. A sale is listed as pending when the contract has been signed but the transaction has not closed.

In other development, new applications for US unemployment benefits fell by 6,000 to 271,000 in the seven days ended August 22, the first decline after four straight weekly gains. The latest report on initial claims indicates that the labor market is still improving. Initial claims have clung below the key 300,000 threshold for 25 weeks, the longest stretch in more than 15 years. The average of new claims over the past month, meanwhile, edged up by 1,000 to a seasonally adjusted 272,500. The four-week average smooths out sharp fluctuations in the more volatile weekly report and is seen as a more accurate predictor of labor-market trends. Continuing jobless claims increased by 13,000 to 2.27 million in the week ended August 15. These claims reflect people already receiving unemployment checks.

Meanwhile, Federal Reserve Bank of Kansas City President Esther George stated that it’s important for the nation’s central bank to understand this week’s extreme stock market volatility, but cautioned that markets are focused on the near term. She added that policy makers are always trying to divine whether the forecast should adjust because of what they’ve seen. She reiterated her long-standing view that the Fed should normalize interest rates.

The Dow Jones Industrial Average added 369.26 points or 2.27 percent to 16,654.77, the Nasdaq gained 115.17 points or 2.45 percent to 4,812.71, while the S&P 500 was up by 47.15 points or 2.43 percent to 1,987.66.

The Indian ADRs ended in green on Thursday, Dr. Reddy’s Lab was up 0.94%, Tata Motors was up 0.81%, Infosys was up by 0.32%, HDFC Bank was up by 0.19% and ICICI Bank was up 0.15%.

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