The US markets closed mostly lower on Thursday, after the Federal Reserve left interest rates unchanged, and left investors uncertain about the timing of what would be the first rate hike in nearly a decade. The Federal Reserve held interest rates steady due to global headwinds that could slow the economy and keep inflation subdued as the central bank kept alive the possibility of a hike before the end of the year. The Fed stated that recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term. By a 9-to-1 vote, the Fed kept rates steady as it highlighted that the financial market turmoil did not change its assessment that the risks to the economy were nearly balanced, but added a new phrase that it was monitoring developments abroad. According to the latest so-called dot-plot, 13 of the 17 Fed officials think the Fed will raise rates at least once before the end of the year. One, Richmond Fed President Jeffrey Lacker, dissented from the decision as he wanted a quarter-point rate hike. And one US central banker, Minneapolis Fed President Narayana Kocherlakota, is now advocating negative interest rates for the US economy in 2015 and 2016. The Fed also lowered where it believes rates should be in the longer run to 3.5% from 3.8% three months ago. The Fed meets two more times this year, on October 27-28 and December 15-16.
On the economy front, the US current account deficit narrowed to a preliminary $109.7 billion in the second quarter, or 2.5% of gross domestic product, from a revised $118.3 billion, or 2.7%, in the first quarter. The smaller deficit resulted from narrower deficits on goods and secondary income. Increases in the surpluses on primary income and services also contributed to the decrease in the current-account deficit which peaked at 6.5% of GDP at the end of 2005 and has been sharply lower since the end of the Great Recession. The current-account gap in the first quarter was revised up from a previous $113.3 billion. New applications for US unemployment benefits fell by 11,000 to 264,000 in the seven days ended September 12. The latest report on initial claims shows the domestic economy remains resilient in face of a weaker global outlook. This is the lowest level of claims since mid-July. That reading of 255,000 in the week ended July 18 was the lowest level of claims since September 1974. The average of new claims over the past month, meanwhile, edged down by 3,250 to a seasonally adjusted 275,000. 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 declined by 26,000 to 2.24 million in the week ended September 5. These claims reflect people already receiving unemployment checks.
On the other hand, the Philadelphia Fed manufacturing index took a surprise turn into negative territory in September, falling to negative 6 from positive 8.3 in August. Evidence suggests that the responses regarding general activity that were received earlier in the month may have been negatively affected by the volatility in the stock market and international news reports. The Empire State manufacturing index was negative 14.7 for September.
The Dow Jones Industrial Average lost 65.21 points or 0.39 percent to 16,674.74, the S&P 500 was down by 5.11 points or 0.26 percent to 1,990.20 while, the Nasdaq was up by 4.71 points or 0.10 percent to 4,893.95.
The Indian ADRs ended mixed on Thursday, Infosys was down 0.12%, Dr. Reddy’s Lab was down by 0.09% and Tata Motors was down 0.05%. On the other hand, HDFC Bank was up 0.77% and ICICI Bank was up by 0.12%.
