US market closed lower on weak retail sales data

15 Oct 2015 Evaluate

The US markets closed lower on Wednesday, hit by a dour forecast by the world’s biggest retailer and as a key report from the Federal Reserve which offered a muted picture of growth in the US. A key report about the US economy released offered a cautious take on the US economy, further lending credence to speculation that the Federal Reserve will not raise interest rates this year. The Federal Reserve’s Beige Book indicated some slowing in the economy, with two of the 12 districts - Richmond and Chicago - reporting that the pace of growth had slowed from mid-August until early October. One district, Kansas City, noted an overall slight decline in economic activity. The nine remaining districts, if they described growth, reported it as modest or moderate. Fed officials stated that they held off hiking rates in September after China’s surprise currency devaluation led to renewed questions about the health of emerging markets in general. The dollar strengthened markedly against several currencies as a result amid volatile financial markets. There were bright spots in the Beige Book assessment of the US economy, notably real estate and nonfinancial services. The Beige Book report comes two weeks before the Fed meets to set interest rate policy.

On the economy front, sales at US retailers barely rose in September after no change in August, suggesting that consumers cut back on spending toward the end of summer. Retail sales rose a seasonally adjusted 0.1% in September. An initially reported gain in August was also revised to show no increase. The slowdown in retail purchases over the past few months raises questions about whether Americans have grown more anxious after stocks in the US and around the world fell sharply. Auto sales were strong once again, jumping 1.7% last month, with sales hitting the highest level since 2005. The auto sector generates about one-fifth of all retail spending. Inventories at US businesses were flat in August. The unchanged reading was below the 0.1% gain. Business sales fell 0.6% in August, the biggest drop since January. The inventory-to-sales ratio, an indication of demand, rose to 1.37 from 1.36 in July. One new piece of information was retail inventories, which rose 0.3% in August compared with a 0.1% drop in sales. Excluding autos, retail inventories rose 0.4%.

Meanwhile, inflationary pressure in the guts of the US economy was invisible again in September, largely because of another drop in gasoline prices. The producer-price index, which includes wholesale costs, fell 0.5% last month. Measures of wholesale inflation at earlier levels of production also showed very little inflationary pressure in the pipeline. Over the past year overall producer prices have fallen an unadjusted 1.1%, and the year-over-year increase has been negative for eight straight months. Core wholesale prices are up a scant 0.5% in the last 12 months.

The Dow Jones Industrial Average dropped by 157.14 points or 0.92 percent to 16,924.75, Nasdaq was down 13.76 points or 0.29 percent 4,782.85, while the S&P 500 lost 9.45 points or 0.47 percent to 1,994.24.

Indian ADRs ended mostly in red, HDFC Bank was down by 0.14%, Infosys was down 0.13%, Wipro was down by 0.11% and ICICI Bank was down 0.03%. On the other hand, Dr. Reddy’s Lab was up by 0.18%.

US market closed lower on weak retail sales data

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