US markets records biggest monthly gains since October 2011

31 Oct 2015 Evaluate

The US markets closed lower on Friday, but still recorded their biggest monthly gains since October 2011. The main indexes also recorded modest weekly gains for a fifth consecutive week. However, Friday’s session was more cautions, after a number of weaker economic reports and mixed earnings. On the economy front, Americans are snapping up new cars and trucks at the fastest rate in a decade, but cheaper gas prices led to the smallest increase in consumer spending in September in eight months. Consumer spending rose a seasonally adjusted 0.1% last month to mark the smallest gain since January. Purchases of long-lasting goods such as new autos jumped 0.6% while spending on services like dining out increased 0.3%. Yet spending on nondurable goods - mainly gasoline and oil-related energy products - dropped a sharp 0.3%. That largely explains softer spending in September. Personal incomes rose just 0.1% in September. The personal savings rate rose a notch to 4.8% and reached a five-month high. The PCE index, the Federal Reserve’s preferred inflation barometer, has risen a scant 0.2% in the past 12 months. The Fed wants to see inflation rise closer to 2% before it initiates a series of interest-rate increases. The core PCE index that excludes food and energy rose 0.1% in September, and it’s up a mild 1.3% over the past year.

Separately, the cost of employing the average US worker sped up in the third quarter after a record-low increase in the spring. The employment cost index advanced a seasonally adjusted 0.6% from July to September after a 0.2% gain in the second quarter. Over the past 12 months, employment costs have risen an unadjusted 2%, the same as in the second quarter but down sharply from a post-recession high of 2.6% in the first quarter. The Chicago business barometer, also called the Chicago PMI, surged back into positive territory in October, rising to a level of 56.2 from 48.7 in September. That’s the highest level since January, and came after big gains in production and new orders. Consumer sentiment rose in October, though not as much as a preliminary figure suggested. The index increased to 90.0 in October from 87.2 in September, though that was below initial 92.1 reading.

Meanwhile, the International Monetary Fund urged the Federal Reserve to be cautious on raising rates, warning that tightening too fast could force it to reverse and possibly lose credibility. The United States and the global economy face risks tied to the impending rate hike, which would be the first in more than nine years. While a rate rise would represent the Fed’s confidence in US economic growth, the IMF warned that it could happen amid large uncertainty about slack in labour markets, the neutral policy rate and the path for inflation and wages. It added that global financial stability is often in the balance, given that an increase in the Fed’s benchmark rates could spark abrupt shifts in global investment portfolios and high market volatility.

The Dow Jones Industrial Average lost 92.26 points or 0.52 percent to 17,663.54, Nasdaq was down 20.52 points or 0.40 percent 5,053.75, while the S&P 500 dropped 10.05 points or 0.48 percent to 2,079.36.

Indian ADRs ended mostly in red, HDFC Bank was down by 1.10%, Infosys was down 0.13%, Dr. Reddy’s Lab was down by 0.12% and ICICI Bank was down 0.04%. On the other hand, Wipro was up by 0.01%.

US markets records biggest monthly gains since October 2011

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