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US markets slump after ECB unveils monetary stimulus

04 Dec 2015 Evaluate

The US markets slumped on Thursday, pushing both the Dow industrials and the S&P 500 further into negative territory for the year, after the European Central Bank unveiled a smaller-than-expected expansion of its monetary stimulus program. Federal Reserve Chairwoman Janet Yellen too made it pretty clear she’ll support the central bank’s first interest-rate increase in nine years when policy makers meet in two weeks. Yellen added that she expects the economy to continue to grow over the forecast horizon, adding more jobs and bringing inflation back up toward the central bank’s 2% annual target. Atlanta Fed President Dennis Lockhart stated that the case for a December increase in interest rates is compelling. Lockhart stated that he thinks the economy will sustain a moderate pace of growth in coming quarters. He added that the US central bank’s condition for a rate hike of further improvement in the labor market has been met. The Atlanta Fed president also highlighted that factors holding down inflation are transitory. Lockhart is a voting member of the Fed policy committee this year and is a centrist on the committee.

On the economy front, a closely-watched gauge of service sector activity eased more sharply than expected in November, a small red flag amongst a recent spate of stronger economic data. It was the steepest one-month decline for the index since November 2008. The purchasing managers’ index from the Institute of Supply Management fell to 55.9% from 59.1%. The gauge of business activity fell 4.8 points to 58.2%, and new orders, a proxy for future activity, fell 4.5 points to 57.5%. On the other hand, orders for goods produced in US factories rose 1.5% in October, rebounding from a decline in the prior month. Orders for durable goods - products meant to last at least three years - advanced 2.9% in October. Orders for nondurable goods were flat. In September, factory orders fell 0.8%.

Meanwhile, more Americans applied for unemployment benefits in the last week of November, but the pace of layoffs remained near a 15-year low amid a tightening labor market. Initial jobless claims rose 9,000 to a seasonally adjusted 269,000 in the period from November 22 to November 28. The average of initial claims over the past month, considered a more reliable measure, fell by 1,750 to 269,250. New claims are created when a person loses a job and applies for unemployment benefits. Weekly claims dipped below the 300,000 mark in February and are now at levels last seen at the tail end of the Internet boom in 2000.

The Dow Jones Industrial Average slid 252.01 points or 1.42 percent to 17,477.67, the Nasdaq fell 85.69 points or 1.67 percent to 5,037.53 and the S&P 500 tumbled 29.89 points or 1.44 percent to 2,049.62.

The Indian ADRs closed in red; Dr. Reddy’s Lab was down by 0.91%, Tata Motors was down by 0.62%, HDFC Bank was down by 0.23%, Wipro was down by 0.15% and ICICI Bank was down by 0.13%.



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