US markets closed lower as oil sinks to seven year low

18 Dec 2015 Evaluate

The US markets closed lower on Thursday, snapping a three-day winning streak as oil prices posted their lowest settlement in nearly seven years. The market’s slump comes a day after the Federal Reserve lifted benchmark interest rates for the first time in nearly a decade. The day’s economic reports were mixed, underlining strength in the labor markets and weakness in manufacturing. A measure of manufacturing activity in the Philadelphia area fell back into negative territory in December, another indicator of the difficult times facing the manufacturing sector. The manufacturing index in December fell to negative 5.9, the third month in the last four where the readings were below zero. Manufacturing more generally has been weighed down by the strength of the US dollar, tepid foreign demand and the collapse in oil prices. The Philadelphia Fed index for current new orders remained negative and fell 6 points, to -9.5. However, firms reported higher shipments, as the current shipments index increased 6 points to a reading of 3.7.

Meanwhile, the US current-account deficit, a measure of the nation’s debt to other countries, rose 11.7% in the third quarter to the highest level since 2008. The deficit increased to a seasonally adjusted $124.1 billion from a revised $111.1 billion in the second quarter. It’s the biggest gap since the fourth quarter of 2008. The increase stemmed mostly from higher payments to foreigners on US investments as well as other income transfers. The trade deficit was little changed. As a percentage of the US economy, the current-account deficit equaled 2.7% of gross domestic product, up from 2.5% in the prior quarter. That’s the highest percentage in three years.

On the other hand, the number of Americans applying for unemployment benefits fell last week after a mini-spike earlier in December that boosted jobless claims to a five-month high. Initial claims fell by 11,000 to a seasonally adjusted 271,000 in the seven days running from December 6 through December 12. A more reliable measure, the average of initial claims over the past month, fell by 250 to 270,500. Weekly jobless claims are on track in 2015 to post the smallest annual average since 1973, reflecting an improved labor market and the lowest level of layoffs in years. A strong pace of hiring since 2011 has driven the unemployment rate down to a post recession low of 5%.

The Dow Jones Industrial Average lost 253.25 points or 1.43 percent to 17,495.84, the Nasdaq was down 68.58 points or 1.35 percent to 5,002.55 and the S&P 500 dropped 31.18 points or 1.50 percent to 2,041.89.

The Indian ADRs closed mostly in red; Dr. Reddy’s Lab was down by 0.93%, Tata Motors was down 0.46%, Infosys was down 0.29% and Wipro was down by 0.26%. On the other hand, HDFC Bank was up 0.05%.

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