The US markets closed sharply lower on Friday, locking in the worst 10-day start to a calendar year ever, as oil prices plunged and investors worried about slowing growth in the US. Both the Dow and S&P 500 finished the week down more than 2%, while the Nasdaq shed more than 3% of its value this week. Oil appeared to be the main driver of concern with global benchmarks settling below $30 a barrel, as investors feared that supplies will continue to rise as Iran prepares to enter the market and Russia continues pumping oil to help support its flagging economy. New York Fed President William Dudley stated that he still expects sufficient economic strength to push the unemployment rate down further and for the economy to be slightly above the long-term trend this year. Dudley did acknowledge that data since the December rate hike has been on the softer side. The key official, who gets a vote at every meeting, explained his vote in support of a rate hike, saying it needed to be done now in a gradual way to prevent sharp tightening later. Dudley played down the difference in rate projections between the Fed’s summary of economic projections and the path implied by the federal funds futures market, noting the market incorporates all views, including outliers, and the Fed path is a median projection.
On the economy front, sales at US retailers fell slightly in December, as 2015 recorded the slowest pace of gains since 2009. Retail sales dropped a seasonally adjusted 0.1% last month. For all of 2015, retail sales grew just 2.1% even though job creation remained strong and more people earned an income. By contrast, sales expanded by an average rate of 5.1% from 2010 through 2014. Much - but not all - of the year’s weakness in sales can be explained by plunging gasoline prices. The cost of producing goods and services fell again in December, capping in the biggest decline in wholesale prices in 2015 in five years. The government’s producer price index, which includes wholesale costs, dropped 0.2% last month. Producer prices fell 1% in 2015. The drop in December and for the full year was largely the result of falling gasoline prices. They sank 8.3% last month and plunged 29% in 2015.
Meanwhile, a reading of New York-area manufacturing conditions in January fell sharply, suggesting production in the region has stalled and raising questions about the outlook for the economy. The Empire State manufacturing index sank to negative 19.4 in January from a revised negative 6.2 in December. This is the lowest level for the index, a key early reading on manufacturing, since the midst of the last recession in March 2009. Industrial production fell 0.4% in December the third straight monthly decline. November’s decline in output was revised to a 0.9% drop from the prior estimate of a fall of 0.6%. Capacity utilization fell to 76.5% in December from a downwardly revised 76.9% in November, slower than the 76.8% expected. Separately, business inventories fell 0.2% in November, as department stores and companies that sell building materials cut down on their restocking. In the 12 months ended in November, however, inventories were up 1.6%.
On the other hand, consumer sentiment rose more than expected in January as lower inflation buoyed Americans’ spending plans. Sentiment rose to 93.3 from 92.6 in the University of Michigan’s preliminary January reading. That was the fourth straight monthly gain and beat the reading of 93.0 expected by the street. The sub-gauge of future expectations rose 3 points, while the current conditions index fell 3 points.
The Dow Jones Industrial Average lost 390.97 points or 2.39 percent to 15,988.08, the Nasdaq was down 126.58 points or 2.74 percent to 4,488.42 while, the S&P 500 dropped 41.51 points or 2.16 percent to 1,880.33.
The Indian ADRs closed in red; HDFC Bank was down 2.48%, Tata Motors was down 1.24%, Dr. Reddy’s Lab was down 0.96%, Infosys was down by 0.53% and ICICI Bank was down by 0.48%.
