US markets closed higher for second straight week

30 Jan 2016 Evaluate

The US markets closed higher on Friday, booking a second straight weekly gain but posting the worst January performance since 2009. Friday’s surge came amid a global equity rally following a surprise decision by the Bank of Japan to push a key interest rate into negative territory that some said could push the Federal Reserve to ease up on its plans to steadily raise interest rates. Dallas Fed President Robert Kaplan stated that he’s not ready to commit to any timing for the next increase in interest rates, emphasizing the central bank needed to assess how financial-market turbulence and economic developments abroad would affect the US economy. He added that it was significant that the Fed decided this week to no longer describe the risks to the US economy as being balanced, a term that meant officials were comfortable with their view of the outlook. San Francisco Fed President John C. Williams enlightened that slowing global growth and lower demand for funds has pushed down the outlook for a normal level of US interest rates to between 3 percent and 3.5 percent, somewhat lower than they were 10 years ago. Williams added that economy has been growing at 2 percent to 2.25 percent pace and he saw no reason to expect a recession this year.

On the economy front, the economy bogged down at the end of 2015, raising questions about whether US growth is losing momentum. Gross domestic product - the value of everything a nation produces - expanded at a 0.7% annual rate from October to December. That was a big markdown from 2% growth in the autumn and 3.9% growth in the spring, even though it was largely expected. The economy expanded at a 2.4% clip last year, the same as in 2014. The US hasn’t topped 3% growth since 2005. An early look at US trade patterns in December showed a small increase in the nation’s trade deficit. The trade gaps in goods - services are excluded - rose 1.6% to a seasonally adjusted $61.5 billion. A higher deficit subtracts from gross domestic product. The US trade outlook has deteriorated in the past year because of weaker growth in foreign markets and a strong dollar that’s made American exports more expensive. Exports fell 2.5% in the fourth quarter. That contributed to sharply slower growth in the final three months of the year. The government reported last month that the total US trade deficit in November fell slightly to $42.4 billion.

Meanwhile, an index that measures the price of US labor rose modestly in the fourth quarter, but showed little sign of marked acceleration. The employment cost index increased 0.6% from October through December. The ECI is a closely followed gauge that reflects how much companies, governments and nonprofit institutions pay their employees in wages and benefits. Despite some signs of scattered wage pressures, most workers still aren’t getting big increases in their paychecks. Over the past 12 months, employment costs have climbed 2%. Consumer sentiment took a hit as the stock market gyrated in January. Sentiment dipped to 92.0 from 92.6 in the University of Michigan’s final January reading. The sub-gauge of current conditions fell to 106.4 from 108.1, while the expectations portion was unchanged at 82.7.

The Dow Jones Industrial Average added 396.66 points or 2.47 percent to 16,466.30, the Nasdaq was up 107.27 points or 2.38 percent to 4,613.95 while the S&P 500 gained 46.88 points or 2.48 percent to 1,940.24.

The Indian ADRs closed in green; HDFC Bank was up 2.61%, Dr. Reddy’s Lab was up 1.65%, Tata Motors was up 1.00%, Infosys was up by 0.61% and Wipro was up 0.35%.

US markets closed higher for second straight week

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