US markets closed lower for the second straight day

06 Apr 2016 Evaluate

The US market closed lower on Tuesday, logging a second day of losses as fears about global economic health dogged the market and fueled selling in traditionally riskier assets. Following pressure from Europe and Japan, along with the run-up in US stocks from February lows, investors are easing off, even with signs of economic improvement domestically. Chicago Fed President Charles Evans stated that financial markets are more pessimistic than the US central bank in their pricing of US interest rate hikes. Evans, a top Federal Reserve policymaker, also repeated his call for just two US interest-rate hikes this year, saying that the risks to his forecast for economic growth are weighted to the downside. Evans added that Fed has to be proactive and aggressive to reach its inflation target. Evan enlightened that Fed expects inflation to stabilize by end of the year and edge higher next year, so he is looking at two rate hikes by end of the year.

On the economy front, the US trade deficit widened 2.6% in February largely because of an uptick in imports, marking the third increase in a row and the biggest gap since the end of last summer. The deficit increased to a seasonally adjusted $47.1 billion from a revised $45.9 billion in January. The last time the trade gap was higher was in August 2015. The bigger trade gap in the first two months of 2016 compared to a year earlier is expected to subtract from first-quarter US growth. A higher deficit reduces gross domestic product. Imports advanced by 1.3% to $225.1 billion in February, led by increases in pharmaceutical drugs, toys, games and sporting goods. The rise in imports suggests Americans may have boosted spending a bit, a sign that consumers are keeping the economy on a steady growth path. US exports rose a smaller 1% to $178.1 billion, but that was the first gain since September.

On the other hand, companies in the US services sector such as health care providers and retailers grew in March at the fastest pace since December, indicating the US economy improved after a slow start to the first quarter. The Institute for Supply Management stated that its nonmanufacturing index rose to 54.5% in March from 53.4% in February. Twelve of the 18 main service industries reported growth in March. The new orders index rose 1.2 points to 56.7% while employment edged back into positive territory, up 0.6 points to 50.3%.

Meanwhile, International Monetary Fund chief Christine Lagarde stated that sub-zero interest rates in Europe and Japan are net positives for the global economy, though she warned that the side effects of unorthodox central-bank policies should be closely monitored. Lagarde praised recent policy moves by the European Central Bank and the US Federal Reserve, and called on governments to play their part by introducing growth-friendly reforms. Lagarde added that economic sentiment had been bolstered by fresh stimulus from the ECB last month and by an apparent shift toward a slower pace of rate increases by the Fed.

The Dow Jones Industrial Average lost 133.68 points or 0.75 percent to 17,603.32, Nasdaq dropped 47.87 points or 0.98 percent to 4,843.93 while, S&P 500 was down by 20.96 points or 1.01 percent to 2,045.17.

The Indian ADRs closed in red; Tata Motors was down by 1.13%, HDFC Bank was down 0.80%, Infosys was down 0.44%, Wipro was down 0.31% and ICICI Bank was down 0.26%.

US markets closed lower for the second straight day

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