US markets closed lower on disappointing data, weak earnings

29 Apr 2016 Evaluate

The US market closed lower on Thursday, as Apple Inc. extended its losing streak, while the broader market crumbled under the combined weight of disappointing data and weak corporate earnings. The market had started off on a sour note after the Bank of Japan decided to keep its interest rates unchanged and offer no additional stimulus. On the economy front, the US economy sputtered in the first quarter, expanding at the slowest pace in two years as business slashed investment by the steepest amount since the Great Recession. Gross domestic product, the sum of a nation’s economy, slowed to a 0.5% annual growth rate in the first three months of 2016. The US had grown 1.4%, 2% and 3.9% in the prior three quarters. Export-heavy manufacturers facing a tougher global sales environment and US energy producers coping with cheap oil led a corporate retreat in the January-to-March period. Companies cut spending on structures such as mining rigs by nearly 11% and investment in new equipment fell by 8.6%, the biggest drop since the waning stages of the 2007-2009 downturn. The saving grace once again were consumers, though even they cut back on spending. Instead of splurging, consumers increased their rate of savings instead to 5.2% from 5% at the end of 2015. Separately, the rate that Americans own their homes fell in the first quarter to the third lowest on record, another indication that worsening finances as well as changing preferences since the Great Recession are altering behavior. The Commerce Department reported that the ownership rate fell a tenth to a seasonally adjusted 63.6% in the first quarter, marking the third lowest figure since the 63.5% low in the second quarter of 2015. The ownership rate was 67.8% in the quarter when the US entered recession.

On the other hand, the number of Americans who applied for unemployment benefits last week rose by 9,000 to 257,000, but initial claims continued to cling near a four-decade low. The exceedingly low level of so-called initial jobless claims reflects a surge in hiring over the past several years that’s nudged the nation’s unemployment rate down to 5%. The average of new claims over the past four weeks, a less volatile measure, fell by 4,750,000 to 256,000. That’s the lowest level since December 1973. Although the economy slowed sharply in the first quarter, companies still added more than 200,000 jobs a month. Some 2.13 million people collected weekly unemployment benefits, known as continuing claims, in the seven days ended April 16. That was 5,000 lower compared to the prior week.

The Dow Jones Industrial Average lost 210.79 points or 1.17 percent to 17,830.76, Nasdaq was down by 57.85 points or 1.19 percent to 4,805.29 while, S&P 500 dropped 19.34 points or 0.92 percent to 2,075.81.

The Indian ADRs closed in red; Tata Motors was down 0.66%, HDFC Bank was down 0.65%, Dr. Reddy’s Lab was down 0.43%, Infosys was down 0.33% and Wipro was down 0.18%.

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