US markets closed lower led by tech sector slump

30 Apr 2016 Evaluate

The US market closed lower on Friday, as a selloff in the technology sector deepened, but the Dow Jones Industrial Average and the S&P 500 hung on to post monthly gains in April. A string of disappointing quarterly results from high-profile tech companies, including Microsoft and Apple, has led to persistent selling in the group in recent sessions, making it the worst-performing sector for the year to date. On the economy front, consumer confidence tumbled in April as Americans’ views of the economy in the future darkened. The index is now 7.2% lower than its level a year ago, a decline driven largely by the expectations component. It fell 4.8% during the month to 77.6, and is 12.6% lower than in April 2015. Consumers’ views of the current situation, meanwhile, were more positive. They rose 1.0% in April to 106.7, and were down just 0.3% for the year. A measure of Chicago-area economic activity softened in April, indicating that manufacturers and other large companies are still struggling to cope with lower exports, tepid global growth and even some weakness in the United States. The Chicago business barometer, or Chicago PMI, fell 3.2 points to 50.4 in April.

Meanwhile, consumer spending barely rose in March as Americans continue to pocket steady gains in their incomes. Americans increased spending by a scant 0.1% last month. Incomes, meanwhile, advanced a sharp 0.4% last month. Although incomes are rising, especially when inflation is taken into account, households are still in a cautious mood. The savings rate in March climbed to 5.4% from 5.2%, matching the highest level since the end of 2012. Inflation as measured by the PCE index rose 0.1% in March, as did the so-called core measure that strips out the volatile food and energy categories. The core PCE index climbed 1.6% from March 2015 to March 2016, down a tick from the previous month.

However, an index that measures what it costs a business to employ a worker rose mildly in the first quarter and showed no sign of acceleration in the cost of labor. The employment cost index climbed 0.6% for the third quarter in a row. But the cost of keeping workers on the job has actually tapered off over the past year despite widespread predictions that wages would speed up. From January through March, wages increased 0.7%. Wages represent about 70% of a company’s cost to employ its workers.

The Dow Jones Industrial Average lost 57.12 points or 0.32 percent to 17,773.64, Nasdaq was down by 29.93 points or 0.62 percent to 4,775.36 while, S&P 500 dropped 10.51 points or 0.51 percent to 2,065.30.

The Indian ADRs closed mostly in red; Dr. Reddy’s Lab was down 0.76%, Tata Motors was down 0.33%, ICICI Bank was down by 0.29% and Infosys was down 0.09%. On the other hand, HDFC Bank was up 0.04%.

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