US markets closed lower on global worries

04 May 2016 Evaluate

The US market closed lower on Tuesday, as weaker-than-expected manufacturing data in China revived worries about global growth and sent investors scurrying out of the perceived risk of equities. European equities sold off, while commodity prices as well as currencies of commodity-exporting countries fell after a surprise interest-rate cut in Australia added to global economic jitters. On the economy front, economic woes from weak commodity prices are spreading in the oil patch from energy firms to other businesses and consumers, according to a Federal Reserve survey of senior bank loan officers released report. Bank officers reported that credit quality deteriorated in the first quarter on loans to businesses and consumers in energy dependent areas of the country. In particular, credit quality on auto loans had suffered, with 23% of banks reporting deterioration, according to the survey of 70 domestic and 22 branches of foreign banks operating in the US. About 15% of banks reported that credit quality had worsened on consumer credit card loans and 14% on loans outside of credit card and autos. Commercial real estate loans were a concern for 16% of the banks.

On the other hand, US auto sales recovered in April, suggesting the March downturn was the result of the early onset of Easter. US light vehicle sales rose to a seasonally adjusted annual rate of 17.4 million, recovering from the March nosedive to 16.6 million. Car and truck sales have eased off the breakneck pace seen at the end of 2015, when the sales rate was above 18 million for every month from September through November. Auto sales have been boosted by a number of factors: low gas prices, more jobs and loose lending standards, among them.

Meanwhile, Cleveland Fed President Loretta Mester stated that waiting for markets to calm down before raising interest rates may backfire and just lead to more volatility. Mester enlightened that forestalling rate increases for too long in light of financial market volatility that doesn’t affect the outlook may simply produce more volatility in the future if we find ourselves having to increase rates more aggressively than anticipated to achieve our goals. Mester added that she would like to see gradual interest-rate hikes this year. However, the Cleveland Fed president warned of risks for excessive delay in raising rates. Mester, one of the more hawkish regional Fed presidents, is a voting member of the Fed policy committee this year.

The Dow Jones Industrial Average lost 140.25 points or 0.78 percent to 17,750.91, Nasdaq was down by 54.37 points or 1.13 percent to 4,763.22 while, S&P 500 dropped 18.06 points or 0.87 percent to 2,063.37.

The Indian ADRs closed in red; HDFC Bank was down 0.40%, Tata Motors was down 0.40%, ICICI Bank was down by 0.31%, Infosys was down 0.28% and Dr. Reddy’s Lab was down 0.18%.

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