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  3. US markets closed lower on disappointing earnings

US markets closed lower on disappointing earnings

12 May 2016 Evaluate

The US market closed lower on Wednesday, erasing nearly all of the sizable gains from the previous day’s session, as disappointing earnings and a slump among retailers led to disquiet among investors. On the economy front, the US government ran a budget surplus of $106.4 billion in April, down from a surplus of $156.7 in the same month in 2015. Most of the decline of the surplus is due to timing quirks because May 1 was a Sunday and some payments were shifted into April. But even without these technical issues, the surplus would have been about 6% lower year-on-year. After narrowing for four straight years, the deficit for the current fiscal year looks set to see an increase of red ink. The Congressional Budget Office is projecting a $534 billion deficit for the current fiscal year, about $100 billion greater than fiscal 2015’s deficit. As a percentage of gross domestic product, the shortfall would be 2.9%.

Meanwhile, former Minneapolis Fed President Narayana Kocherlakota stated that the Fed’s unconventional policy of buying bonds pushed up the value of stocks and bonds that mainly belong to wealthy Americans. He cites data from the Fed’s Survey of Consumer Finances showing that the typical family in the bottom of the wealth distribution was worse off in 2013 than it had been in any year going back to 1989. He agrees that the Fed did make the poor even poorer. Kocherlakota added that inequality rose because monetary policy was too tight, not because it was too easy. He added that Fed should have done more to support home prices.

The Dow Jones Industrial Average was down by 217.23 points or 1.21 percent to 17,711.12, Nasdaq dropped by 49.19 points or 1.02 percent to 4,760.69, while S&P 500 lost 19.93 points or 0.96 percent to 2,064.46. 

The Indian ADRs closed mostly in red; Dr. Reddy’s Lab was down 0.95%, Tata Motors was down 0.90%, Infosys was down 0.33% and HDFC Bank was down 0.15%. On the other hand, ICICI Bank was up by 0.14%.


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