US markets closed mostly lower; Dow manages to end in green

13 May 2016 Evaluate

The US market closed mostly lower on Thursday, as a slump in technology shares, highlighted by a steep slide in Apple, pressured the market, dragging the S&P 500 and the Nasdaq Composite lower. An unexpected spike in weekly jobless claims of last week also contributed to the weakness in the market. The number of Americans who applied for unemployment benefits in early May rose for the third straight week and hit a 14-month high, reflecting an unusual surge in New York state and perhaps adding to evidence that the US labor market may have softened. Initial claims climbed by 20,000 to 294,000 from May 1 to May 7. The average of new claims over the past four weeks, a less volatile measure, shot up by 10,250 to 268,250. Just a month earlier, initial jobless claims had fallen to a 43-year low. Separately, the cost the US paid for imported goods rose 0.3% in April, largely because of higher oil prices. The increase was the second in a row. The last time import prices rose two straight months was almost one year ago. Over the last 12 months, import prices are 5.7% lower, but the trend is slowly shifting higher. Aside from oil, import prices for food and industrial supplies also rose and the cost of foreign autos edged higher. Consumer goods were somewhat cheaper, though. Stripping out fuel, import prices increased 0.1% to mark the first advance since July 2014.

Meanwhile, Kansas City Fed President Esther George stated that interest rates are too low for today’s economic conditions, creating risks for the outlook. The Kansas City Fed added that because monetary policy has a powerful effect on financial conditions, it can give rise to imbalances or capital misallocation that negatively affects longer-run growth. Low rates can cause interest-sensitive sectors to take on too much debt and grow quickly, only to unwind in ways that are disruptive. Cleveland Fed President Loretta Mester stated that both headline and core inflation have moved higher as oil prices and the dollar have shown some stability of late. The most recent data are encouraging and consistent with the Fed policy committee’s view that inflation will gradually move back to target over time. Mester noted that, as of the first quarter, inflation, as measured by the headline personal consumption expenditure index, has risen to 1% from 0.2% in the first quarter of last year.

Moreover, Boston Fed President Eric Rosengren stated that the economy appears to be strengthening after the sluggish first quarter giving the green light for the US central bank to continue its attempt to normalize interest-rate policy. The Boston Fed President said he expects second-quarter gross domestic product will rebound above 1.75% from the anemic 0.5% rate in the first three months of the year. Rosengren put a positive spin on the April jobs report, saying the 160,000 gain in nonfarm payrolls was less than expected but still enough to gradually tighten labor markets.

The Nasdaq dropped by 23.36 points or 0.49 percent to 4,737.33, S&P 500 lost 0.35 points or 0.02 percent to 2,064.11, while Dow Jones Industrial Average gained 9.38 points or 0.05 percent to 17,720.50.

The Indian ADRs closed mostly in green; Tata Motors was up 0.62%, Dr. Reddy’s Lab was up 0.28%, HDFC Bank was up 0.20% and Infosys was up 0.06%. On the other hand, ICICI Bank was down by 0.05%.

US markets closed mostly lower; Dow manages to end in green

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