Interest rate worries drag US markets lower on Friday

14 May 2016 Evaluate

After a choppy start US Markets extended their southward journey in afternoon deals with Dow and the S&P 500 ending the session at their lowest closing levels in a month. The major averages closed firmly in negative terrain but off their lows for the session. Sentiments remained dampened as upbeat retail sales data led to renewed concerns about the outlook for interest rates. The retail sales surged up by 1.3 percent in April after slipping by 0.3 percent in March. Excluding a jump in auto sales, retail sales still rose by 0.8 percent in April compared to an upwardly revised 0.4 percent increase in March. Ex-auto sales had been expected to rise by 0.5 percent. A separate report from the University of Michigan also showed that consumer sentiment jumped to an eleven-month high in May. The reports generated some optimism about the economic outlook, although the data also led to speculation about the possibility of an interest rate hike next month. Meanwhile, the Labor Department released a report showing a modest rebound in producer prices in the month of April, although prices were flat compared to the same month a year ago.

On the sectoral front, banking stocks remained under pressure as the day progressed, resulting in a 1.6 percent drop by the Dow Jones Banks Index. The index ended the session at a one-month closing low. Oil service stocks also saw notable weakness, as reflected by the 2.5 percent loss posted by the Philadelphia Oil Service Index. The weakness in the sector came as crude for June delivery slid $0.49 to $46.21 a barrel. Considerable weakness was also visible among transportation, brokerage, retail, and telecom stocks also, while gold stocks bucked the downtrend.

The Nasdaq dropped by 19.66 points or 0.41 percent to 4,717.68, S&P 500 lost 17.50 points or 0.85 percent to 2,046.61 and Dow Jones Industrial Average was down by 185.18 points or 1.04 percent to 17,535.32.

The Indian ADRs closed mostly in red; HDFC Bank was down 1.16%, ICICI Bank was down 0.25%, Infosys was down 0.17% and Wipro was down by 0.09%. On the other hand, Dr. Reddy’s Lab was up by 0.31%.

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