US markets closed mostly lower on Fed statement

28 Jul 2016 Evaluate

The US markets closed mostly lower on Wednesday, after the Federal Reserve signaled a willingness to raise benchmark interest rates in the fall. In its policy statement, the Fed stated that near-term risks to the economic outlook have been diminished, suggesting that a rate hike in September may be appropriate. According to CME Group’s FedWatch tool, the market sees an 18% probability of a September rate hike, compared with a 30% probability before the statement. The Fed stated that information received since the Fed policy committee met in June indicates that the labor market strengthened and that economic activity has been expanding at a moderate rate. Job gains were strong in June, and household spending has been growing at a brisk clip. Yet the central bank also noted that business investment remained soft. At the same time, Fed officials stated that they would continue to closely monitor inflation indicators and global economic and financial developments. The committee repeated that it expects economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate. There was no reference to the specific timing of the next potential rate hike. Kansas City Fed President Esther George, who wanted a rate hike now, was the lone dissenter.

On the economy front, orders for durable or long-lasting goods made in the US sank 4% in June, marking the biggest drop in almost two years and reflecting ongoing struggles by American manufacturers to drum up sales and help boost the US economy. The only standout performer: Auto makers. Orders for new cars and trucks rose 2.6%, reversing a similar decline in the prior month. New orders fell most sharply for commercial airplanes and expensive military hardware such as ships, tanks and fighter jets. Passenger plane bookings dove nearly 60% and orders for defense capital goods dropped 21%. Stripping out the volatile transportation sector, orders fell a smaller 0.5%. Core orders are also 3.8% lower through the first half of the year compared to the same period in 2015. The increase in durable-goods orders in May, meanwhile, was revised to show a 2.8% decline instead of 2.3%.

The Dow Jones Industrial Average was down by 1.58 points or 0.01 percent to 18,472.17, S&P 500 lost 2.60 points or 0.12 percent to 2,166.58, while the Nasdaq added 29.76 points or 0.58 percent to 5,139.81.

The Indian ADRs closed mostly in green; HDFC Bank was up 0.46%, ICICI Bank was up 0.15% and Tata Motors was up 0.10%. On the other hand, Dr. Reddy’s Lab was down 0.29% and Infosys was down by 0.05%.

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