US markets closed lower; Dow marks seventh straight day of loss

03 Aug 2016 Evaluate

The US markets closed lower on Tuesday, marking the seventh straight day of loss for the Dow industrials and ending a five-day winning streak for the Nasdaq, as investors sifted through quarterly results as well as data on personal income and inflation. The decline in stocks highlighted fading appetite for risk assets, underscored by West Texas Intermediate crude which settled below $40 a barrel for the first time since early April. On the economy front, consumers boosted spending by 0.4% in June - the third straight strong increase - in a good sign for the economy. But they’ve also been saving less to fund their purchases. The increase outlays in June matched expectations. Spending in the three months from April to June marked the biggest quarterly gain since the seven-year-old recovery began in mid-2009. Higher spending also underpinned a 1.2% increase in gross domestic product in the second quarter and prevented US growth from turning negative. Businesses slashed investment and government spending also fell in the spring. Most of the increase in spending in June was on services such as housing, health care, entertainment and utilities such as air conditioning. Purchases of big-ticket items fell slightly. As a result, the personal-savings rate dropped to 5.3% and matched a 15-month low. Savings had hit a four-year high earlier in the year. Inflation as measured by the PCE index edged up 0.1% in June. The so-called core rate of inflation that strips out the volatile food and energy categories also rose 0.1%. The PCE index, the Federal Reserve’s preferred inflation barometer, increased 0.9% in the 12 months ended in June. That’s unchanged from in the prior month. The annual rate of core inflation was also flat at 1.6%.

Meanwhile, Dallas Federal Reserve Bank President Robert Kaplan stated that a raft of global risks that could adversely affect the United States remains on the horizon and requires close monitoring. He enlightened that central bank should raise interest rates in a gradual and patient manner in light of continuing challenges facing the US economy. Kaplan added that he is closely monitoring how slowing growth, high levels of overcapacity and high levels of debt to GDP in major economies outside the US might be impacting economic conditions in the US. Kaplan also noted that inflation continues to run below the Fed’s 2% target. The Dallas Fed expects headline inflation to come near 2% in the medium term.

The Dow Jones Industrial Average lost 90.74 points or 0.49 percent to 18,313.77, Nasdaq dropped 46.47 points or 0.90 percent to 5,137.73, while S&P 500 was down by 13.81 points or 0.64 percent to 2,157.03.

The Indian ADRs closed in red; Tata Motors was down 1.23%, Dr. Reddy’s Lab was down 0.40%, Infosys was down 0.18%, Wipro was down 0.17% and ICICI Bank was down 0.13%.

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