US markets closed lower amid hawkish Fed talk

17 Aug 2016 Evaluate

The US markets closed lower on Tuesday, a day after notching record highs, as investors weighed hawkish comments by Federal Reserve officials against sharp gains for oil futures, a weakening dollar and fresh consumer-price data that showed US inflation remains tepid. The consumer price index rose 0.8% compared to a year ago. Core CPI, which strips out the volatile food and energy categories, rose 2.2%, lower than the 2.3% yearly change in June. The cost of food was unchanged in July, and has risen 0.2% over the past year, the smallest increase since the 12 months ending in March 2010. Energy prices declined 1.6% and are 10.9% lower for the year. Real hourly wages, those which account for inflation, increased 0.4% in July, more than reversing the 0.2% decline in June. Wages are up 2.0% over the year. On the other hand, home builders broke ground on more structures than expected in July as confidence in the economy and demand for housing continues to expand. Housing starts ran at a seasonally adjusted 1.21 million annual rate, a 2.1% increase over an upwardly-adjusted June figure. Permits were at a 1.15 million annual rate in July, essentially flat from a revised June reading. Single-family starts edged up 0.5% to a 770,000 annual pace. Most of the strength in July came from multifamily starts, which popped 8.3% to a 433,000 annual rate.

Meanwhile, New York Fed President William Dudley stated that the time for another interest rate hike is approaching and a move as soon as the next meeting in September is a possibility. The labor market is averaging 190,000 jobs a month over the last three months and growth should accelerate in the second half of the year. Dudley added that the bond market is one area where he’s concerned about a possible asset bubble. Dudley is always a voting member of the Fed’s policy committee and his views are closely watched because he is seen as a close ally of Fed Chairwoman Janet Yellen.

The Dow Jones Industrial Average lost 84.03 points or 0.45 percent to 18,552.02, Nasdaq was down 34.91 points or 0.66 percent to 5,227.11, while S&P 500 dropped 12.00 points or 0.55 percent to 2,178.15.

The Indian ADRs closed mixed; Infosys was down 0.25%, Wipro was down 0.10% and ICICI Bank was down 0.03%. On the other hand, HDFC Bank was up 0.32% and Tata Motors was up 0.17%.

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