US markets closed lower ahead of Fed meet

26 Aug 2016 Evaluate

The US markets closed lower on Thursday, with investors reluctant to make big bets the day before a much-anticipated speech by Federal Reserve Chairwoman Janet Yellen that will be picked apart for clues to the central bank’s next rate move. Kansas City Fed President Esther George stated that she thought it was time to raise interest rates. The Kansas City Fed President added that she was not trying to cool off the economy by moving to high interest rates. But she doesn’t think that it would be appropriate to begin the process of normalizing interest rates. George enlightened that rate hikes should be gradual and she would support paring down the Fed’s $4.5 trillion balance sheet by first stopping reinvestment of maturing securities. George has been a proponent for higher rates, voting several times in the last year for an increase, including at this past July’s meeting. George, who is a voting member of the Fed’s policy committee this year, notified that she didn’t know if anything would cause her to change her mind at the Fed’s meeting next month. But she implied that decision-making remains data-dependent.

On the economy front, the number of Americans who applied for unemployment benefits last week stretching from August 14 to August 20 fell by 1,000 to 261,000 and remained near post-recession lows, indicating a healthy labor market in which few people are losing their jobs. The average of new jobless claims over the past month dropped by 1,250 and stood 264,000. The less volatile four-week average is seen as a more accurate measure of labor-market trends. The number of people seeking benefits each week hit a 27-year high of 665,000 near the end of the Great Recession in 2009 before beginning a long descent. Claims fell below the key 300,000 threshold in early 2015 and have remained there for 77 straight weeks, the longest streak since 1970. Continuing jobless claims, meanwhile, declined by 30,000 and stood at 2.15 million in the week ended August 13.

Meanwhile, orders for durable or long-lasting goods made in the US surged 4.4% in July to mark the biggest gain since last fall, a sign that an extended decline in production may be over. Orders for new autos, however, were flat. Stripping out the volatile transportation sector, orders rose a smaller 1.5%. Still, that matches the biggest increase of the year.

The Dow Jones Industrial Average lost 33.07 points or 0.18 percent to 18,448.41, Nasdaq was down 5.50 points or 0.11 percent to 5,212.20, while S&P 500 dropped 2.97 points or 0.14 percent to 2,172.47.

The Indian ADRs closed mixed; Tata Motors was up 0.75%, Dr. Reddy’s Lab was up 0.32% and ICICI Bank was up 0.09%. On the other hand, Infosys was down 0.34% and Wipro was down 0.12%.

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