US markets closed lower disappointed by ECB stimulus

09 Sep 2016 Evaluate

The US markets closed lower on Thursday, after the European Central Bank kept key interest rates steady but disappointed some by not announcing additional measures to boost Europe’s sluggish economy. The ECB’s policy inaction, so far, has been a blow to risk appetite, suggesting that the absence of additional new stimulus by the ECB may give the Federal Reserve more room for tighter monetary policy. Investors have been closely eyeing each data set, looking for clues about whether the Fed will raise interest rates in September. Market expectations for a rate hike in September were 18 percent, according to the CME Group’s FedWatch tool. On the economy front, the number of Americans who applied for unemployment benefits last week stretching from August 28 to September 3 fell by 4,000 to a two-month low of 259,000, reflecting the unwillingness of businesses to part with workers in a tight labor market despite slower economic growth. New claims have hovered around the 260,000 range for the past few months. The post-recession low of 252,000 was set in July. The average of new jobless claims over the past month fell by 1,750 to 261,250. New claims fell below the key 300,000 threshold in early 2015 and have remained there for 79 straight weeks, the longest stretch since 1970. That was the first year in the modern era when claims topped 300,000. Continuing jobless claims, meanwhile, dropped 7,000 to 2.14 million in the week ended August 27.

Meanwhile US consumer borrowing picked up in July, bolstering expectations that consumer spending will remain a key factor in accelerating economic growth. Outstanding consumer credit rose by a seasonally adjusted $17.7 billion in July. Adding to the sense of strength, a slowdown in June was revised to reflect a rise. The Fed’s data now show a $14.5 billion gain in June, up from the prior estimate of $12.3 billion, which was the slowest pace in almost four years. In the second quarter, real consumer spending rose at a 4.4% annual rate. Consumer credit rose at a 5.8% seasonally adjusted annual growth rate in July, a pickup from June’s upwardly revised 4.8% pace. It is below the 7.8% rate seen in March, which was the fastest monthly pace this year.

The Dow Jones Industrial Average lost 46.23 points or 0.25 percent to 18,479.91, Nasdaq dropped 24.45 points or 0.46 percent to 5,259.48, while S&P 500 was down 4.86 points or 0.22 percent to 2,181.30.

The Indian ADRs closed mostly in red; Tata Motors was down 0.53%, Infosys was down 0.35%, HDFC Bank was down 0.31% and Wipro was down 0.18%. On the other hand, Dr. Reddy’s Lab was up 0.11%.

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