US markets closed lower on Tuesday

14 Sep 2016 Evaluate

The US markets closed lower on Tuesday, as equities suffered a sharp sell-off amid a slump in energy shares and uncertainty about the Federal Reserve’s plans for monetary policy. A decline in crude-oil prices, as the International Energy Agency warned of slowing growth in demand, also helped fuel the downdraft for the stock benchmarks. Fed Governor Lael Brainard stated that the Federal Reserve should avoid removing support for the US economy too quickly, that solidified the view the central bank would leave interest rates unchanged next week. Brainard added that she wanted to see a stronger trend in US consumer spending and evidence of rising inflation before the Fed raises rates, and that the United States still looked vulnerable to economic weakness abroad. Brainard did not comment on the specific timing of future rate policy changes but she held firm in arguing for caution in what could be the last word from a Fed policymaker before the central bank’s September 20-21 meeting. Minneapolis Fed President Neel Kashkari stated that the Federal Reserve has perfect tools for fighting too-high inflation, but it has few tools to fight the too-low inflation that has persisted for the past several years. Kashkari added that low inflation means there is no pressure to raise interest rates aggressively.

On the economy front, the federal government ran a budget deficit of $107 billion in August, $43 billion more than in August 2015.The government spent $338 billion last month, up 23% from the same month a year ago. Spending rose notably for veterans’ programs and Medicare. For the first 11 months of the fiscal year, spending is up 3%. Total receipts for August were up 10% to $231 billion. Individual income and payroll tax receipts rose by 9%. Corporate receipts were flat at $5 billion. Receipts are up 1% for the fiscal year to date. For the fiscal year so far, the budget deficit is up 17%. A measure of small-business sentiment declined in August as owners became more hesitant, with election worries at the forefront. The National Federation of Independent Business small-business optimism index fell 0.2 points to 94.4. The outlook for business conditions in the next six months had the most dramatic change, dropping seven points. Setting an all-time high for the survey, 38% of business owners cited the political climate as a reason not to expand.

On the other hand, the poverty rate dropped sharply, and median incomes charted their first increase since the Great Recession, according to data released by the Census Department. The official poverty rate fell 1.2 percentage points between 2014 and 2015 to 13.5%, and the number of people in poverty fell by 3.5 million. The threshold for a family of two adults and two children to be considered living in poverty was $24,036. Real median household income rose 5.2% during the year, the first annual increase in median household incomes since 2007.

The Dow Jones Industrial Average lost 258.32 points or 1.41 percent to 18,066.75, Nasdaq dropped 56.63 points or 1.09 percent to 5,155.26, while S&P 500 was down 32.02 points or 1.48 percent to 2,127.02.

The Indian ADRs closed in red; HDFC Bank was down 1.53%, Tata Motors was down 1.00%, Dr. Reddy’s Lab was down 0.51%, Infosys was down 0.32% and Wipro was down 0.17%.

US markets closed lower on Tuesday

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