The US markets closed lower on Friday, with the S&P 500 ending lower for a ninth straight session in the longest losing streak since December 1980. Global equity weakness has been tied in part to Republican presidential nominee Donald Trump’s gains against Democratic rival Hillary Clinton in the polls over the past week. He is viewed as more likely to inject uncertainty into domestic and global affairs, and investors generally don’t like uncertainty. Economic data released were mixed, but underlined steady growth and were seen as not impacting the Federal Reserve’s view for continued normalization of interest rates. According to the CME Group’s FedWatch tool, market participants see a 71.5% chance of the Federal Reserve tightening policy next month. On the economy front, the US added 161,000 new jobs in October and the unemployment rate fell below 5% again, reflecting a tight labor market that’s forced firms scrambling to fill open positions to boost pay at the fastest pace in seven years. Unemployment, meanwhile, fell to 4.9% from 5% and remained near an eight-year low. The jobless rate has barely changed in the past year. Although job openings are at a record high, companies aren’t filling positions as rapidly as they become available. Hourly pay for the typical employee jumped 0.4% in October to $25.92.
Separately, the US trade deficit plunged 10% in September to a 19-month low, aided by a fourth straight increase in exports that gave the economy a boost in the third quarter. The nation’s trade gap shriveled to $36.4 billion from a revised $40.5 billion in August. Exports rose 0.6% to $189.2 billion and hit the highest level since the summer of 2015 despite a sharp pullback in shipments of soybeans. American companies exported more consumer goods, aircraft and industrial supplies. US imports dipped 1.3% in September to $225.6 billion to mark a four-month low. The size of the trade deficit in the third quarter averaged $38.8 billion a month, the smallest since the beginning of 2014. The lower trade gap contributed to a 2.9% advance in gross domestic product in the third quarter that was the biggest gain in two years.
Meanwhile, Fed Vice Chairman Stanley Fischer stated that the US labor market is close to full strength and the economy could at some point overshoot the Federal Reserve’s goals for employment and inflation. Fischer did not say whether the Fed was likely to raise interest rates in December but he noted that investors in financial markets were betting on a hike that month. More strikingly, he appeared to acknowledge the US labor market could overheat and that inflation could exceed the Fed’s 2 percent target although he did not say when the US economy might exceed the Fed’s objectives. Dallas Federal Reserve Bank President Robert Kaplan stated that he believes there is increasing reason to raise US interest rates, though he declined to say when the next rate hike should take place.
Additionally, Atlanta Federal Reserve President Dennis Lockhart enlightened that Federal Reserve rate increases over the next two years will be ‘very’ gradual amid expected steady growth and stable job gains. Lockhart added that he felt the economy remained on track for moderate growth of around two percent, allowing the Fed to move rates higher - a bit at a time. The federal funds rate and other interest rates are all likely to remain below historical averages, while the housing industry in general should benefit as millennial come off the sidelines and begin buying homes.
The Dow Jones Industrial Average lost 42.39 points or 0.24 percent to 17,888.28, Nasdaq dropped 12.04 points or 0.24 percent to 5,046.37, while S&P 500 was down 3.48 points or 0.17 percent to 2,085.18.
The Indian ADRs closed mixed; Dr. Reddy’s Lab was down 0.49%, HDFC Bank was down 0.16% and ICICI Bank was down by 0.05%. On the other hand, Infosys was up 0.08% and Wipro was up by 0.06%.
