US markets closed higher; Dow records 7-day winning streak

16 Nov 2016 Evaluate

The US markets closed higher on Tuesday, with the Dow Jones Industrial Average turning in a seventh winning session in a row and its fourth straight record close. There also was a temporary respite in what has been a rout in US government bonds, suggesting that investors are reassessing their positions after a sharp swing in the wake of Republican Donald Trump’s surprise election win. On the economy front, sales at US retailers surged in October to cap the best two-month stretch since early 2014, offering more proof that a vastly improved jobs market is encouraging Americans to spend and keep the economy growing at a steady pace. Retail sales jumped 0.8% last month after a revised 1% gain in September. The increase in retail sales suggests the US economy got off to a good start in the fourth quarter. Consumer spending is the main driver of growth. The improvement in October was spearheaded by a strong month for auto dealers, whose sales hit an 11-month high. Excluding autos and gas, sales still rose a healthy 0.6%. A measure of New York-area manufacturing conditions turned positive in November for the first time in four months, as respondents reported both rising new orders and shipments. The Empire Fed index rose 8.3 points to 1.5, on a scale where any reading above zero indicates improving conditions. The new-orders index climbed 8.7 points to 3.1, and the shipments index rose 9.1 points to 8.5. The inventories index fell 11.3 points to -23.6, a multiyear low, indicating that inventory levels declined significantly. However, the index for number of employees dropped 6.2 points to -10.9, and the average work week also remained in negative territory.

Meanwhile, Boston Fed President Eric Rosengren, a historically dovish policymaker who surprised some in September when he joined the minority in advocating a rate rise, stated that the US economy should hit its inflation goal next year and could well go too far in driving unemployment lower. In arguing that a modest tightening was needed to avoid a sharp policy change in the near future, Rosengren’s appeared to reinforce market expectations - now above 75 percent - for a mid-December hike. Rosengren decided not to dissent again in November because, changes in the Fed statement were well aligned with the notion (and the market perception) of a high likelihood of tightening in December. Fed Vice Chairman Stanley Fischer enlightened that he welcomes the possibility of more fiscal stimulus coming from Washington. Fischer said more fiscal policy could change the Fed’s view of what the underlying neutral rate is for the economy. That is important because if the Fed believes the neutral rate will rise, it may have to raise its benchmark overnight lending rate more to slow the economy. Even if the Fed does not want to slow the economy, it could mean the central bank would be further behind the curve just to remain neutral. Fischer enlightened that more expansive fiscal policy will increase the neutral rate and ease the task of monetary policy.

The Dow Jones Industrial Average gained 54.37 points or 0.29 percent to 18,923.06, Nasdaq was up 57.22 points or 1.10 percent to 5,275.62, while S&P 500 edged higher 16.19 points or 0.75 percent to 2,180.39.

The Indian ADRs ended mixed, Tata Motors was down by 0.62%, HDFC Bank was down by 0.46% and Infosys was down 0.06%. On the other hand, Dr Reddy’s was up 0.85% and ICICI Bank was up by 0.11%.

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US markets closed higher; Dow records 7-day winning streak

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