The US markets closed mostly lower on Wednesday, as an early session rally led by a surge in the energy sector sputtered out in late trade. Crude oil posted its biggest one-day pop since February, after the Organization of the Petroleum Exporting Countries agreed to cut production levels. The late-afternoon claw-back by equities coincided with the release of the Federal Reserve’s Beige Book, which showed a modest economic expansion without any tailwind from the presidential election. There was no sign of any postelection euphoria in the Federal Reserve’s latest survey of current economic conditions released. The Fed survey, known as the beige book, is a collection of anecdotes from business contacts in the Fed’s 12 regional districts. This report was based on comments collected by November 18. Retail sales remained mixed. Sales were higher for apparel and furniture, but car sales were down in most of the Fed’s districts, while used cars were becoming a more popular option. The survey highlighted that in a majority of the Fed’s districts, staffing services reported rising wages or difficulty filling positions without wage increases. The unemployment rate has fallen steadily over the past few years but workers have yet to see much benefit. Wages have just kept pace with inflation. Retailers continue to have little control over product pricing, according to contacts in Cleveland and Atlanta. Overall, the beige book found continued modest to moderate growth in the economy. Demand for manufactured goods was mixed. The strong dollar was cited as a headwind to more robust demand in a few districts.
On the economy front, private employers hired far more workers than expected in November, suggesting the pace of hiring picked up after several months of moving sideways. Payroll processor ADP reported that 216,000 net new jobs were added in the month. October’s original tally of 147,000 was revised down substantially, to 119,000. November’s tally was strong across the board. Small businesses added 37,000 jobs, medium businesses added 89,000, and large businesses hired 90,000 workers. The Chicago PMI jumped to 57.6 in November, its highest level since January 2015. In October, the index had slipped 3.6 points to 50.6. Separately, consumer spending rose 0.3% in October, up from a revised 0.7% rise in September, while personal income rose 0.6% in October, the fastest growth since April, and up from a revised 0.4% gain in September. Consumer spending makes up about two-thirds of gross domestic product, and economists closely watch these data for information about overall growth. Inflation continues to push closer to the Federal Reserve’s 2% target, holding down real personal spending to a 0.1% gain. As measured by an index for personal-consumption expenditures, inflation rose 1.4% over the past 12 months, the highest rate in two years. This is up from a 0.3% annual rate in October 2015. The core PCE gauge, which excludes food and energy, grew 1.7% over the past year, the same rate as September. The core PCE rate was 1.3% one year ago.
Meanwhile, Cleveland Fed President Loretta Mester stated that the US economy needs higher interest rates although the Federal Reserve will closely scrutinize the expected changes in America’s fiscal, trade and immigration policies. Mester did not specifically refer to proposals by US President-elect Donald Trump to slash tax rates, boost infrastructure investment and curtail immigration. But she said changes in these policy areas appeared likely and that the US central bank would have to weigh how they affect employment and inflation. Dallas Fed President Robert Kaplan stated that the Federal Reserve should take a wait-and-see stance toward the economic ideas of President-elect Donald Trump because some of the policies under discussion in the Trump camp could boost growth, while other ideas may slow the economy. Kaplan sounded content with market consensus that the US central bank will raise interest rates at its policy meeting next month.
The Nasdaq was down 56.24 points or 1.05 percent to 5,323.68, S&P 500 dropped 5.85 points or 0.27 percent to 2,198.81, while the Dow Jones Industrial Average added 1.98 points or 0.01 percent to 19,123.58.
The Indian ADRs closed mostly in green; Dr. Reddy’s Lab was up 0.33%, ICICI Bank was up 0.31% and HDFC Bank was up 0.14%. On the other hand, Tata Motors was down by 0.10% andInfosys was down 0.02%.
