US markets closed higher on Tuesday

07 Dec 2016 Evaluate

The US markets closed higher on Tuesday, with the Dow Jones Industrial Average finishing at an all-time high for a second day in a row. The market is pricing in a high chance of a rate increase by the Federal Reserve next week, while investors also are awaiting the European Central Bank’s meeting, set for Thursday, which could help provide clues on the outlook for European markets. The Fed is entering its ‘blackout’ period on Tuesday, which means there won’t be any central bank speakers ahead of the monetary-policy setting meeting on December 13-14. Markets are currently pricing in a 92.7% probability of a rate increase at the meeting, according to the CME FedWatch tool. The Atlanta Federal Reserve’s GDP Now forecast model showed that the US economy is on track to grow at a 2.6 percent annualized pace in the fourth quarter following the latest data on jobs, car sales and equipment investment. The latest fourth-quarter GDP estimate was lower than the 2.9 growth rate calculated on December 1.

On the economy front, a large surge in the productivity of US companies and employees in the third quarter was left unchanged after a second look by government economists. Productivity rose at an annual 3.1% pace in the three months covering July through September, the same as the initial reading. Output of goods and services - the stuff workers make or provide - was revised up to 3.6% from 3.4%. The amount of time employees worked was also raised to 0.5% from a preliminary 0.3% reading. Unit-labor costs, meanwhile, grew 0.7% in the third quarter vs. an initial 0.3% increase. Unit-labor costs reflect how much it costs a business to produce one unit of output, such as a ton of coal or a bushel of wheat.

Meanwhile, the US trade deficit jumped almost 18% in October as imports rose to the highest level in 14 months. The nation’s trade gap climbed to a four-month high of $42.6 billion from a revised $36.2 billion in September. The size of the trade deficit from August to October averaged $39.8 billion a month, smaller than the $42.4 billion gap in the same three-month period in 2015. October imports increased 1.3% to $229 billion, marking the highest level since August 2015. Exports, meanwhile, slipped 1.8% to $186.4 billion in October. The deficit is unlikely to continue to decline, though, given a strong dollar that’s weighing on exports and an improved US economy that’s boosting demand for imports. A higher trade deficit reduces the official score card for the economy known as gross domestic product.

The Dow Jones Industrial Average added 35.54 points or 0.18 percent to 19,251.78, Nasdaq was up 24.11 points or 0.45 percent to 5,333.00, while S&P 500 gained 7.52 points or 0.34 percent to 2,212.23.

The Indian ADRs closed mostly in green; HDFC Bank was up 1.55%, Tata Motors was up by 0.21%, ICICI Bank was up 0.17% and Infosys was up 0.13%. On the other hand, Dr. Reddy’s Lab was down 0.09%.

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