US markets closed lower on Trump immigration debacle

31 Jan 2017 Evaluate

The US markets closed lower on Monday, with the Dow logging its worst daily loss since mid-October as investors grappled with the latest policy decisions by President Donald Trump. Wall Street also looked ahead to a heavy week of economic data, corporate earnings and the latest meeting by the Federal Reserve set to begin Tuesday. The CBOE Volatility index VIX, a measure of investor anxiety, surged 11% in its biggest one-day pop in about five months, though it remains well below its long-term average of 20. While stocks reacted favorably to Trump’s election in November, with major indexes hitting a series of records as investors bet he would push for lower taxes and deregulation, the first week of his administration was marked by confusion and controversy. Tensions have been high between the US and Mexico, while a public outcry that occurred over a travel ban this weekend sowed further doubts among some that lack of equity volatility could continue. The Federal Open Market Committee’s two-day meeting kicks off Tuesday, with economists widely predicting the central bank will hold pat and leave interest rates unchanged. That means investors will likely focus on any new guidance on the ‘balance of risks’ statement with respect to policy confidence about further stimulus withdrawal.

On the economy front, Americans spent more on new cars and other big-ticket items in December to finish the year on a optimistic note, though a key level of inflation hit the highest level in more than two years. Consumer spending rose 0.5% last month. That’s the biggest increase in spending in December since the last month of 2009, just as the US began to emerge from the Great Recession. The increase in spending outpaced the 0.3% gain in individual incomes. As a result, the US savings rate fell 0.2 percentage points to 5.4%, marking the lowest level since early 2014. Overall, consumer spending rose a solid 3.8% in 2016 after a 3.5% advance in 2015. The PCE index rose 0.2% in December. The core rate that strips out food and energy edged 0.1%. The core rate was flat at 1.7% over the past 12 months.

Meanwhile, a gauge of pending home sales rose in December, a sign of enduring demand despite housing headwinds. The National Association of Realtors’ index jumped 1.6% to 109. That’s 0.3% higher than a year ago. The index forecasts future sales by tracking real estate transactions in which a contract has been signed, but the deal has not yet closed. December’s contract activity was mixed regionally. The index tracking the Northeast fell 1.6%, and the one covering the Midwest dipped 0.8%. Pending home sales jumped 2.4% in the South, and surged 5% in the West.

The Dow Jones Industrial Average dropped 113.23 points or 0.56 percent to 19,971.13, Nasdaq lost 47.07 points or 0.83 percent to 5,613.71, while S&P 500 was down by 12.46 points or 0.54 percent to 2,280.90.

The Indian ADRs closed in red; HDFC Bank was down 1.24%, Tata Motors was down 1.11%, Wipro was down 0.22%, ICICI Bank was down 0.21% and Infosys was down 0.13%.

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