US markets closed lower on Tuesday

01 Mar 2017 Evaluate

The US markets closed lower on Tuesday, while the S&P 500 managed to book its best monthly gain in a year. A handful of Federal Reserve policymakers jolted markets into higher expectations for a March US interest rate increase, with comments that suggested rate-setters are worried about waiting too long in the face of pending economic stimulus from Washington. New York Fed President William Dudley, among the most influential US central bankers, said that the case for tightening monetary policy has become a lot more compelling since the election of President Donald Trump and a Republican-controlled Congress. John Williams, President of the San Francisco Fed, meanwhile, said that with the economy at full employment, inflation headed higher, and upside risks from potential tax cuts waiting in the wings, he personally doesn’t see any need to delay on raising rates. Separately, Donald Trump delivers his highly-anticipated maiden speech to the US Congress seeking to reframe his young presidency, boost low approval ratings and detail an agenda of economic empowerment, health reforms and increased defense spending. Tackling immigration reform would be another massive legislative endeavor, piling on top of Trump’s already ambitious goals of repealing and replacing Obamacare and passing a tax reform package.

On the economy front, US consumers are the most confident in the US economy in 15 years, buoyed by the strongest job market since before the Great Recession. The survey of consumer confidence rose to 114.8 in February from 111.6 in January. That’s the highest level since July 2001. A much healthier labor market has lifted the spirits of consumers. The share of those living in the US who said jobs are hard to get, for example, fell to an eight-year low of 20.3% in February. Millions of Americans have found new jobs since 2010, tugging the unemployment rate below 5% and forcing companies to increase pay somewhat faster after years of sluggish wage growth. A gauge of Chicago-area manufacturing shot higher in February. MNI Indicators said the Chicago PMI rose by 7.1 points to 57.4 in February, marking the highest reading in more than two years. It also was the biggest single month gain since January 2016. The component measuring new orders shot higher by 10.1 points, and the production gauge rose to a 13-month high. The prices paid component jumped 7.2 points to 68.6 in February, the highest level in just about two and a half years.

On the other hand, the growth in the US economy in the final quarter of Barack Obama’s presidency was left at 1.9%, held down by a bigger trade deficit even as consumer spending rebounded strongly. The government’s second look at gross domestic product in the fourth quarter showed a bigger increase in purchases by consumers than initially reported: 3% vs. 2.5%. Yet the increase in what consumers spent was offset by somewhat smaller gains in business investment and local and state spending, revised government figures reveal. As a result, GDP was unchanged from the original estimate.

The Dow Jones Industrial Average lost 25.20 points or 0.12 percent to 20,812.24, Nasdaq was down 36.46 points or 0.62 percent to 5,825.44, while S&P 500 dropped 6.11 points or 0.26 percent to 2,363.64.

The Indian ADRs closed mostly in red; Tata Motors was down 0.41%, Dr. Reddy’s Lab was down 0.31%, ICICI Bank was down 0.10% and Infosys was down by 0.07%. On the other hand, HDFC Bank was up 0.20%.

US markets closed lower on Tuesday

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