US markets closed lower on Friday

01 Apr 2017 Evaluate

The US markets closed lower on Friday, but still posted sizable weekly and quarterly gains. Economic data and speeches from Federal Reserve officials appeared to have little impact on the market. The New York Federal Reserve said it dialed back its forecast on US gross domestic product in the first quarter and second quarter following weaker-than-forecast data on consumer spending in February. The regional central bank’s ‘Nowcast’ forecast program showed first-quarter GDP on track to expand at a 2.87 percent pace, slower than the 2.96 percent rate calculated a week ago and second-quarter GDP on course to grow at 2.58 percent, compared with 2.66 percent a week earlier.

On the economy front, most Americans were optimistic about the US economy in March, but not quite as much as initially reported. The index of consumer sentiment was revised to 96.9 in March from preliminary 97.6. The index registered 96.3 in February. The rate of inflation in consumer goods and services topped 2% in February for the first time since 2012. A government report that tracks consumer spending showed a 0.1% increase last month. Separately, a reading of Chicago-area economic activity nudged higher in March to cap the strongest quarter in more than two years, a sign of the growing business optimism since the election of President Donald Trump. The Chicago PMI rose to 57.7 in March from 57.4 in February, on a scale where any reading above 50 indicates improving conditions. The first-quarter average of 55.1 was the best showing since the fourth quarter of 2014. In March, 4 of the 5 components improved, with only employment falling, into contraction territory. The first-quarter average for prices paid is the highest since the third quarter of 2011, in a sign of inflationary pressure.

Meanwhile, New York Fed President William Dudley said that the Federal Reserve’s forecast of two more interest rate hikes this year seems reasonable. Dudley said predicting the future path of interest rates isn’t very relevant. He noted the Fed initially thought it would hike rates four times in 2016 but managed only one. Dudley enlightened that the economy is only growing a little above trend, seen as somewhere around 2% annual rate and the Federal Reserve could begin shrinking its $4.5-trillion balance sheet as soon as this year. Dudley downplayed the latest reading on inflation, which showed headline inflation, as measured by the Fed’s target personal consumption expenditure price index, accelerated in February to a 2.1% annual rate, slightly above the central bank’s official target.

Moreover, St. Louis Fed President James Bullard said that the base case of Federal Reserve officials for gradual but steady rate hikes over the next few years is misguided. Bullard said he would not oppose one more rate hike this year but said that might be all. Bullard downplayed the fact that inflation hit the Fed’s target for the first time in nearly five years. He dismissed the argument by many Fed officials that the central bank should move rates up gradually but steadily to avoid having to push rates up quickly further down the road.

The Dow Jones Industrial Average lost 65.27 points or 0.31 percent to 20,663.22, the Nasdaq was down 2.6 points or 0.04 percent to 5,911.74, while S&P 500 dropped 5.34 points or 0.23 percent to 2,362.72.

The Indian ADRs closed mostly in green; HDFC Bank was up 2.64%, Tata Motors was up 1.16%, Infosys was up 0.52% and ICICI Bank was up 0.38%. On the other hand, Dr. Reddy’s Lab was down 2.46%.

US markets closed lower on Friday

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