US markets closed lower on weak GDP data

29 Apr 2017 Evaluate

The US markets closed lower on Friday, as investors traded cautiously ahead of the weekend, marking President Donald Trump’s 100th day in office, and as a lack of details in the president’s much-heralded tax plan gave investors pause. However, all three major equity benchmarks closed out April firmly in positive territory. The New York Federal Reserve raised its outlook on US gross domestic product in the first quarter and second quarter due to data that showed rising new home sales and durable goods orders earlier this week. The regional central bank’s ‘Nowcast’ forecast program showed first-quarter GDP likely grew at a 2.70 percent pace versus the 2.65 percent rate calculated a week ago and second-quarter GDP was on track to expand at a 2.33 percent pace, compared with 2.06 percent a week ago.

On the economy front, the government’s official scorecard for the US economy in the first quarter pointed to the weakest growth in three years, but the slowdown appeared tied to temporary effects that are likely to give way a rebound in the coming months. Gross domestic product increased at a meager 0.7% annual pace in the first three months of the year, down from 2.1% and 3.5% in the back half of 2016. The steep drop-off stemmed from the smallest increase in consumer spending since the end of 2009, largely reflecting fewer sales at car dealers. Consumer outlays rose just 0.3%, a steep drop from the 3.5% gain at the end of 2016. Government also reduced spending and businesses scaled back on inventory production to make sure they didn’t get stuck with lots of unsold goods on warehouse shelves. Americans spent less on gasoline and home-heating fuel after a spell of unseasonably warm weather in February - the second hottest on record. Warm weather also dampened sales at retailers such as clothing stores trying to move the last of their cool-weather inventory while a bout of stormy weather kept consumers away in March.

On the other hand, the Chicago Business Barometer PMI index rose to 58.3 in April from 57.7 in March. This was above consensus expectations of a figure around 56.5, the third successive monthly increase, and the strongest reading since January 2015. New orders increased further on the month with the index close to three-year highs. The production index declined slightly to 59.5 from 61.7 previously, although remained at historically high levels. Separately, the amount of money it costs businesses to employ workers surged in the first quarter to the fastest rate since 2007, underscoring the upward pressure on wages in a tightening US labor market and improved bargaining position for workers. The Bureau of Labor Statistics said that the employment-cost index jumped 0.8% in the first three months of 2017. The index has grown 2.4% over the past 12 months, the fastest pace since 2015 and the second best showing since 2008. The employment-cost index is a closely followed gauge that reflects how much companies, governments and nonprofit institutions pay their employees in wages and benefits.

The Dow Jones Industrial Average lost 40.82 points or 0.19 percent to 20,940.51, Nasdaq dropped 1.33 points or 0.02 percent to 6,047.61, while S&P 500 edged lower by 4.57 points or 0.19 percent to 2,384.20.

The Indian ADRs closed mostly in green; Dr. Reddy’s was up 0.26%, Tata Motors was up 0.24% and Wipro was up 0.08%. On the other hand, HDFC Bank was down 0.90% and ICICI Bank was down by 0.09%.

US markets closed lower on weak GDP data

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