US markets slip on Trump worries

18 May 2017 Evaluate

The US markets closed lower on Wednesday, as concerns about President Donald Trump’s FBI controversy weighed on investor sentiment. Uneasiness for global equities came after the New York Times reported that Trump in February asked then-director of the Federal Bureau of Investigation, James Comey, to stop his investigation into former National Security Adviser Michael Flynn. The report also prompted some House Republicans to call for a further investigation and for the FBI to hand over documents related to communications between the president and Comey, whom Trump fired earlier this month. A closely watched gauge of fear on Wall Street posted its biggest daily jump since the day following Britain’s vote to exit from the European Union, which roiled global markets last June. According to FactSet data, the CBOE Volatility Index was up about 46%, at 15.59. That is its biggest daily move since June 24 when the index jumped 49.3%. The White House is set to unveil President Donald Trump’s first full budget for the 2018 fiscal year on Tuesday - a plan that will include details about his proposed cuts to foreign aid and domestic spending, and his desired hikes for the military.

Meanwhile, after months of speculation, it happened -- Household debt levels in the US have surpassed their 2008 peak. The New York Federal Reserve released a new report that showed US collective household debt balances totaled $12.73 trillion in March 2017, surpassing the 2008 peak of $12.68 trillion. This isn’t the first debt milestone Americans have hit recently. The Federal Reserve announced in April that the US had $1 trillion in credit-card debt. While the debt level is similar to 2008, the things Americans are in debt for have changed, as household incomes have increased in recent years, and housing and stock prices have improved. Compared with 2008, fewer borrowers have housing-related debt - including their first mortgages, or home equity lines of credit - and instead more have taken on auto and student loans.

Moreover, Minneapolis Federal Reserve Bank President Neel Kashkari warned against using interest-rate hikes to address unwanted asset bubbles, saying that bubbles are hard to identify and such hikes would likely do more harm than good. Kashkari is a voting member this year on the US central bank’s policy committee, and in March was the lone dissenter on a Fed vote to raise rates for the third time since the Great Recession. He has previously said he opposed the rate hike because he felt keeping rates low would result in more jobs for Americans who want to work. Kashkari added that keeping a sharp eye out for potential bubbles and using supervisory powers to protect banks from failures are better options than raising rates.

The Dow Jones Industrial Average lost 372.82 points or 1.78 percent to 20,606.93, Nasdaq dropped 158.63 points or 2.57 percent to 6,011.24, while S&P 500 edged lower by 43.64 points or 1.82 percent to 2,357.03.

The Indian ADRs closed mostly in red; Infosys was down 2.42%, Wipro was down 1.82%, ICICI Bank was down 1.45% and HDFC Bank was down 1.44%. On the other hand, Tata Motors was up 0.09%.

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