US markets closed lower after Senate delays health-care vote

28 Jun 2017 Evaluate

The US markets closed lower on Tuesday, as large-cap technology stocks fell more than 1 percent, while a Senate vote delay raised heighten policy uncertainty. The International Monetary Fund cut its growth forecasts for the US economy to 2.1 percent for both 2017 and 2018, dropping its assumption that President Donald Trump’s tax cut and fiscal spending plans would boost growth. The IMF, after a review of US economic policy, said the Trump administration was unlikely to achieve its goal of annual GDP growth of 3 percent over a sustained period, partly because the labor market is at a level consistent with full employment. The US economy grew 1.6 percent last year. The assumed stimulus from expected tax cuts and new federal spending spurred the IMF earlier this year to bump up its US growth forecasts to 2.3 percent in 2017 and 2.5 percent in 2018. The assumptions for those forecasts appeared to have evaporated in the face of a lack of details over the Trump tax plan and the $3.6 trillion in government spending cuts proposed in the administration’s budget plan in late May.

Meanwhile, US Federal Reserve Chair Janet Yellen said that she does not believe that there will be another financial crisis for at least as long as she lives, thanks largely to reforms of the banking system since the 2007-09 crash. Yellen added that it would not be a good thing if reforms of the financial services industry since the crisis were unwound, and urged those who had helped manage the fallout at the time to be vocal in preventing such a dilution. She also reiterated her view that the US central bank would continue to raise interest rates only gradually. She said the stockpile of bonds the Fed amassed to help the US economy through the crisis would be shrunk gradually and predictably. Minneapolis Fed President Neel Kashkari said that with inflation low and wages showing little sign of an upward surge, the US Federal Reserve should not be raising interest rates. Kashkari added that neither wage nor inflation data is giving any sign that the economy is about to overheat and indeed may suggest that there is still some slack in the labor market. The Fed raised rates twice this year, including earlier this month, and Kashkari dissented both times. Philadelphia Federal Reserve Bank President Patrick Harker said that the Fed may have to rethink its interest rate hike plans if inflation continues to wane. The appropriate policy stance is to see how things turn out as opposed to making long term commitment to what we have today. Harker also said the Fed’s monetary policy would still be accommodative with a further 25 basis point rate increase.

On the economy front, consumers are still plenty confident in the US economy, although they don’t expect growth to accelerate anytime soon, a survey shows. The Conference Board said its consumer confidence index rose to 118.9 last month from 117.6. The present situation index, which tracks how consumers view the current health of the economy, rose to a nearly 16-year high of 146.3 from 140.6.

The Dow Jones Industrial Average lost 98.89 points or 0.46 percent to 21,310.66, Nasdaq dropped 100.53 points or 1.61 percent to 6,146.62, while S&P 500 edged lower by 19.69 points or 0.81 percent to 2,419.38.

US markets closed lower after Senate delays health-care vote

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