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US markets closed mostly higher; Nasdaq reports minor loss

13 Dec 2017 Evaluate

The US markets closed mostly higher on Tuesday, with the S&P 500 and Dow at records for a fourth session in a row, but the Nasdaq bucked the trend to head south as the Federal Reserve kicked off its two-day meeting. The central bank’s Federal Open Market Committee is widely expected to announce its third and final interest-rate hike of 2017 on Wednesday, but investors want to see what the policy-making body signals about 2018. The announcement will be followed by departing Fed chief Janet Yellen’s last news conference in that role.

On the economy front, the US government ran a budget deficit of $139 billion in November, up just 1% from the same month a year ago. Spending rose 3% in the month, and revenues climbed 4%. Some of the biggest drivers of spending in November were for Homeland Security and interest on the public debt. Homeland Security spending more than doubled from last November to $9 billion. The Congressional Budget Office said that jump was largely for disaster relief. Withholding of individual income and payroll taxes, meanwhile, climbed by 6% - something the CBO attributes to increases in wages and salaries. The latest Treasury report comes just days after President Donald Trump signed a stopgap budget to keep the government running until December 22, and Congress works on a major tax bill. The bill is allowed to add no more than $1.5 trillion to deficits over 10 years, and lawmakers are due to hold an open meeting on Wednesday to debate the measure.

Meanwhile, the index of small-business optimism from the National Federation of Independent Business rose 3.7 points to 107.5 in November, the second-highest reading in the 44-year history of the index. Sentiment among small-business owners surged, coming close to the highest it’s been in more than three decades. The 107.5 reading easily beat the 104.4 consensus from among economists surveyed. Small-business owners are elated by the business-friendly tone and tilt toward tax cuts in Washington, even though they acknowledge few concrete victories for the policies they crave. In November, eight of the 10 components of the index increased, led by what NFIB called a stunning and rare 16-point gain in expected better business conditions and a 13-point increase in the measure of sales expectations.

Separately, the producer price index in November surged 0.4% for the third straight month. The increase was broad based. Another measure preferred by economists, known as core PPI, also rose 0.4%. The core rate strips out food, energy and trade margins, volatile categories that can distort the report from month to month. The increase in the PPI pushed the 12-month rate of wholesale inflation to 3.1%, the highest level since January 2012.

The Dow Jones Industrial Average added 118.77 points or 0.49 percent to 24,504.80, the S&P 500 edged higher by 4.12 points or 0.15 percent to 2,664.11, while the Nasdaq lost 12.761 points or 0.19 percent to 6,862.32.


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