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US markets edge higher on jump in housing starts

19 Jul 2012 Evaluate

The US markets edged higher on Wednesday, for the second day in a row amid better-than-estimated earnings and a jump in housing starts. Also, Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee that policy makers are studying options for further easing that may include additional asset purchases. Bernanke stated that central bankers are capable of removing record stimulus from the financial system and raising interest rates when needed to avoid triggering inflation. Bernanke reiterated remarks to Congress that the central bank was ready, though in no rush, to inject more stimulus into the US economy and doesn’t expect the economy to slip back into recession. At this point we don’t see a double-dip recession - we see continued moderate growth, Bernanke stated in testimony to the House Financial Services panel.

Even the addition of two more Fed regions showing slowed growth in the Beige Book did little to dent the gains. The US grew at a modest to moderate pace over the last month and a half as more districts are reporting slowing growth, according to the latest survey of anecdotes on the economy released by the Federal Reserve. The so-called Beige Book, which covered the economy between June and early July, was less enthusiastic than the moderate assessment of the last Beige Book and now three regions, up from one, reported slowing growth.

Besides, housing starts surged in June to the highest level since October 2008 and shot up 23.6% from a year ago month. Investors focused on a surge in June housing starts over a drop in building permits as a sign that the home-building market has bottomed. US builders started construction on new homes in June at the fastest pace since fall 2008, though building permits fell, the government reported. The Commerce Department stated that housing starts rose 6.9% to an annual rate of 760,000 last month from an upwardly revised 711,000 in May.

The Dow Jones industrial average rose by 103.16 points, or 0.81 percent, to 12,908.70. The S&P 500 Index gained 9.11 points, or 0.67 percent, to 1,372.78, while the Nasdaq Composite was up 32.56 points, or 1.12 percent, to 2,942.60.

Most of the Indian ADRs closed in green on Wednesday, ICICI Bank was up 0.74%, Infosys was up by 0.59%, Tata Communication was up 0.41% and Sterlite Industries was up 0.10%. On the flip side, Dr. Reddy’s Lab was down 0.64%.

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