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US markets decline further ahead of Fed decision

01 Aug 2012 Evaluate

The US markets slipped on Tuesday, as investors remained worried that central banks would not come through with enough stimulus to bolster the global economy. Besides, Treasury Secretary Timothy F. Geithner stated that two to three years of aggressive, creative programs are needed to help the US recover from its housing crisis. On Wednesday, the Federal Reserve will finish two-day policy session, with many skeptical anticipating of how much impact the central bank can have. Federal Reserve Chairman Ben S. Bernanke will probably forgo announcing a third round of large- scale asset purchases this week, and is more likely to wait until September to unveil plans to buy $600 billion in housing and government debt. Also, US economic reports included data from the Commerce Department which showed consumer purchases slowed in June, while wages rose. US consumers reduced spending for the second straight month despite a sharp increase in wages, boosting their savings rate to the highest level in a year. Consumer spending accounts for more than two-thirds of US growth, so any reduction in demand filters through to businesses and hurts the rest of the economy.

Meanwhile, US consumer confidence in July climbed for the first rise in six months as Americans grew more hopeful about employment prospects in six months, the Conference Board stated. After declining for four months, US consumer confidence increased in July on improved expectations, but remained at relatively low levels. The consumer confidence index rose to 65.9 in July - the highest level since April - from a revised 62.7 in June. Separately, the S&P/Case-Shiller index of US home values indicated housing prices are steadying. US home prices jumped in May, marking the second month of gains, according to a closely followed index released. The S&P/Case-Shiller 20-city composite rose 2.2% on the month to take the 12-month change to 0.7%. All 20 cities in the index saw monthly gains, including a 4.5% surge in Chicago and a 4% gain in hard-hit Atlanta.

In Europe, European central banks and some leaders have reiterated that the 17-nation union is staying together, but already there is comments coming out of Germany indicating that they are not willing to go down that path without serious concessions from other countries. Besides, the euro-zone unemployment rate remained unchanged in June. The jobless rate for June was a record high of 11.2% matching the data in May but increased from 10% in the month a year ago.

The Dow Jones industrial average lost 64.33 points, or 0.49 percent, to 13,008.70. The S&P 500 Index lost 5.98 points, or 0.43 percent, to 1,379.32, while the Nasdaq Composite was down by 6.32 points, or 0.21 percent, to 2,939.52.

The Indian ADRs closed mixed on Tuesday, ICICI Bank was down 0.63%, Dr. Reddy’s Lab was down 0.55% and HDFC Bank was down 0.44%. On the flip side, Sterlite Industries was up 0.14% and Infosys was up 0.09%.

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