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US markets drops on disappointing economic reports and doubts on Fed stimulus

24 Aug 2012 Evaluate

The US markets slipped on Thursday, with the Dow industrials off for a fourth day, after disappointing US economic reports emerged and on sluggish progress in fixing Europe’s debt crisis. The sentiments also turned pessimistic after Federal Reserve official threw cold water on the notion that another round of stimulus is on its way. A day after minutes from the last Federal Open Market Committee meeting prompted thoughts of a third round of quantitative easing, Federal Reserve Bank of St. Louis President James Bullard stated that FOMC release was a bit stale and voiced opposition to additional easing. However, the debate over possible Fed action next week shifts to Fed Chairman Ben Bernanke, who is scheduled to speak next Friday to an annual gathering of central bankers in Jackson Hole, Wyo.

The US economic reports were mixed, with data showing that jobless claims climbed more than projected last week and new-home sales rose more than estimated in July. Applications for US jobless benefits rose slightly last week, but the latest figures suggest little change in the nation’s underperforming labor market. Initial claims increased by 4,000 to a seasonally adjusted 372,000 in the week ended August 18. That’s the highest level in five weeks. Besides, sales of new homes rebounded in July as the housing industry remained one of the few areas of steady growth in the US economy. The sale of single-family homes climbed 3.6% to an annual rate of 372,000 last month from 359,000 in June and matching the increase in May. The level of sales in May and July were the highest in more than two years.

In Europe, the waiting game got extended one more time after the leaders held ground at the latest meeting between the euro zone finance chief Jean-Claude Juncker and Greek Prime Minister Antonis Samaras. Juncker stated firmly that Greece’s hope of any more time to repay bailout loans hinge on a report from the troika scheduled for release next month. Markets have largely ignored the possible outcome in the meetings and estimated that at the last minute Germany will blink and offer more time to Greece. Separately, a private survey of European businesses indicated slowing economic activities in the euro zone and a decline of 0.5% in the GDP in the region and not sparing Germany either.

The Dow Jones industrial average lost 115.30 points, or 0.88 percent, to 13,057.50. The S&P 500 Index lost 11.41 points or 0.81%, to 1,402.08, while the Nasdaq Composite was down by 20.27 points, or 0.66 percent, to 3,053.40.

The Indian ADRs closed mixed on Thursday, HDFC Bank was down 0.43%, ICICI Bank was down by 0.27% and Tata Communications down by 0.09%. On the other hand, MTNL was up by 0.25% and Infosys was up 0.11%.

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