US market slips due to tepid report on economic growth

The US markets slipped on Thursday, making a last-minute retreat after spending most of the day climbing toward record highs, but ended the month with 1% gains. The drop was after release of mixed data on growth and employment, and ahead of government spending cuts set to begin at midnight. The automatic federal budget cuts of $85 billion looked certain to kick in Friday after a pair of bills to replace them failed in the Senate on Thursday. Neither a Democratic nor a Republican bill aimed at replacing the so-called sequester was able to get enough support to win a test vote on Thursday. While senators from both parties hadn’t expected passage, the bills represented a last-ditch legislative effort to replace the across-the-board cuts to domestic and military spending. However, the budget cuts for fiscal 2013 would not take effect all at once on Friday. Instead, they would go into effect gradually through the end of the fiscal year on September 30. In total, the sequester would cut about $1 trillion over nine years. Separately, Charles Evans, president of the Chicago Fed Bank stated that the Federal Reserve should not scale back its bond-buying program. Evans stated that the US should not replicate the mistake made by the Japanese government of trying to end its easy monetary policy too soon.

On the economy front, the US economy grew in the final three months of 2012 but just barely instead of shrinking for the first time since the end of the recession as originally reported. The nation’s entire output of goods and services, known as gross domestic product, expanded at an annual 0.1% pace in the fourth quarter. Initially the government stated last month that the economy contracted by 0.1%, which would have marked the first decline since the second quarter of 2009. The revised GDP report showed that construction spending rose faster than previously estimated while exports fell less than the government thought. That nudged GDP into positive territory. Also, a measure of Chicago-area manufacturing accelerated in February to the highest level since March, ISM-Chicago reported. The Chicago PMI rose to 56.8 from 55.6 in January, beating expectations of 54.0. The new orders subcomponent rose to a reading of 60.2 from 58.2 in January. Readings over 50 indicate expansion.

Besides, the number of people who applied for jobless benefits dropped in the most recent weekly data, according to a US Department of Labor report that signals continued labor-market gains even as the economy faces massive federal spending cuts. Initials claims for regular state unemployment-insurance benefits dropped 22,000 to 344,000 in the week ended February 23, according to the government.

The Dow Jones Industrial Average dropped by 20.88 points or 0.15 percent to 14,054.50, the Nasdaq lost 2.07 points or 0.07 percent to 3,160.19 and the S&P 500 slipped 1.31 points or 0.09 percent to 1,514.68.

The Indian ADRs closed in red on Thursday, HDFC Bank was down by 1.41%, ICICI Bank was down by 0.68%, Infosys was down 0.62%, Tata Motors was down by 0.36% and Dr. Reddy’s Lab was down 0.31%.