US markets edge higher as economic data offset spending cut worries

02 Mar 2013 Evaluate

The US markets edged higher on Friday, with the major indexes finishing with weekly gains, as upbeat consumer confidence and manufacturing data countered concern about government-spending cuts. A meeting between President Obama and congressional leaders concluded without an agreement on breaking the impasse over the cuts. Without a deal, Obama is mandated by midnight to order federal agencies to cut their budgets to reach an $85 billion reduction between Saturday and October 1. With the sequester cuts coming, at least temporarily, the next chance to turn them off could be the expiration of a stopgap government funding bill on March 27. On the economy front, the University of Michigan-Thomson Reuters consumer-sentiment gauge rose to a final February reading of 77.6, the highest level since November. Also, the Institute for Supply Management’s manufacturing index accelerated in February, climbing to a reading of 54.2% from 53.1% in January. That represents the third straight expansion. The new orders component was particularly strong, climbing to 57.8% from January’s 53.3%.

Besides, consumers increased spending in January for the third straight month, suggesting that a big drop in income and a tax hike at the start of the year only exerted a mild drag. The consumer spending advanced a seasonally adjusted 0.2% last month. Incomes, meanwhile, sank 3.6% in January after spiking 2.6% in December. The companies accelerated the payment of rewards for workers and investors in December to avoid higher tax rates in January, accounting for the big swing.

Separately, the final reading of the Markit manufacturing purchasing managers’ index fell to 54.3 in February from 55.8 in January and a flash estimate of 55.2. Output rose to the fastest rate since March 2012, while the employment gauge was the weakest since November. Nonetheless, the index is well above the 50 line representing growth. Additionally, outlays for US construction projects unexpectedly declined in January. Construction spending fell 2.1% in January to an annualized rate of $883.3 billion, the first drop since last March.

The Dow Jones Industrial Average rose by 35.17 points or 0.25 percent to 14,089.70, the Nasdaq added 9.55 points or 0.30 percent to 3,169.74 and the S&P 500 gain 3.52 points or 0.23 percent to 1,518.20.

The Indian ADRs closed mostly in red on Friday, Dr. Reddy’s Lab was down 0.57%, Tata Motors was down by 0.41% and ICICI Bank was down by 0.14%. On the flip side, HDFC Bank was up by 0.10% and Wipro was up 0.05%.

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