US markets decline on Fed talk of easing monetary stimulus

17 May 2013 Evaluate

The US markets declined on Thursday, halting the S&P 500’s four-session winning streak, after a Federal Reserve official stated that central bank could begin tamping back on monetary easing. Fed Bank of San Francisco President John Williams stated that the Fed may reduce its $85 billion in monthly bond-buying as early as this summer amid signs the economy is gaining strength. Three other regional Fed presidents called for phasing out monthly purchases of $40 billion in mortgage securities. Dallas Federal Reserve President Richard Fisher stated that Fed should cut its purchases of mortgage-backed securities, with the goal of eliminating them entirely as the year continues. On the economy front, business among manufacturers in the Philadelphia region worsened in May, the Philadelphia Federal Reserve reported that the bank’s business-conditions index sank to -5.2 from 1.3 in April. Any number below zero indicates more companies are shrinking their business instead of growing it. The number of people who applied last week for new unemployment benefits surged to the highest level in a month and a half, indicating the US labor market is still not healing fast enough to rapidly bring down the nation’s jobless rate. Initial jobless claims climbed by 32,000 to a seasonally adjusted 360,000 in the week ended May 11, the Labor Department stated.

Besides, construction of new US homes dropped in April as far fewer apartments were put up, according to government reports released that nonetheless signal rebounding activity in the building sector. Housing starts fell 16.5% in April to a seasonally adjusted annual rate of 853,000 - the lowest level since November - after a big drop in the volatile apartment segment, according to data from the US Department of Commerce. However, another sharp decline in the cost of gasoline pushed consumer prices lower in April for the second straight month and inflationary pressure dropped to the lowest rate since late 2010, the US government reported. The consumer price index fell by a seasonally adjusted 0.4%, as sharply lower energy costs offset a small increase in food prices. The inflation rate over the past 12 months fell to 1.1% in April from 1.5% in March, marking the lowest level since November 2010.

The Dow Jones Industrial Average lost 42.47 points or 0.28 percent at 15,233.20, the S&P 500 dropped 8.31 points or 0.50 percent to 1,650.47 and the Nasdaq inched lower by 6.37 points or 0.18 percent to 3,465.24.

Indian ADRs closed mixed on Thursday, HDFC Bank was down 0.63%, Tata Motors was down 0.38% and Tata Communications was down 0.30%. On the flip side, Dr. Reddy’s Lab was up by 0.26% and Infosys was up by 0.25%.

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