US markets tumble on reports of slowing economy

06 Jun 2013 Evaluate

The US markets tumbled on Wednesday for a second session in a row as persistent worries about the slowing economy and concern about when the Federal Reserve will start tapering its bond buying program kept investors on edge. The pressure mounted after the release of the Fed’s so-called Beige Book, which found the US economy to be still growing at a modest to moderate pace. The Federal Reserve stated that there is little evidence that cutbacks in federal government spending were slowing down the economy. Instead, the so-called Beige Book released by the Fed, covering the period from early April to late May, added that economy maintained the modest to moderate pace that has been in place so far this year. Of the Fed’s 12 district banks, the only outlier was Dallas, which reported strong growth. On the economy front, US businesses weren’t as productive in first quarter as originally believed and worker pay posted the biggest drop since 1947, as companies sought to avoid the full effect of a big tax increase that took effect in January. The growth in productivity from January to March was taken down a few pegs to 0.5% from 0.7%, according to newly revised figures from the Labor Department. Meanwhile, private-sector employment growth rose in May, as the economy gained 135,000 jobs, Automatic Data Processing Inc. reported. The ADP revised April’s private-job gain to 113,000.

On the other hand, the Institute for Supply Management stated that its May services index edged up to 53.7% in May from 53.1% in April, indicating a slight acceleration. Of the key sub-indexes, the business activity index was at 56.5%, the new orders index was at 56%, and employment barely stayed positive at 50.1%. Separately, orders for goods produced in US factories rose 1.0% in April, largely because of higher demand for autos and airplanes, the Commerce Department reported. Orders for durable goods - products meant to last at least three years - climbed 3.5% in April. Orders for nondurable goods such as food and clothing dropped 1.0%.

The Dow Jones Industrial Average lost 216.95 points or 1.43 percent, to close at 14,960.60. The Nasdaq dropped 43.78 points or 1.27 percent, to end at 3,401.48, while the S&P 500 edged lower 22.48 points or 1.38 percent, to close at 1,608.90.

The Indian ADRs closed in red on Wednesday, Infosys was down 1.03%, ICICI Bank was down 0.75%, Dr. Reddy’s Lab was down 0.61%, Tata Motors was down 0.36%, and HDFC Bank was down by 0.34%.

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