US markets slip on IMF talks, consumer sentiment data

15 Jun 2013 Evaluate

The US markets slipped on Friday, with investors on guard ahead of next week’s monetary-policy decision by the Federal Open Market Committee. The FOMC will hold a two-day policy gathering next week, with Fed Chairman Ben Bernanke due to hold a news conference Wednesday, after the FOMC decision. The International Monetary Fund gave voice to a somewhat more pessimistic view on the US economy, as the international organization again called for the US to end the budget sequester. As part of an annual review into each member country’s finances, the IMF stated that risks to the US economic outlook appear modestly tilted to the downside. The IMF raised concern that higher tax rates and the spending cuts from the federal budget sequester might prove to be a stronger headwind to consumer demand over the next few quarters. A slower pace of growth could in turn delay the normalization of the labor market.

On the economy front, led by gloomier views on current conditions, a gauge of consumer sentiment declined this month. After hitting the highest level in almost six years in May, the University of Michigan and Thomson Reuters’s consumer-sentiment index fell to a preliminary June reading of 82.7 from a final May reading of 84.5. Markets look at data on consumer sentiment for signals about spending. Besides, US wholesale prices rose in May for the first time in three months, nudged up by higher costs of gasoline, fresh eggs and light trucks. The producer price index climbed a seasonally adjusted 0.5% last month. Additionally, the US current account deficit rose by $3.8 billion to $106.1 billion in the first quarter, or 2.7% of gross domestic product on an annualized basis, the Commerce Department reported. The deficit in the first three months of the year is much lower than the market consensus, due to sharp downward revision to the deficit in 2012.

Meanwhile, the Federal Reserve stated that industrial production was unchanged in May, the second straight weak monthly report. April’s production was revised slightly higher to a drop of 0.4% from the initial estimate of a 0.5% drop. Output at factories alone increased 0.1% in May after two straight monthly declines. Capacity utilization - a gauge of slack in the economy - fell to 77.6% in May from 77.8% in April, below the average of 80.2% from 1972-2012.

The Dow Jones Industrial Average lost 105.90 points or 0.70 percent, to close at 15,070.20, S&P 500 edged lower by 9.63 points or 0.59 percent, to close at 1,626.73 while Nasdaq dropped 21.81 points or 0.63 percent, to end at 3,423.55.

The Indian ADRs closed mostly in green on Friday, Dr. Reddy’s Lab was up 0.51%, ICICI Bank was up 0.43% and Infosys was up 0.38%. On the other hand, Wipro was down by 0.06% and Sterlite Industries was down 0.02%.

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