US markets slip over Fed talks of reduction in asset purchases

07 Aug 2013 Evaluate

The US markets ended lower on Tuesday, after Federal Reserve official stated that economy should be able to shoulder reduced Fed asset purchases later this year. Charles Evans, the president of the Chicago Fed stated that the economic fundamentals are actually really better allowing the US central bank to begin to slow down the pace of its asset purchases before year end. Evans, a voting Federal Reserve official, expects growth in the second half of the year to accelerate to a 2.5% annual growth rate, from a paltry 1% rate over the past three quarters, and reach over 3% growth rate in 2014. Besides, Dennis Lockhart, the president of the Atlanta Fed Bank stated that the initial cut in the Federal Reserve’s bond buying program could come at any of the three remaining policy meetings this year: September, October or December. Lockhart voiced that he was not disappointed by the July unemployment report and will be watching data closely for the next few weeks to see if the economy is on track for faster growth.

On the economy front, the US trade deficit shrank in June to the lowest level since the fall of 2009, a surprising drop likely to give a boost to the nation’s lackluster 1.7% growth figure for the second quarter. The Commerce Department stated trade gap reduced 22.4% to $34.2 billion from a downwardly revised $44.1 billion in May. The sharp narrowing of the trade deficit reflected higher exports and lower imports. Job openings at US workplaces rose to 3.94 million in June -- the highest level since May 2008 -- from 3.91 million in May. Compared with same period in the prior year, June’s job openings rose 3.8%, as private openings increased 3.3% to 3.53 million, and government openings increased to 402,000 from 372,000.

Separately, annual home-price growth in June was close to the fastest pace in seven years, as inventories of existing and new homes remained low, according to data released. Home prices, including distressed sales, rose 1.9% in June, and were up 11.88% from a year earlier, according to CoreLogic.

The Dow Jones Industrial Average lost 93.39 points or 0.60 percent to 15,518.70, the S&P 500 was down 9.77 points or 0.57 percent to 1,697.37, while the Nasdaq edged lower by 27.18 points or 0.74 percent to 3,665.77.

Indian ADRs closed in red on Tuesday; HDFC Bank was down 1.77%, ICICI Bank was down 0.81%, Infosys was down 0.65%, Tata Motors was down by 0.56% and Sterlite Industries was down 0.30%.

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