US markets slip on concern of Fed scaling back its stimulus soon

16 Aug 2013 Evaluate

The US markets slipped on Thursday, with the Dow industrials posting their first back-to-back triple-digit drop since June, as Treasury yields spiked to 2011 highs and Wal-Mart Stores Inc. and Cisco Systems Inc. cut their forecasts. In addition, several upbeat economic reports spurred thinking that the Federal Reserve will begin to scale back its monthly bond buys in September. Signaling a slower pace of layoffs, the number of people who applied for new jobless benefits fell 15,000 to 320,000 in the week that ended August 10, hitting the lowest level of initial claims since October 2007. Separately, Home-builder confidence rose in August to the highest level in nearly eight years, on gains in both current sales conditions and prospective ones. The National Association of Home Builders/Wells Fargo housing market index rose 3 points to 59, marking the fourth rise in a row.

Meanwhile, US consumer prices rose a seasonally adjusted 0.2% on gains for gasoline, housing, clothing and food, among other goods. Excluding energy and food, the core consumer-price index also rose 0.2%. Additionally, a big drop in automotive output helped keep industrial production flat in July, as the annual growth rate fell to the worst level in more than three years. The Federal Reserve stated that industrial production was unchanged on a seasonally adjusted basis after a downwardly revised 0.2% increase in June. The details of the report came in on the weak side, notably a drop in output from the fast-growing automotive sector. Motor-vehicle and part production slumped 1.7%. Capacity utilization fell to 77.6% from 77.8% in June. However, the manufacturers in the New York and Philadelphia regions stated that business improved at a slightly slower pace in early August than in the prior month. The New York Fed’s Empire State general business conditions index fell to 8.2 in August from 9.5 in July. In Philadelphia, manufacturing activity retreated to 9.3 after hitting 19.8, its highest level in over two years in July. The size of the retreat in the Philly Fed index was larger than expected.

The Dow Jones Industrial Average slipped 225.47 points or 1.47 percent to 15,112.20, the S&P 500 was down 24.07 points or 1.43 percent to 1,661.32, while the Nasdaq dropped by 63.16 points or 1.72 percent to 3,606.12.

Indian ADRs closed in red on Thursday; ICICI Bank was down 1.47%, Infosys was down 1.15%, HDFC Bank was down 0.91%, Tata Motors was down by 0.22% and Wipro was down 0.15%.

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