US markets gain despite lackluster retail sales data

30 Oct 2013 Evaluate

The US markets closed higher on Tuesday, with S&P 500 index setting record closing highs, despite a lackluster report on retail sales. The Nasdaq Composite too managed to conclude its trade in green after being frozen for nearly an hour because of a human error in the data distribution system. On the economy front, US prices of wholesale goods fell slightly in September because of a sharp drop in the cost of food and inflation at the producer level fell to the lowest annual rate in four years. The Labor Department stated the US producer price index slipped a seasonally adjusted 0.1% in September. Excluding the volatile categories of food and energy, core wholesale prices edged up 0.1%. The core rate, viewed by the Federal Reserve as better indicator of underlying inflationary trends, has risen a scant 1.2% in the last 12 months. The low level of inflation is allowing the Fed to maintain a multi-billion dollar stimulus program aimed at propping up US economic growth. Even as annual home-price growth in August hit the fastest pace in more than seven years, data released showed that monthly gains are slowing down. Home prices in August were up 12.8% from the year-earlier period, the fastest pace since early 2006, according to S&P/Case-Shiller’s gauge that tracks 20 cities. Of the 20 cities, 13 posted double-digit annual gains.

Meanwhile, US retail sales fell in September for the first time in six months, but the decline mostly stemmed from a drop-off in auto purchases that could prove temporary. Sales in most other retail businesses rose, indicating that consumers did not cut back much on spending in the month prior to the government shutdown. The Commerce Department reported that Retail sales decreased a seasonally adjusted 0.1% in September, as sales at auto dealers posted the biggest drop in nearly a year. Retail sales account for about one-third of consumer spending, the main engine of economic growth. Separately, the bottom fell out of consumers’ economic expectations this month, plunging a gauge of their confidence to the lowest level in half a year, as Washington’s partisan bickering shut down the government and worried global investors. The Conference Board reported that its gauge of consumer confidence fell to 71.2 in October from 80.2 in September. Business inventories rose 0.3% to a seasonally adjusted $1.67 trillion in August, the Commerce Department reported. Inventories were up 3.1% from August 2012.

The Dow Jones Industrial Average gained 111.42 points or 0.72 percent to 15,680.30, the S&P 500 was up 9.84 points or 0.56 percent to 1,771.95, while Nasdaq added 12.21 points or 0.31 percent to 3,952.34.

Indian ADRs closed in green on Tuesday; ICICI Bank was up 2.12%, HDFC Bank was up 0.95%, Dr. Reddy’s Lab was up 0.69%, Tata Motors was up 0.42% and Infosys was up 0.19%.

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