US markets slip as Fed likely to stick to its taper plan

21 Nov 2013 Evaluate

The US markets closed lower on Wednesday, after Federal Reserve meeting minutes signaled the central bank was on track to slow down its bond-buying program that has boosted the equity market. The Fed minutes stated that many officials at the central bank think it could decide to slow the pace of purchases at one of its next few meetings. The minutes showed that central bank officials are looking for ways to exit or at least slow down the controversial program in fairly short order. By a 9-to-1 vote, the Fed on October 30 continued the $85 billion-per-month asset-purchase program, otherwise known as QE3, and made little changes to the language in the statement. Minutes from the October 29-30 meeting showed that officials considered reducing the size of the asset-purchase program even before an unambiguous further improvement in the labor-market outlook was apparent. James Bullard, President of the St. Louis Fed, notified directly that a taper of the central bank’s $85 billion-per-month bond purchase program could come very soon. On the economy front, the National Association of Realtors reported that sales of existing homes fell in October to the slowest pace in four months as rising mortgage rates and prices cut affordability. Existing-home sales fell 3.2% in October to a seasonally adjusted annual rate of 5.12 million, marking a second month of declines. The sales pace in October was up 6% from the year-earlier period, a sharp drop from annual growth of more than 10% in September.

On the other hand, US consumer prices fell slightly in October because of a decline in energy costs, pulling down the annual pace of inflation to the lowest rate since 2009. The decline in consumer prices - the first since April - is yet another sign that inflationary pressure in the US economy is largely absent for now. In October, the consumer price index dropped by a seasonally adjusted 0.1%. Over the past 12 months the consumer prices have risen an unadjusted 1%, the smallest increase since October 2009. The core CPI, which excludes volatile food and energy costs, rose 0.1% in October. The core rate has climbed a somewhat-faster but still-soft 1.7% in the past 12 months. Business inventories grew 0.6% in September, the Commerce Department stated. The gain was ahead of the 0.4% expected and was the strongest rise since January. Compared to September 2012, inventories grew 3.1%. Separately, the government shutdown in October did not deter consumers from showing up in auto showrooms and other stores. Sales at US retail stores climbed by a seasonally adjusted 0.4% in October led by car and truck purchases in what was a good month for auto companies.

The Dow Jones Industrial Average dropped 66.21 points or 0.41 percent to 15,900.80, the S&P 500 was down 6.50 points or 0.36 percent to 1,781.37, while Nasdaq lost 10.28 points or 0.26 percent to 3,921.27.

Indian ADRs closed in red on Wednesday; Infosys was down 0.53%, HDFC Bank was down 0.41%, ICICI Bank was down 0.34%, Tata Motors was down 0.33% and Dr. Reddy’s Lab was down 0.29%.

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