US markets rallies on stronger-than-expected retail sales

15 Jan 2014 Evaluate

The US markets rallied on Tuesday, as investors welcomed stronger-than-expected retail sales, which rose by a modest 0.2% in December as Americans stocked up on food and drinks for the holidays, bought more clothes and purchased more goods online. The Commerce Department reported that the increase in sales last month would have been a healthier 0.7% if the auto sector was excluded. Auto sales hit a post-recession high in November but then tapered off last month. By and large, 2013 turned out to be a so-so year for retailers. Sales unadjusted for inflation rose by 4.2%, marking the smallest annual gain since the recession ended in mid-2009. Retail sales account for about one-third of consumer spending, the main engine of economic growth. Besides, the small-business optimism index of a trade group rose 1.4 points to 93.9 in December. The National Federation of Independent Business’ index rose on gains in the component of those who expect the economy to improve and those who expect real sales to be higher. Three of the ten components were negative.

Moreover, prices of goods imported into the US were unchanged in December and they fell 1.3% for the full year. Lower costs of non-fuels offset a 0.4% increase in fuel imports in the final month of 2013. The fuel index had fallen 4.3% in November and 3.3% in October to reflect the declining cost of oil and lower prices at the gas pump. The US export index, meanwhile, rose 0.4% in December but fell 1.0% for the full year, a result of weak growth among many US trading partners. However, the US Commerce Department reported that inventories at US businesses rose 0.4% in November. The business sales rose 0.8% in November.

Meanwhile, Dallas Fed President Richard Fisher stated that he wanted the taper to be double the size it was -- in other words, $20 billion instead of $10 billion. The Fed is still buying $75 billion worth of Treasurys- and mortgage-backed bonds each month. Fisher, who this year is a voting member of the Federal Open Market Committee, stressed he would ‘not flinch’ from continuing to reduce asset purchase even if a stock market correction were to ensue.

The Dow Jones Industrial Average gained by 115.92 points or 0.71 percent to 16,373.86, the Nasdaq added by 69.71 points or 1.69 percent to 4,183.02 and the S&P 500 gained 19.68 points or 1.08 percent to 1,838.88.

Indian ADRs closed mostly in green on Tuesday; Infosys was up 1.12%, Tata Motors was up by 0.43%, Dr. Reddy’s Lab was up 0.16% and HDFC Bank was up by 0.01%. On the other hand, ICICI Bank was down by 0.38%.

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