US markets fell on Yellen’s comment

20 Mar 2014 Evaluate

The US markets snapped its winning streak on Wednesday, after Federal Reserve Chairwoman Janet Yellen stated that rate hikes could happen about six months after the Fed wraps up bond purchases. Yellen added that the Fed’s language probably means something on the order of around six months, that type of thing. The taper of the Fed’s bond purchases is expected to end in October or November, putting the potential first rate hike on course for April or May of 2015. The Fed also stated that it will continue trimming, or tapering, its monthly bond buying program by another $10 billion, to $55 billion a month. Those asset purchases, a policy known as quantitative easing, started at the height of the 2008 financial crisis to support the US economy. The Fed added in its statement that it was dropping its 6.5% unemployment threshold for hiking interest rates, instead saying that it will strive for maximum employment and 2% inflation before any rate change. The central bank enlightened that it would keep interest rates near zero for a considerable time after its bond purchases end.

On the economy front, the US current account deficit narrowed to $81.1 billion in the fourth quarter, or 1.9% of gross domestic product, from a revised $96.4 billion in the third quarter. The smaller deficit was accounted for by a decrease in the deficit on goods and services and a bigger surplus in income transfers, among other things. The deficit is down sharply from the peak of 6.5% of GDP in the 2005 fourth quarter. For the full year, the current-account deficit was 2.3% of GDP, compared to 2.7% in 2012.

The Dow Jones Industrial Average lost 114.02 points or 0.70 percent, to 16,222.17, the Nasdaq Composite was down by 25.71 points or 0.59 percent, to 4,307.60, while the S&P 500 dropped 11.48 points or 0.61 percent, to close at 1,860.77.

The Indian ADRs closed mostly in red on Wednesday; Infosys was down 1.07%, Dr. Reddy’s Lab was down 0.62%, Tata Motors was down by 0.59% and HDFC Bank was down 0.27%. On the other hand, ICICI Bank was up 0.89%.

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