US markets gain; S&P at record high

The US markets closed higher on Wednesday, sending the benchmark S&P 500 index to a record level for the 16th time this year. A mixed bag of economic reports sent shares lower in early trade, but investors shrugged them off by the afternoon. According to a summary of economic conditions released, US economic activity continued at the same plodding pace seen over much of the last two years without any sign of a break higher. The so called Beige Book, a collection of anecdotes about the economy published by the Federal Reserve, stated that the pace of growth picked up in only 2 of its 12 districts - Cleveland and St. Louis. And these two regions had reported slowing growth in the last Beige Book in April. The remainder of the Fed’s districts reported moderate or modest growth except Kansas City, where there was a decline in activity. The assessment is likely to keep the Fed on its steady path to end its bond-buying program by the fourth quarter. The central bank will then be faced with the question of when the economy will be strong enough for higher short-term interest rates. The Beige Book is based on information collected from early April until May 23, and this one was written by the New York Fed.

On the economy front, service firms reported a pickup in activity in May, adding to the view that the economy has recovered from the weak first quarter. The Institute for Supply Management stated that its services index rose to 56.3%, its highest level since August, from 55.2% in April. However, US productivity in the first quarter declined by an even sharper 3.2% annual rate - the worst in six years - as workers spent more time on the job producing fewer goods during an unusually stormy weather. Companies across the US suffered severe disruptions in the first quarter because of one of the most brutal winters in decades, so the loss in productivity is likely to be mostly if not entirely reversed in the second quarter. Hourly wages of American workers were little changed compared to the preliminary Labor report, rising 2.3% overall or by 0.4% adjusted for inflation.

Separately, private-sector hiring slowed down in May, as employers added 179,000 jobs. The street had expected a May gain of 210,000 private-sector jobs, compared with an originally estimated increase of 220,000 jobs in April.

The Dow Jones Industrial Average was up by 15.19 points or 0.09 percent, to 16,737.53, the Nasdaq Composite added 17.56 points or 0.41 percent, to 4,251.64 and the S&P 500 gained 3.64 points or 0.19 percent, to close at 1,927.88.

The Indian ADRs closed in red on Wednesday; Infosys was down 0.66%, Dr. Reddy’s Lab was down by 0.40%, ICICI Bank was down by 0.32%, Tata Motors was down 0.22% and HDFC Bank was down 0.19%.