US markets slip as conflict in Iraq escalates

The US markets closed lower on Thursday, as a spike in oil prices and softer-than-expected economic data dented sentiment on Wall Street. As unrest in Iraq, intensified concerns over supply and sent crude oil prices soaring. On the economy front, the number of Americans who applied for unemployment benefits last week increased slightly but remained near a post-recession bottom, indicating little change in a gradually improving US labor market. Initial jobless claims rose by 4,000 to a seasonally adjusted 317,000 in the seven days ended June 7. The average of new claims over the past month climbed by 4,750 to 315,250, one week after falling to a seven-year low. The inflation picture looks to be changing very quickly, and May’s import price data feeds into that story. On a monthly basis, import prices nudged up by 0.1% on higher fuel prices. On a year-over-year basis, import prices grew in May for the first time since July 2013. The growth, of 0.4%, obviously isn’t much, but as recently as November import prices were falling at a 1.8% clip.

Separately, inventories at US businesses rose 0.6% in April. Business sales rose 0.7%. The inventory-to-sales ratio, an indication of demand, remained at 1.29 in April. However, sales at US retailers rose last month on strong demand for cars, trucks and home-improvement products, but spending tapered off at most other retailers after a big bump in demand in April. Despite the mixed report, the pace of sales in April and May taken together reflect an economy growing at a moderate pace in the spring after the US suffered a sharp contraction in the first quarter. Retail sales account for about one-third of consumer spending, the main engine of US economic activity. Excluding the large auto sector, retail sales grew just 0.1% in May. And sales were flat minus autos and gasoline.

The Dow Jones Industrial Average was down by 109.69 points or 0.65 percent, to 16,734.19, the Nasdaq Composite lost 34.30 points or 0.79 percent, to 4,297.63 and the S&P 500 dropped 13.78 points or 0.71 percent, to close at 1,930.11.

The Indian ADRs closed mostly in red on Thursday; Infosys was down 1.07%, Tata Motors was down 0.15% and Dr. Reddy’s Lab was down by 0.10%. On the other hand, HDFC Bank was up 1.00% and ICICI Bank was up by 0.20%.