US markets closed lower; post biggest weekly drop in 2 years

The US markets closed lower on Friday, leaving the S&P 500 with its biggest weekly drop in two years, as concern over Argentina and Portugal overshadowed data that signaled the Federal Reserve may have leeway to keep rates low. On the economy front, US manufacturing lost some momentum in July after hitting an almost-two year high in June. The manufacturing PMI fell to 55.8, which is below the flash estimate of 56.3 and the 57.3 reading in June. Besides, employment growth decelerated in July, a sign that businesses could be increasingly cautious. The final University of Michigan/Thomson Reuters consumer sentiment index was 81.8, down from 82.5 in July. Spending on US construction projects fell by 1.8% in June, with the decline coming almost entirely in commercial projects. Outlays are still up 5.5% from the same time last year. Spending for new houses, condos, apartment buildings and other residential properties dipped 0.2%. Outlays on commercial projects sank 2.8%, however, to drag the overall number sharply lower. Spending in May, meanwhile, was revised up to show a 0.8% gain instead of 0.1%.

On the other hand, the US in July gained more than 200,000 jobs for the sixth straight month, signaling the economy is likely to sustain its momentum through the summer months. The economy added 209,000 jobs last month outside the farm sector. Although hiring tapered off after a 298,000 gain in June, the US has generated at least 200,000 jobs in six straight months for the first time since 1997. The unemployment rate meanwhile, rose slightly to 6.2% from 6.1% despite another strong month of hiring. Consumer spending in the US rose a modest 0.4% in June, as Americans spent more on staples such as gasoline as well as services such as eating out and personal care. And spending in May was revised a tick higher to show a 0.3% gain. Americans continue to spend at a pace that’s likely to keep the economy growing around 2% to 2.5% a year, but they would have to sharply increase outlays to return the US to its historic growth rate of 3.2%. Personal income rose 0.4% in June.

Separately, US manufacturing companies expanded at its fastest pace since April 2011. The Institute for Supply Management’s manufacturing index rose to 57.1% last month from 55.3% in June. Readings over 50% indicate more companies are expanding instead of shrinking. The indexes for new orders, production and employment all increased in July, with the employment gauge hitting its highest level since June 2011. Seventeen of the 18 industries tracked by ISM reported growth last month.

Meanwhile, Dallas Fed President Richard Fisher stated that in his view the date for interest rate lift-off has been moved forward. He also believes that more officials at the central bank are beginning to digest his views. Fisher believes interest rates could start rising early in 2015 if the economic data keep coming in stronger. Fisher, an outspoken hawk, is a voting member on the Fed’s policy-setting group, the Federal Open Market Committee.

The Dow Jones Industrial Average lost 69.93 points or 0.42 percent to 16,493.37, Nasdaq was down by 17.13 points or 0.39 percent to 4,352.64, while the S&P 500 slipped by 5.52 points or 0.29 percent at 1,925.15. 

Indian ADRs closed mixed on Friday; Tata Motors was down 0.21%, Dr. Reddy’s Lab was down 0.17% and HDFC Bank was down 0.04%. On the other hand, ICICI Bank was up by 0.96% and Infosys was up 0.35%.