US markets closed up; snaps 3-day losing streak

The US markets closed higher on Wednesday, with the S&P 500 and Dow Jones Industrial Average recording their best one-day percentage gain in more than 5 weeks. The rebound snapped a 3-day losing streak that has been blamed in part on worries about global growth and fighting in Iraq and Syria. Federal Reserve Bank of Chicago President Charles Evans stated that he favored patience as the central bank ponders when to raise interest rates for the first time since 2006. Evans, who doesn’t have a vote on the Federal Open Market Committee until next year, added that it, was crucial for the federal funds target rate to move away from zero only when policy makers were sure they wouldn’t have to retreat later. That means the FOMC should be prepared to temporarily accept an inflation rate that exceeds its 2% target.

Meanwhile, Federal Reserve Bank of Cleveland President Loretta Mester stated that forward guidance should be more of a communications device that signals how policy will respond to changes in economic conditions. Mester added that she would like to see the forward guidance evolve over time to give more information about the conditions that we systematically assess in calibrating the stance of policy to the economy’s actual progress and anticipated progress toward dual-mandate goals, and to the speed with which that progress is being achieved. She repeated her view that the Fed’s existing pledge to keep interest rates low for a considerable time after asset purchases end should be reformulated.

On the economy front, sales of new single-family homes surged last month, hitting the fastest pace in more than six years. New-home sales rose 18% in August to a seasonally adjusted annual rate of 504,000, the fastest pace since May 2008. The 18% gain was the largest one-month percentage rise since January 1992.

Dow Jones Industrial Average gained 154.19 points or 0.90 percent to 17,210.06, Nasdaq was up by 46.53 points or 1.03 percent to 4,555.22, while S&P 500 ended higher by 15.53 points or 0.78 percent to 1,998.30. 

The Indian ADRs closed mostly in green on Wednesday; Dr. Reddy’s Lab was up 1.10%, Infosys was up 0.79% and HDFC Bank was up by 0.26%. On the other hand, Tata Motors was down by 0.51% and ICICI Bank was down by 0.05%.