US markets close lower; stocks recover from session lows

The US markets closed lower on Monday, recovering from early morning selling bout, as investor confidence was hit by violent unrest in Hong Kong and a rebound in consumer spending fueled speculation that Federal Reserve may raise interest rates sooner than anticipated. On the economy front, consumer spending rebounded toward the end of the summer as Americans bought more cars, electronics and furniture. Consumer spending rose by a seasonally adjusted 0.5% in August after no change in the prior month. Initially the government had reported that spending fell in July. Consumption accounts for more than two-thirds of the US economy activity. Inflation as gauged by the PCE price index was flat in August, though the core rate excluding food and energy edged up 0.1%. Over the past year the PCE index has risen 1.5%, down from 1.6% in the prior month and a two-year peak of 1.7% in May. Separately, a gauge of pending home sales fell 1% in August, pulling back from an 11-month high in July, the National Association of Realtors reported. Signaling that upcoming closings of existing homes are likely to slow down, the index of pending home sales hit a seasonally adjusted 104.7 in August, compared with 105.8 in July.

Meanwhile, Charles Evans, the president of the Chicago Fed stated that inflation expectations may not be as strong a pull on prices as many economists seem to expect. Evans noted that over the past 5 years, professional forecasts for long-run inflation have been at the 2% target, and Treasury inflation-protected securities (TIPS) break-evens have been flat, yet actual inflation has only recently made it back up to 1.5% and there is no sign of higher inflation compensation being built into interest rates or wages.

Dow Jones Industrial Average lost 41.93 points or 0.25 percent to 17,071.22, Nasdaq was down by 6.34 points or 0.14 percent to 4,505.85, while S&P 500 ended lower by 5.05 points or 0.25 percent to 1,977.80. 

The Indian ADRs closed mostly in red on Monday; HDFC Bank was down by 1.32%, ICICI Bank was down by 1.26%, Tata Motors was down by 1.15%. On the other hand, Infosys was up by 0.44% and Wipro was up 0.32%.