US markets closed lower as commodities slump

The US markets closed lower on Thursday, accelerated by losses in the final hour of trade, as tanking oil prices helped fuel a selloff in the energy and materials sectors. A parade of Federal Reserve speakers, some telegraphing a December rate hike, contributed to a rough day for stock investors. New York Fed President William Dudley suggested that central bank may lift interest rates as early as next month. Dudley added that it is quite possible that the conditions the Committee have established to begin to normalize monetary policy could soon be satisfied. Dudley included a line that he wasn’t saying his views toward action in December. Domestic demand continues to grow at a solid pace, and the fundamentals supporting domestic growth look sturdy. He added that the international outlook appears less problematic than it did just a few months ago. But he had greater concerns on inflation because it continues to fall substantially short of its 2% target and that inflation expectations are under downward pressure. He expects the pace of tightening will be quite gradual once lift-off occurs.

Additionally, Richmond Federal Reserve President Jeffrey Lacker stated that the US central bank still retains a unique ability to influence inflation, but that monetary policy’s impact on real economic activity is limited. The Federal Reserve has been perturbed by inflation that continues to run below its 2 percent target rate, and some Fed officials have advocated waiting for more signs that inflation will rise before embarking on a path of monetary tightening. St. Louis Fed President James Bullard stated that prudence alone should be edging up interest rates and shrinking its balance sheet back towards more normal settings. Bullard added that the Fed is quite close to normal with an unemployment rate of 5% and inflation only slightly below target, if one uses the Dallas Fed’s trimmed mean inflation rate, currently running at 1.7% year-on-year.

On the economy front, the federal government ran a budget deficit of $136 billion in October, up 12% or $15 billion from the same month last year. Spending in the first month of the fiscal year was $348 billion, up 4% from October 2014. Total receipts were $211 billion, a 1% decrease. The October deficit would have been $80 billion if not for the shifts in timing of some payments. The receipts were hurt because there was one less Wednesday in October compared to last year. The government’s budget year runs from October through September. The number of people who applied for US unemployment benefits was unchanged at 276,000 in the first week of November, remaining near a 15-year low. The average of new claims over the past month, meanwhile, rose 5,000 to a seasonally adjusted 267,750. The monthly average smooths out sharp fluctuations in the more volatile weekly report and is seen as a more accurate predictor of labor-market trends.

Separately, job openings rose in September to the second-highest level in the history of the series. Job openings rose to a seasonally adjusted 5.53 million from 5.38 million in August, though that’s short of the 5.67 million peak reached this summer. The series started in December 2000. The quits rate -- an important proxy of worker confidence, since it shows the willingness to look for another job -- was 1.9% for the sixth consecutive month. The hiring rate ticked down a notch to 3.6%.

The Dow Jones Industrial Average lost 254.15 points or 1.44 percent to 17,448.07, Nasdaq was down 61.94 points or 1.22 percent 5,005.08, while the S&P 500 dropped 29.03 points or 1.40 percent to 2,045.97. 

Indian ADRs ended in red, HDFC Bank was down 1.21%, Tata Motors was down 0.72%, Dr. Reddy’s Lab was down by 0.30%, ICICI Bank was down 0.13% and Infosys was down 0.11%.