US markets closed higher ahead of Fed decision

The US markets closed higher on Tuesday, recording a second session of gains ahead of a long anticipated meeting of the Federal Reserve’s interest-rate setting committee. A surge in oil prices helped support the energy sector and gave stocks a lift as the Fed is slated to raise interest rates at the conclusion of its two-day policy meeting. On the economy front, the falling cost of gas and food kept consumer prices in check in November but some inflationary pressure appears to be building in the economy. The consumer price index was flat on a seasonally adjusted basis. Energy prices dropped 1.3% last month - gasoline price fell again - and food costs slipped 0.1% to mark the first decline since March. Inflation, however, is no longer trending lower. From November 2014 to November 2015, consumer inflation climbed 0.5%. Although that’s still very low, it’s the biggest annualized gain since December 2014. Similarly, core consumer prices increased at a 2% rate over the past 12 months for the first time since May 2014. The Federal Reserve wants overall inflation to rise to the 2% range, though the central bank relies on a different measure known as the PCE index that’s rising at a much slower annualized rate. The PCE had risen a scant 0.2% through the 12 months ended in October.

Additionally, a reading of New York-area manufacturing conditions showed less contraction in December, signaling factory conditions are weak but not deteriorating further. The Empire State general business conditions index moved up to a reading of negative 4.6, from negative 10.7 in the prior month, marking the best level since July. The index, on a scale where any positive number indicates improving conditions, was better than the negative 7.5 forecast. The index has been negative for five straight months. One sign of improving conditions in data was the index for future business activity, which climbed to 38.5 in December from 20.3 in the prior month.

Meanwhile, former Federal Reserve Chairman Ben Bernanke is optimistic that US economy can power through renewed global economic weakness and inflation will pick up, but added that Congress has to be the first line of defense just in case the downward pressure is too much. Bernanke told that the domestic economy is pretty strong, resilient enough to withstand the headwinds from the weak global economy. And while the Fed is on the brink of moving off zero, Bernanke acknowledges it may have to return to that level.

The Dow Jones Industrial Average added 156.41 points or 0.90 percent to 17,524.91, the Nasdaq was up 43.13 points or 0.87 percent to 4,995.36 and the S&P 500 gained 21.47 points or 1.06 percent to 2,043.41.

The Indian ADRs closed in green; HDFC Bank was up by 1.17%, Tata Motors was up 0.65%, Infosys was up 0.27%, Dr. Reddy’s Lab was up by 0.22% and Wipro was up by 0.13%.