US markets close lower on worries over oil, North Korea

The US markets closed lower on Wednesday, as falling oil prices, worries about slowing growth and North Korea’s claim to have completed its fourth successful nuclear test weighed on global markets. The market extended their decline after the release of minutes from the December Federal Reserve meeting, which showed some policy makers had reservations about raising interest rates. Minutes of the Federal Reserve’s historic decision to lift interest rates revealed an undercurrent of doubt by central bankers despite a unanimous vote. According to the minutes of the December 15-16 meeting, released some members stated that their decision to raise the target range was a close call, particularly given the uncertainty about inflation dynamics, and emphasized the need to monitor the progress of inflation closely. In hiking rates for the first time since 2006, Fed officials cited improvement in labor markets and said they were reasonably confident that inflation would move up toward the Fed’s 2% target. But some officials seemed to have as much trepidation as confidence. Among the concerns were that further shocks to prices of oil and other commodities, or a sustained rise of the dollar, could delay the expected upturn in inflation. Additionally, a couple of officials were worried that further strengthening of the labor market might not be sufficient to offset the downward pressures from global disinflationary forces. The consensus view of Fed officials and the staff was that the further drop in oil prices in the fourth quarter was likely to exert some additional transitory downward pressure on inflation in the near term.

On the economy front, the nation’s trade deficit sank 5% in November to the smallest amount in a year, but not because the economy is much improved: US exports fell slightly, hitting the lowest level since the start of 2012, and imports dropped even faster. The US trade gap declined to a seasonally adjusted $42.4 billion from $44.6 billion in October. US exports slipped 0.9% to $182.2 billion in November. Imports fell a sharper 1.7% to $224.6 billion. At the same time, the price the US paid for imported oil fell in November to the lowest level since 2009. The steadily growing US economy has been unable to speed up in the past few years largely because of a weakened trade position.

On the other hand, private-sector employment gains ramped up last month, suggesting the US labor market remains on solid ground despite signs of weakness elsewhere around the globe. Employers added 257,000 jobs in December. This is the strongest gain since December 2014. ADP revised November’s gain down slightly to 211,000 from a prior estimate of 217,000. Companies in the US that offer services such as retailers, real-estate firms and financial companies grew again in December but at the slowest pace in a year and a half. The Institute for Supply Management’s nonmanufacturing index fell to 55.3% from 55.9% in November.

The Dow Jones Industrial Average lost 252.15 points or 1.47 percent to 16,906.51, the Nasdaq was down 55.66 points or 1.14 percent to 4,835.77 while, the S&P 500 dropped 26.45 points or 1.31 percent to 1,990.26. 

The Indian ADRs closed mostly in red; Dr. Reddy’s Lab was down 1.15%, Tata Motors was down by 0.75% and ICICI Bank was down by 0.24%. On the other hand, HDFC Bank was up 0.09% and Wipro was up by 0.01%.