US markets closed higher despite oil slide

The US markets closed higher on Friday, despite drop in oil prices. Crude had traded higher earlier on hopes that major oil producers would agree to freeze output, which had pushed stocks to their opening highs. But the production freeze didn’t go as far as an outright output cut. On the economy front, business conditions in the New York region remained in deep negative territory. The Empire State manufacturing index for February only inched up to negative 16.6 from negative 19.4 in January. This is the seventh straight monthly contraction in the index, a first reading of manufacturing conditions in the month. The National Association of Home Builders stated that sentiment among home builders dipped in February. The NAHB/Wells Fargo housing market index fell 3 points to 58, from an upwardly-revised 61 in January. The index touched a 10-year high in October, and averaged 59 throughout 2015. Builders are responding to recent consumer worries about the economy. The sub-gauge that tracks current sales conditions also dropped three points, settling at 65 in February.

Meanwhile, Boston Fed President Eric Rosengren stated that the Federal Reserve can take its time to raise interest rates if headwinds from the global economy and financial markets persist. The strong dollar and the fall in oil prices make it less likely the Fed will be able to achieve its 2% target. Rosengren added that the Fed did not promise in December to hike rates by four quarter-point moves in 2016, but was just presenting a forecast if the economy evolved as expected. The Boston Fed president is a voting member of the Fed’s policy committee this year.

Separately, Patrick Harker, the president of the Philadelphia Fed stated that the US central bank should wait until the inflation data are stronger before raising interest rates again. Harker added that inflation could even be negative in the first quarter. Nervousness in financial markets also implies slower growth in the first half. Harker stated that the equity market could calm down and reverse direction and the recent sell-off had not overwhelmed the economy’s fundamental strength. Fed policy should be able to truly normalize in the second half of the year, with steady growth, a low unemployment rate and price pressures starting to assert themselves.

The Dow Jones Industrial Average added 222.57 points or 1.39 percent to 16,196.41, the Nasdaq was up 98.45 points or 2.27 percent to 4,435.96 while, the S&P 500 gained by 30.80 points or 1.65 percent to 1,895.58.  

The Indian ADRs closed mostly in green; Dr. Reddy’s Lab was up 0.97%, Tata Motors was up 0.59%, ICICI Bank was up by 0.14% and Wipro was up 0.12%. On the other hand, HDFC Bank was down 0.60%.