US markets closed lower as oil prices plummet

The US markets closed lower on Tuesday, erasing most of their gains from Monday’s session, as a fresh selloff in crude-oil prices weighed on Wall Street investors, who have viewed plunging energy prices as a signal that the health of the global economy is on shaky footing. On the economy front, consumers’ confidence fell in February to the lowest level in seven months, as Americans became a bit more pessimistic about job prospects and business conditions. The consumer confidence index dropped to 92.2 from a revised 97.8 in January. Last fall, confidence effectively matched a post-recession high as the index hit 102.6 before tapering off. But it still falls short of the 111.9 peak reached during the 2001-2007 expansion, and it’s well below an all-time high of 144.7 achieved in mid-2000. On the other hand, US home prices were steady in December, but home values in 2015 increased much faster than inflation on a combination jobs growth and low inventories. The S&P/Case-Shiller 20-city composite was steady in December, with 10 of 20 cities showing increases. After seasonal adjustment, prices rose 0.8%.  Over the last 12 months, home prices increased 5.7%, with Portland, San Francisco and Denver each posting double-digit gains.

Meanwhile, Federal Reserve Vice Chairman Stanley Fischer stated that there is a possibility that the market selloff of 2016 may not damage the economy. Fischer added that he’s not worried that further modest declines in the unemployment rate will spark excessive inflation, a view that could allow the Fed to be cautious as it considers additional interest rate hikes. Fischer stressed that the Fed is data dependent when making policy decisions. The Fed has forecast four rate hikes this year, while markets are not pricing in any. Fischer enlightened that Fed policy remains accommodative and that there is some benefit to maintaining a large balance sheet for a time.

The Dow Jones Industrial Average lost 188.88 points or 1.14 percent to 16,431.78, the Nasdaq was down 67.03 points or 1.47 percent to 4,503.58 while, the S&P 500 dropped 24.23 points or 1.25 percent to 1,921.27.   

The Indian ADRs closed in red; HDFC Bank was down 2.53%, Tata Motors was down 0.92%, Dr. Reddy’s Lab was down 0.80%, ICICI Bank was down 0.28% and Infosys was down 0.24%.