US markets drop as investors await Fed signal on stimulus

The US markets edged lower on Monday, after a choppy trading session, with the energy and financial sectors leading the S&P 500 lower, as Treasury yields hit fresh two-year highs since investors awaited signals this week on the Federal Reserve’s stimulus plans. This was the fourth consecutive session of declines for both the Dow industrials and the S&P 500, marking the longest losing streak since December 28, 2012, when the market fell for five straight trading days. Treasury yields continued to push higher, exploring territory last seen in July 2011. Yields have been on the rise since this spring, when Federal Reserve Chairman Ben Bernanke indicated the Fed could begin scaling back its $85 billion-a-month bond-buying plan later this year. Also with no major economic data due on Monday, investors are looking ahead to the release of the minutes of the latest meeting of Fed policy makers, as well as the Kansas City Federal Reserve’s annual retreat in Jackson Hole, Wyo, at the end of the week. The minutes of the Federal Open Market Committee’s July 30-31 meeting will be released on Wednesday.

Meanwhile, the Federal Reserve stated that some of the largest US banks are stumbling in efforts to assess their own potential risks and financing needs, raising the possibility that banks could be pushed to increase their capital or curtail dividends and share buybacks to satisfy regulators. Most large banks have made progress in evaluating and preparing themselves to withstand a severe economic downturn. The Fed study indicated that each of the 18 large banks required to submit capital plans to the Fed exhibited flaws in some part of the process.

The Dow Jones Industrial Average slipped 70.73 points or 0.47 percent to 15,010.70, the S&P 500 was down 9.77 points or 0.59 percent to 1,646.06, while the Nasdaq dropped by 13.69 points or 0.38 percent to 3,589.09.

Indian ADRs closed in red on Monday; ICICI Bank was down 2.80%, Tata Motors was down 1.72%, HDFC Bank was down 1.33%, Dr. Reddy’s Lab was down 1.16% and Infosys was down 0.68%.