The US markets closed higher on Tuesday, with major indexes simultaneously closing at records for a second session in a row on the back of gains in defensive sectors and energy, even as concerns remained about the market’s valuation. San Francisco Federal Reserve Bank President John Williams warned that the global drop in interest rates since the financial crisis is likely to persist and will make it harder for central banks to keep world economies healthy. The Fed has raised its short-term interest-rate target just twice since the 2007-2009 financial crisis and recession, and many other global central banks have kept their rates pinned near zero or even below. In a view that has gained traction among economists over the past year or two, Williams has argued that even as developed economies recover, interest rates are likely to top out at lower levels than before the crisis because economic growth is on a slower trajectory due to structural factors like aging populations. While before the crisis, the natural rate of interest in the UK, US, Europe and Canada was between 2 percent and 3 percent, it is now nearer to 0.25 percent, and it is showing no signs of perking back up. Philadelphia Fed President Patrick Harker said that the US economy is back to normal, the labor market is healthy again and inflation is headed higher, repeating that he expects the Fed to raise interest rates three times this year. Harker, who votes on monetary policy this year under a rotation, said he expects inflation to hit a 2 percent Fed target this year or next.
On the economy front, momentum in both the US manufacturing and service sectors slowed in February. The Markit flash US manufacturing purchasing managers index fell to a seasonally adjusted reading of 54.3 from 55 in January. A similar gauge for services slipped to 53.9 from a 14-month high of 55.6 in the prior month. Both indices slipped to two-month lows. Any reading below 50 indicates more respondents said conditions are getting worse than getting better. The flash estimate is based on about 85%-90% of respondents each month.
The Dow Jones Industrial Average added 118.95 points or 0.58 percent to 20,743.00, the Nasdaq was up 27.37 points or 0.47 percent to 5,865.95, while S&P 500 gained 14.22 points or 0.60 percent to 2,365.38.
The Indian ADRs closed in green; HDFC Bank was up 2.22%, Tata Motors was up 1.04%, Infosys was up 0.41%, Dr. Reddy’s Lab was up 0.24% and Wipro was up 0.10%.