The US markets closed slightly higher on Tuesday, with the Nasdaq notching a new record, while oil prices declined the US trade deficit hit its highest level in four years. The Federal Reserve (Fed) Bank of Atlanta slashed its forecast for first quarter (Q1) gross domestic product (GDP) growth in the US after the release of data last week. Specifically, the Atlanta Fed cut its US Q1 GDP growth estimate to 2.7%, from the prior forecast of 3.7% published on February 1. Minneapolis Federal Reserve Bank President Neel Kashkari said that with the US economy not yet at full employment, little risk of inflation surging and no immediate threat to financial stability, the Federal Reserve should keep rates moderately accommodative. Kashkari said that while markets are pricing in expectations for fiscal stimulus under President Donald Trump, he is not doing so in his own economic forecasts. Kashkari added that inflation is showing signs of rising only slowly, labor cost growth is weak, and low inflation in other developed countries around the world make it unlikely that inflation will surge at home. Philadelphia Federal Reserve Bank President Patrick Harker said interest-rate hike should be on the table at the US central bank’s next meeting in March. Harker will vote on monetary policy this year on the Fed’s policy-setting panel, added that he is supportive of three rate hikes this year, of course with a major caveat depending on how the economy evolves and policy, fiscal policy evolves.
On the economy front, job openings were little changed in December, but hires continued a multi-month winning streak, as economic growth powers on. There were 5.5 million job openings on the last day of December. That was essentially flat compared to November. But 5.3 million people were hired during the month, up from 5.2 million in November. Fewer people quit jobs voluntarily in December - 3 million compared to 3.1 million in November. Consumer borrowing rose $14.2 billion in December, below expectations, as credit-card use increased at a much slower pace that in the prior month. Total consumer credit increased $14.2 billion in December to a seasonally adjusted $3.76 trillion, posting an annual growth rate of 4.5%. Consumer credit in November was revised up to an increase of $25.2 billion from the prior estimate of $24.5 billion. Revolving credit, which is mostly made up of credit card loans, slowed to a gain of $2.3 billion or an annual rate of 2.9%. This was the smallest increase since February 2016 and compared with a rise of 14.4% in November.
Separately, the US trade deficit rose slightly in 2016 to $502.3 billion, marking the highest level in four years and underscoring the difficulty the Trump administration faces in bringing the nation’s trade outlook back into balance. The trade gap widened last year because exports fell faster than imports, the result of a weak global economy and a stronger dollar that made American products more expensive to foreign buyers. The deficit with Mexico, the biggest target of President Donald Trump’s wrath, rose 4.2% to $63.2 billion in 2016 to mark a five-year high. The gap with China is by far the largest among the major US trading partners. Although the deficit dropped 5.5% in 2016, it still totaled $347 billion. That’s more than three-fifths of the overall US trade deficit. In December, meanwhile, the trade deficit fell as expected. The gap in the final month of 2016 dipped 3.2% to $44.3 billion.
The Dow Jones Industrial Average added 37.87 points or 0.19 percent to 20,090.29, Nasdaq was up 10.67 points or 0.19 percent to 5,674.22, while S&P 500 gained 0.52 points or 0.02 percent to 2,293.08.
The Indian ADRs closed mostly in red; Tata Motors was down 1.15%, Dr. Reddy’s Lab was down 0.70% and ICICI Bank was down 0.08%. On the other hand, Infosys was up 0.22% and Wipro was up 0.05%.