A volatile US Market ends day in the red

Traders turn cautious as Ben Bernanke says that the U.S. economy is facing "significant" risks to growth

After kicking off the day in the red, US Market made an entry into the green during the mid-day hours but a sell-off in the final hours brought it back into red today, Tuesday, 15 July, 2008. Finally it ended the day with losses. Trading was volatile as the day was packed with reports and events. Federal Chairman, Ben Bernanke, Treasure Secretary Henry Paulson testified before senate banking committee today. But financials once again played the spoilsport. Six economic sectors finished with a loss. Energy finished markedly lower, reflecting the drop in oil prices followed by the financial sector.

After being down by almost 200 points earlier during the day, The Dow Jones industrial Average inched up in the green during the lunch hours. But finally it ended the day with a loss of 92.65 points at 10,962.54. The Nasdaq Composite Index, finished higher by 2.84 points at 2,215.71. S&P 500 finished lower by 13.39 points at 1,214.91.

In the Wall Street today, Federal Reserve Chairman Ben Bernanke said that the U.S. economy is facing "significant" risks to growth. As per him, rising energy prices, reduced access to credit and a further deepening in the U.S. housing slump have created significant downside risks to the outlook for growth.

Bernanke also said today that the weakening dollar has contributed to the rise in crude prices. He said it is too difficult to assess how much of an impact it has. Bernanke feels the trade deficit is largely to blame for the dollar's decline.

Financials were once again in focus after Fannie Mae and Freddie Mac shares slipped after their rating cut at Moody�s. Also, disappointment over US Bancorp's earnings and an Oppenheimer downgrade of Wachovia started taking a toll on the sector. US Bancorp reported a 12% drop in earnings.

On the economic front, the June Producer Price Index (PPI)- an inflation reading came in mixed. Total June PPI rose above expectations as higher energy and food prices drove up costs, while core PPI, which excludes food and energy prices, increased by a lower than expected amount. On monthly basis, total PPI rose 1.8% (consensus 1.4%) and core PPI increased 0.2% (consensus 0.3%). On a yearly basis total PPI is up 9.2%, while core PPI came a more tame 3%.

Also, June retail sales were disappointing, falling short of expectations. Retail sales rose 0.1% (against expected 0.4%) and retail sales ex-autos rose 0.8% (expected 0.9%).

Technology was one of the mains sectors that was a winner today as Microsoft supported the sector and helped Nasdaq end in the green.

Barring Patni Computers and VSNL, all the Indian ADRs ended in the red. ICICI Bank and HDFC Bank were the largest losers shedding 7.3% and 4.2% respectively.

Crude oil prices witnessed the maximum one day fall in seventeen years today, Tuesday, 15 July, 2008. Prices plunged among overall concerns regarding growth in US and worldwide. Also, the Organization of the Petroleum Exporting Countries lowered its forecast for world oil-demand growth for 2008 and 2009 today. Prices witnessed considerable volatility throughout the day.

Crude-oil futures for light sweet crude for August delivery today closed at $138.74/barrel (lower by $6.44/barrel or 4.4%) on the New York Mercantile Exchange. It rose by $1 earlier in the day but then fell $9.3 to an intraday low of $135.92 in overnight electronic trading. Last week, prices gained $0.21 (0.2%).

OPEC issued its monthly report today, lowering its forecast for world oil-demand growth for 2008 to 1.03 million barrels a day, which represents a decline of 70,000 barrels from its previous estimate. Global oil demand this year is expected to average 86.81 million barrels a day. Earlier this month, the Energy Information Administration projected that U.S. petroleum consumption will shrink by 400,000 barrels a day in 2008, 38% more than EIA's June projection of a decline of 290,000 barrels.

At the currency markets on Tuesday, the dollar got some support from falling crude-oil futures but remained under pressure retreating after Bernanke cited downside risks to economic growth in a speech that followed a spate of lackluster data. The dollar dropped to a new low against the euro earlier, before Bernanke spoke on Capitol Hill. The dollar index which measures the greenback against a basket of six major currencies, fell 0.4% to 71.73.

For tomorrow, Fed Chairman Bernanke will appear before the Senate Banking Committee for his second day of monetary policy testimony. Consumer Price Index (CPI) data for June and the Industrial Production Index for June are due shortly before trading begins.