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article imageU.S. markets are bearish for the third day this week

By Anna Vaysfeld     Aug 7, 2013 in Business
New York - Assumptions and uncertainties over the Fed's actions are keeping investors away from buying for the third session in a week.
An array of neutral to negative economic indicators have not inspired confidence that the Fed might not be ready to reduce its bond buying activities. The rally was mostly based on fears of a possible decrease in free money supply, which is in itself not justified to what federal officials are trying to communicate to investors. Sandra Pianalto the President of the Cleveland Fed has stated that: Right now, with unemployment at 7.4 percent and inflation at 1.3 percent, it is clear that the economy remains well short of maximum employment and that inflation is below our objective.2 Under these conditions, a highly accommodative monetary policy remains appropriate. She also emphasized that in the event that the Fed do decides to scale back its $85B in bond buying, the Fed will remain committed to the full employment growth and price stability.
The economic data revealed somewhat gloomy picture for the energy sector, federal government employment, and consumer credit. EIA (Energy Information Administration) report showed a decline in oil inventory at 1.3 million barrels in August 2 week, while the initial expectations were at 2 million barrels, the outstanding 0.7 million barrels of excess supply sunk crude oil futures for September delivery by 93 cents, or 0.9 percent, closing at $104.37. Yesterday's futures contract was standing at around $106.
The Gallup U.S. job creation index is down from 22 to 21, a one-point decrease; revealing early signs of sequestration effects on Federal employment. Consumer credit report showed weaknesses in consumer's confidence, revolving credit demand declined to 13.8B for the month of June, from 17.5B in May.
On a positive front; non-revolving credit raised to 16.5B, the highest for its 70-year history. The gains were attributed to higher car sales and student loans, although student loans cannot be allocated to increased enrollment-but a consequence of the government student loan buying program from private lenders. Mortgage Banker's Association report for the house purchasing index slightly improved to 1.0 percent for the August 2 week from its stagnant state for the last three months, since the interest rates were on the raise from bond buying activities. The refinancing index has not changed, as interest rates kept on increasing.
Major U.S indices fallen even further from yesterday's close. Dow is at -48.07 points, or -0.31 percent closing at 15,470.67, NASDAQ lost -11.76 points, or -0.32 percent standing at 3,654.01, S&P 500 declined by -6.46, or -0.38 percent, closing at 1,690.91.
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