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After opening the day on a negative note, the Indian indices have continued to trade in the red during the post-noon trading session. Sectoral indices are trading on a negative note with stocks from the FMCG and auto sectors leading the losses.
Gold prices, per 10 grams, are trading at Rs 31,181 levels. Silver price, per kilogram, is trading at Rs 46,551 levels. Crude oil is trading at Rs 3,143 per barrel. The rupee is trading at 66.66 to the US$.
Data released during the week showed that US jobless claims fell to a six-week low last week. The US Department of Labor reported initial jobless claims in the week ending September 3rd decreased by 4,000 to a seasonally adjusted 2,59,000. This was recorded as the 79th straight week that claims remained below the 3,00,000 threshold, which represents a robust labour market.
While the jobs data fuelled optimism for the US economy, the services sector data came in below expectations. Data released during the week showed that the US services sector activity slowed to a 6-1/2-year low in August. This was seen amid sharp drops in production and orders.
The Institute for Supply Management (ISM) said its non-manufacturing activity index fell 4.1 percentage points to a reading of 51.4. This was recorded as the lowest since February 2010. The drop from July was the largest monthly fall since the 2008 financial crisis, with the ISM saying a majority of companies had noted a slowing in their level of business. A reading above 50 indicates expansion in the services sector, which accounts for more than two-thirds of U.S. economic activity.
This came as another negative news for the US economy. Last week, the ISM said its index of national factory activity fell 3.2% to a reading of 49.4 last month. This was the first contraction since February. The index, however, remained above the 43.2 threshold that is associated with a recession.
While manufacturing and services sector remains constrained, sustained labour market strength could push the Fed closer to raising interest rates later this year.
Last month, Fed Chair Janet Yellen voiced optimism about the economy and an anticipation that interest rates hikes are ahead. Yellen said that with a firm labour market in the US and with the Fed's outlook for economic activity and inflation, the case for an interest rate hike has strengthened in recent months.
As for our views on the US interest rate, we believe that the market and the Fed place undue importance on just twenty-five basis points (0.25%). And this in turn leads to a loss of central bank credibility. Asad Dossani, editor at Daily Profit Hunter, explained the issue in his article, Twenty-Five Basis Points.
The Fed's stance on interest rate hikes has fuelled much volatility in the global markets of late. The question is: How can one avoid capital loss amid such volatility? Asad says Don't Fight Easy Money. And to learn how, you can read recent articles from Apurva Sheth - one highlighting some trading principles from Warren Buffett and another explaining how traders can measure their trading performance.
Moving on to the news from the commodity space... Crude oil witnessed volatile trades during this week.
Prices pulled back today on profit-taking after witnessing buying interest yesterday.
Prices of the commodity spiked on Thursday after the release of inventory data from the American Petroleum Institute (API). The data showed a 12-million-barrel drop in the US crude oil supplies for the week of August 28. This was recorded as the largest drawdown in crude inventories since the 12.4-million-barrel drop reported in March 2013. Along with this, a firm trend in Asian markets coupled with a weaker dollar meant gains for crude oil.
During the last week, crude oil witnessed its worst weekly decline since January.
The only positive cue for crude oil is the higher growth anticipated for some major oil consuming economies. Higher growth will lead to higher oil consumption in the coming months, particularly with the onset of winter.
With these triggers, does it make sense to bet on oil? Are crude oil companies a good long-term investment? One of the editions of The 5 Minute WrapUp says This Could Be the Biggest Buying Opportunity Out There.
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