U.S. stocks gave up early morning gains to trade lower Tuesday after the Institute for Supply Management’s survey of U.S. manufacturers showed the sector falling deeper into contraction, as President Trump’s trade war with China drags on.
What are major indexes doing?
The Dow Jones Industrial Average DJIA, -0.91% lost 261 points, or 1%, to reach 26,656, the S&P 500 index SPX, -0.81% fell 26 points to 2,950, a loss of 0.9%. The Nasdaq Composite index COMP, -0.63% retreated 56 points, or 0.7%, to reach 7,943.
On Monday, the Dow rose 96.58 points, or 0.4%, to end at 26,916.83, while the S&P 500 index advanced 14.95 points, or 0.5%, to finish at 2,976.74. The Nasdaq Composite Index closed at 7,999.34, a gain of 6.91 points, or 0.1%.
For the month of September, the Dow gained 2%, the S&P advanced 1.7% and the Nasdaq added 0.5%. For the quarter, the Dow and the S&P 500 both rose 1.2%, but the Nasdaq fell 0.1%.
What’s driving the market?
The ISM’s September survey on manufacturing firms registered at 47.8%, down from 49.1% in July, below the 50.2% predicted by economists polled by MarketWatch, and the worst reading since June 2009. Any reading below 50% indicates contraction.
The data showed that new orders for manufactured goods fell for the second month in a row, though at a slightly slower pace, while the export orders subcomponent of the survey came in at 41%, the lowest level since March 2009. Some survey respondents blamed higher U.S. and Chinese tariffs for weakness in their businesses.
“The disappointing data is only fanning long-standing fears of slowing global growth,” Alec Young, managing director of global markets research at FTSE Russell, wrote in an email. “And with U.S.-China trade expected to produce little in the way of near-term breakthroughs, investors continue to favor counter-cyclical, defensive stocks with high dividend yields as weak data pushes interest rates ever lower.”
Expectations for further rate cuts from the Federal Reserve gained ground on Tuesday. Traders in the Fed fund futures market are now pricing in a 62% chance of a quarter point rate cut in Oct. 30, compared with 40% a day ago.
The World Trade Organization on Tuesday said Tuesday that trade flows this year are set to increase at the weakest pace since the 2008 financial crisis brought the global economy to its knees.
“Job creation may be hampered as firms employ fewer workers to produce goods and services for export,” warned Roberto Azevêdo, the WTO’s director general, in the most recent global forecast by the Geneva-based organization.
The U.S. and China are due to hold talks in mid-October in an effort to make progress on resolving the ongoing trade dispute, which has lingered for almost two years. Meanwhile, China is reported to have bought about another one million tons of U.S. soybeans, even though U.S. farm exports are down about 7% from 2018. Farmers in the U.S. Midwest are facing the most difficult conditions since the 1980s as a result, the Wall Street Journal reported.
However, Federal Reserve Bank of Chicago President Charles Evans said Tuesday that the U.S. central bank’s most recent interest rate cuts have helped to maintain the economic expansion now in its record-setting 11th year, despite headwinds from the protracted Sino-American trade dispute.
Evans estimated that annual economic growth should be around 2.25% in 2019, which he described as a “a solid number, as it exceeds my view of the economy’s long-run potential growth rate,” in the text of a speech to be delivered in Frankfurt.
Meanwhile, President Xi Jinping presided over a military parade marking the 70th anniversary of the People’s Republic of China. During protests planned to coincide with the celebration, a Hong Kong protester was reportedly shot in the chest with a live round, representing a possible major escalation in the conflict between China and the semiautonomous nation on Tuesday.
Separately, markets continue to pay attention developments related to President Donald Trump’s impeachment inquiry after the Wall Street Journal reported that Secretary of State Mike Pompeo listened in on the July 25 phone call between Trump and Ukrainian President Volodymyr Zelensky, a disclosure that ties the State Department more closely to the House impeachment inquiry.
In other economic data, the Commerce Department reported that spending on U.S. construction projects rose 0.1% in August at a seasonally adjusted annual rate of $1.29 trillion, below the 0.4% rise expected by economists polled by MarketWatch.
Which stocks are in focus?
Charles Schwab Corp. SCHW, -8.98% shares tumbled Tuesday after the company announced it would end commissions for online trading of stocks, ETFs and options listed on U.S. or Canadian exchanges, across all mobile and web trading channels. Rivals TD Ameritrade Holding Corp. AMTD, -23.29% and E-Trade Financial Corp. ETFC, -16.18% were also trading sharply lower.
McCormick & Co. MKC, +7.40% reported fiscal third-quarter profit that beat expectations, and raised its full-year 2019 outlook Tuesday morning, sending shares higher Tuesday. The company came up short of revenue expectations, however.
Shares of Bausch Health Cos. Inc. BHC, -8.01% were under pressure Tuesday after the pharmaceutical firm said it is filing a lawsuit against Novartis AG NVS, -0.92% subsidiary Sandoz for patent infringement.
Ford Motor Co. F, -1.80% said Tuesday that it will book an impairment charge of between $800 million and $900 million related to a sale of its assets based to Indian auto maker Mahindra & Mahindra. Shares of the auto maker were falling.
How are other markets trading?
The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -1.70% fell about 4 basis points to 1.632% after the U.S. ISM manufacturing sector purchasing managers index fell further into contraction.
In commodities markets, West Texas Intermediate crude-oil for November delivery CLX19, -1.20% fell 73 cents to $53.32 a barrel on the New York Mercantile Exchange, a day after the commodity recorded a 3.3% drop.
Gold for December delivery GCZ19, +1.26% rose about $17 to reach $1,490 an ounce after finishing Monday’s session at a two-month low.
In Asia, Chinese equity benchmarks were closed in observance of its 70th anniversary. Japan’s Nikkei 225 NIK, +0.59%, meanwhile, gained 0.6%, wiping out a similar loss from Monday. European stocks finished lower, with the Stoxx Europe 600 SXXP, -1.31% down 1.3%.
Add Comment