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Wall Street tumbles as factory activity hits 10-year low

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(Reuters) – The S&P 500 and Dow suffered their worst tumbles in over a month on Tuesday after information confirmed U.S. factory activity shrank in September to its weakest in over a decade, ratcheting up fears that the U.S.-China commerce warfare is hobbling the world’s largest financial system.

FILE PHOTO: Traders work on the ground on the New York Stock Exchange (NYSE) in New York, U.S., September 23, 2019. REUTERS/Brendan McDermid

Investors moved to the protection of U.S. Treasuries after the ISM report confirmed its manufacturing activity index at 47.8, falling farther from August’s sharp contraction and under economists’ expectations of 50.1. A studying under 50 signifies contraction.

With lingering commerce tensions weighing on exports, the U.S. information mirrored related patterns within the euro zone, Japan, the United Kingdom and China.

The S&P industrials index .SPLRCI dropped 2.4%, probably the most among the many 11 main S&P sectors. The supplies .SPLRC and vitality .SPNY indexes each fell 2.3%. All 11 sectors misplaced floor.

A jobs report on Friday is predicted to shed additional gentle on U.S. financial power.

“This is a bad number, fitting in with the world’s manufacturing recession,” Jim Bianco, head of Bianco Research in Chicago, stated of the ISM report. “I think the market is right to be concerned, but we will have to see whether other manufacturing numbers in the U.S. bear that out, not the least of which being the manufacturing payroll numbers on Friday.”

Despite a chronic U.S.-China commerce warfare that has hammered world progress, confidence within the home financial system has helped the benchmark S&P 500 .SPX climb about 17% this 12 months.

Thomas Simons, a Jefferies economist, stated the manufacturing contraction doesn’t underpin a wider softening within the U.S. financial system, as it was the results of a number of elements, together with Boeing Co’s (BA.N) manufacturing points referring to its best-selling jets.

“Manufacturing itself is in a recession, but it does not mean that the overall economy is in a recession.”

The Dow Jones Industrial Average .DJI fell 1.28% to finish at 26,573.04, whereas the S&P 500 .SPX misplaced 1.23% to 2,940.25. Both indexes had their greatest one-day dip since Aug. 23, when U.S. President Donald Trump demanded that American firms search alternate options to doing enterprise with China.

The Nasdaq Composite .IXIC dropped 1.13% to finish at 7,908.69.

The Cboe Volatility Index, or VIX .VIX, an options-based gauge of investor anxiousness, rose 2.Three factors to 18.56, its highest shut in a few month.

Shares of on-line brokerage E*Trade Financial (ETFC.O) tumbled 16.4%, probably the most on the S&P 500, after rival Charles Schwab Corp (SCHW.N) stated it might take away commissions for on-line buying and selling of shares, ETFs and choices listed on U.S. or Canadian exchanges. Charles Schwab’s shares slumped 9.7%.

McDonald’s Corp (MCD.N) dropped 2.7% after JP Morgan stated the quick meals chain’s third-quarter same-store gross sales can be softer than analysts’ estimates.

Shares of chipmaker Xilinx Inc (XLNX.O) declined 4.1% after KeyBanc lowered its score to “sector weight.”

In one of many few shiny spots, Ulta Beauty Inc (ULTA.O) superior 6.1% after an unbiased director purchased shares.

Stitch Fix (SFIX.O) rose 1% in prolonged commerce after the attire vendor’s quarterly earnings per share beat analysts’ estimates.

As the ultimate quarter of 2019 kicks off, traders will probably be specializing in a spread of things, starting with the high-stakes Sino-U.S. commerce talks in early October, company earnings and the Fed’s subsequent coverage assembly.

Declining points outnumbered advancing ones on the NYSE by a 2.76-to-1 ratio; on Nasdaq, a 3.29-to-1 ratio favored decliners.

The S&P 500 posted 12 new 52-week highs and 9 new lows; the Nasdaq Composite recorded 28 new highs and 131 new lows.

Volume on U.S. exchanges was 7.Three billion shares, in contrast with the 7.2 billion common for the complete session during the last 20 buying and selling days.

Additional reporting by Medha Singh and Arjun Panchadar in Bengaluru; Editing by Nick Zieminski and Dan Grebler

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