- Stocks are lower by about 500 Dow points today and 800 points over two days.
- Yesterday's US weaker Manufacturing PMI are adding to global growth fears.
- Today's ADP Employment report was a slight miss, showing a 135,000 increase in payrolls vs. 140,000 expected.
Well, this isn't fun. October got off to a rough start yesterday with stocks shedding 343 points after the US ISM Manufacturing number missed expectations and added to concerns about global growth and the impact of trade frictions on future manufacturing. The services portion of the economy has so far been decent (see consumer spending) and we’ll get a US Services PMI data point tomorrow but at least for now the focus remains on manufacturing weakness here and abroad.
Heading into the open today, we were confronted these facts:
- Stocks closed on their lows yesterday
- The S&P 500 fell below its 50-day moving average
- This morning’s pre-open ADP Employment number was a miss
- US M&A volume fell 40% in Q3 to $246 billion – the lowest quarterly total since 2014
- Overseas markets fell
- It’s October
With all that to content with, futures indicated a lower start to the day, following Europe and Asia weakness. The S&P looked to open about 14 points lower heading into the open and the Dow’s projected decline was about 130 points. Stocks promptly fell further, down almost 300 points shortly after the regular session began, and are now about 500 points lower as we approach noon for an 800+ point decline over two sessions as the S&P 500 gave up the 2,900 level.
The US labor market takes on renewed significance given the manufacturing weakness. ADP’s Employment report showed a gain of 135,000 jobs, below the estimate of a 140,000 gain. Normally this slight miss would not be a big deal but folks are skittish. Most of the attention this week will be on the Nonfarm Payrolls number to be released before the opening on Friday. Also on Friday, Jerome Powell will be making a speech as the chances of a rate cut seem to be increasing. For tomorrow, the Services PMI release (70% of the economy) will also be that much more important. Incidentally, Ford’s Q3 sales fell 4.9% but less than expected. GM’s sales rose 6.3% but below the 7.8% estimate. Both stocks are down.
Meanwhile, oil rose this morning seeking to end a six-day losing streak but gave up earlier gains. A drop in US supplies and lower OPEC output put the supply part of the equation in focus. Front month futures for WTI Crude rose to about $54/bbl this pre-open after the API reported a 5.9 million barrel decline in inventories and OPEC’s production fell by 1.6 million barrels last month, primarily due to the attacks on Saudi facilities. However, today’s DOE inventory build of 3.1 million barrels, released at 10:30 a.m. did not confirm the API number as supplies rose more than the estimated 1.5 million barrel increase. The release coincided with a drop in crude to about $53.50 and what’s looking like a seventh consecutive losing day.
Unsurprisingly bonds rose today with the 10-year Treasury yield falling for the 5th consecutive day to about 1.60% as we write. In sector performance, only Real Estate stocks started out in barely positive territory helped by a few health care REITs. However, as the stock market fell further, all sectors are now in the red with manufacturing-focused Materials & Industrials, growthy Tech, Financials (rate cut?) and Energy (crude drop) the worst performers. Utilities and Real Estate (safety stocks?) are the least worse.
Brian’s Technical Take
Yesterday’s weak ISM manufacturing data led to a bearish reversal which is seeing downside follow through today. The S&P 500 is off nearly 2% and more importantly has fallen back below the 2,939 level which previously marked clearly defined resistance throughout August and thus was an expected support level.
From here key support is down at the 2,822 level, the August lows, which now coincides with the 200-day sma, 2,837. While October is known for being one of the better performing months from a seasonality perspective, it is also known to be one of the most volatile months. With plenty of event risk coming down the pipeline through the remainder of the month, including US-China trade talks, ECB and FOMC meetings, and Brexit, there are plenty of reasons to expect the volatility to remain elevated over the immediate future.
Nasdaq's Market Intelligence Desk (MID) Team includes:
Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie has extensive knowledge of equity trading on both floor and screen-based marketplaces. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis.
Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.
Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen-based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.
Brian Joyce, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Before joining Nasdaq, Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).
Michael Sokoll, CFA is Associate Vice President on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.
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