The Dow Jones slipped as much as 300 points after an unexpectedly-miserableISM manufacturing readingsent the closely-watched economic metric to itslowest pointin 10 years.
As the US stock market cringed , President Donald Trump blamed the economic woes on the Fed, further pressuring a fragile Dow.
Dow Jones Recoils After Another ISM Manufacturing Miss
Minutes before the closing bell, theDow Jones Industrial Averagehad nosedived 269. 34 points or 1% to 26, 647. 49. The Dow hadflirted with triple-digit gainsin early morning trading before the awful PMI print sapped the optimism from the market.
The S&P 500 and Nasdaq also struggled on Tuesday as manufacturing data continues to suggest an impending recession with a second consecutive contraction.
The Dow was the worst hit, failing to get any boost from aweakening US dollarthat sold off after somepositive Brexit headlineslifted the euro and British pound.
Commodity marketswere mixed, as crude oil fell 0.8% on growth concerns, while gold and silver recouped some ofMonday’s lossesin risk-off trade.
Trump Pins Stock Market Woes on Fed’s Strong Dollar
The US president’s desire to pin the struggles of the Dow Jones, US manufacturing, and practically any other economic metric on the Federal Reservehas long been abundantly cl ear. Trump and his advisers claim theDow could be at 30, 000if Jerome Powell had been more aggressive in cutting interest rates.
Fundamentally speaking, it is true that a strong USD is terrible for US exports, but broader macro themes suggest that blaming it entirely on the greenback and tight Fed policy may be unwarranted.
Politically speaking, Trump may be vulnerable if he loses the support of a key base of manufacturing workers who hoped the president wouldrestore their industryto its former glory.
Brian Hearn, CFO of one of the leading providers of lighting and LED production solutions in the United States, had the following to say to CCN regarding the trade war’s effect on their purchasing of Chinese products over US manufactured goods:
“It’s still a competitive advantage for us to buy LED from China, even with Trump’s tariffs. Germany used to make the best product, but China has drastically improved its quality while still offering a significant price advantage. US manufacturers simply cannot compete on price, and do not generally offer superior quality. ”
If a 25% tariff didn’t make US manufacturers much more competitive, only a significant slide in the USD would allow them to catch up in normal trade conditions. Such a dip isextremely unlikelyto occur while the US economy remains strong relative to the rest of the world.
ING: Federal Reserve in a Corner as US Economy Weakens
The Dow Jones hates weak manufacturing numbers, primarily because they have proven to be a generalindicator of recession. Slowing European and Chinese economies are also clear obstacles to the outlook for US exports.
Chief Economist James Knightley at ING wrote on Tuesday his view that more stock market woes can be expected as manufacturing conditions continue to worsen. From Knightley’s perspective, this will force the Fed to make two more cuts over the next few months, ashe states:
“ Given the worries over trade tensions, the weakening global growth story and the strength of the dollar, which is hurting the relative competitiveness, we don’t expect to see a rebound in the performance of the manufacturing sector anytime soon… We think the Fed will provide further “insurance” interest rate cuts to try to limit the slowdown in overall growth. We look for a December rate cut with another 25 basis point move in 1Q 20. ”
Dow Stocks: Apple & Visa Shine Amidst Bloodbath
It was a terrible day for theDow 30, as Cisco slid 3%, while McDonald’s and Caterpillar lost around 2.5%. Energy stocks struggled as Exxon Mobil and Chevron also dropped close to 2%.
It could have been much worse ifApplewasn’t up 0.5%, showing incredible resilience amid market turmoil andcontinuing its strong rally. Visa gets a notable mention for a remarkable 1. 45% gain even as the Dow Jones slipped nearly 300 points.
(Click) herefor a live Dow Jones Industrial Average chart.
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