Weak Manufacturing Data Leads To Sharp Pullback On Wall Street

(RTTNews) - After an early move to the upside, stocks showed a significant downturn over the course of the trading session on Tuesday. The major averages pulled back well off their highs of the session and firmly into negative territory.

The major averages moved to the downside going into the close, ending the day near their lows of the session. The Dow plunged 343.79 points or 1.3 percent to 26,573.04, the Nasdaq slumped 90.65 points or 1.1 percent to 7,908.68 and the S&P 500 tumbled 36.49 points or 1.2 percent to 2,940.25.

The sharp pullback on Wall Street came following the release of a report from the Institute for Supply Management showing a continued contraction in U.S. manufacturing activity in the month of September.

The ISM said its purchasing managers index dropped to 47.8 in September from 49.1 in August, with a reading below 50 indicating a contraction in manufacturing activity. Economists had expected the index to inch up to 50.1.

With the unexpected decrease, the index fell to its lowest level since hitting 46.3 in June of 2009, the last month of the Great Recession.

Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee, noted the contraction continues six straight months of softening in manufacturing.

"Global trade remains the most significant issue, as demonstrated by the contraction in new export orders that began in July 2019," Fiore said. "Overall, sentiment this month remains cautious regarding near-term growth."

The new export orders index slid to 41.0 in September from 43.3 in August, falling to its lowest level since hitting 39.4 in March of 2009.

Economists noted the disappointing data may also reflect the ongoing strike at General Motors (GM), which has also begun to affect production at suppliers.

Meanwhile, President Donald Trump blamed the weak manufacturing data on the Federal Reserve, which he blasted as "pathetic" in a post on Twitter.

"As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies, they don't have a clue. Pathetic!" Trump tweeted.

Sector News

Brokerage stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Broker/Dealer Index down by 5.9 percent to its lowest closing level in a month.

Online brokers fell sharply after Charles Schwab (SCHW) announced plans to eliminate online trade commissions for U.S. stocks, exchange traded funds and options as part of an escalating price war.

Considerable weakness also emerged among oil service stocks, as reflected by the 3.4 percent nosedive by the Philadelphia Oil Service Index.

The weakness among oil service stocks came amid a decrease by the price of crude oil, with crude for November delivery sliding $0.45 to $53.62 a barrel.

Natural gas, networking, banking and chemical stocks also saw significant weakness on the day, moving lower along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Tuesday, with markets in China and Hong Kong closed for holidays. Japan's Nikkei 225 Index climbed by 0.6 percent, while Australia's All Ordinaries Index advanced by 0.8 percent.

Meanwhile, the major European markets moved to the downside on the day. While the U.K.'s FTSE 100 Index slid by 0.7 percent, the German DAX Index and the French CAC 40 Index tumbled by 1.3 percent and 1.4 percent, respectively.

In the bond market, treasuries showed a significant rebound following the weak manufacturing data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.1 basis points to 1.644 percent.

Looking Ahead

Trading on Wednesday may be impacted by reaction to payroll processor ADP's report on private sector employment in the month of September.