U.S. stocks regained some ground on Tuesday after the previous session’s declines, shrugging off weak manufacturing data. According to the most recent reports, U.S. manufacturing has contracted for the first time in three years. The decline was attributed to a strong dollar and reduced spending in the energy sector, though strong automobile sales and weak retail performance has kept investors undecided. Despite the decline in manufacturing, construction has increased in October, possibly balancing out manufacturing woes on fourth quarter GDP reports. Some analysts point out that although the Federal Reserve has repeatedly stressed the importance of positive data in their decision to raise interest rates, the manufacturing sector’s relatively small percentage of the market share will keep the Fed on course for a December interest rate hike. The market’s confidence in this notion can be seen in yesterday’s stock market performance. The Standard & Poor’s gained 22.22 points, or 1.07%, to trade at 2,102.63, closing above the key 2,100 resistance level for the first time in nearly a month just a day before Federal Reserve Chair Janet Yellen is scheduled to speak. The Dow Jones Industrial Average added 168.43 points, or 0.95%, to close at 17,888.35, and the Nasdaq Composite rose 47.64 points, or 0.93%, to close Tuesday’s trading session at 5,156.31. While the market remains optimistic about Friday’s nonfarm payrolls report, ADP’s initial survey will be released today, although like many surveys, its limited sampling presents a wide error margin, as seen with the previous report.
Wall Street’s unwavering confidence in a December interest rate has raised concerns in Asian markets that higher borrowing costs would reduce demand for their products, leading to mixed results in the region. MSCI's broadest index of Asia-Pacific shares outside Japan gained around 0.2%, Shanghai shares added 0.8% and Hong Kong's Hang Seng rose 0.5%. The Japanese Nikkei posted a 0.1% decline after erasing most of its earlier declines caused by a strong yen.
This week’s major economic data releases continue today with the release of a survey of the U.S. employment market ahead of Friday’s official government report. The European Central Bank is scheduled to make its interest rate decision on Thursday, followed by U.S. non-manufacturing PMI. The week will conclude with the U.S. nonfarm payrolls employment report, which holds special significance due to the Federal Reserve’s statements regarding a data-dependent interest rate hike in December.