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Wall Street tumbles as factory activity hits 10-year low

Stock Markets Oct 01, 2019 04:46PM ET
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By Noel Randewich

(Reuters) - The S&P 500 and Dow suffered their worst tumbles in over a month on Tuesday after data showed U.S. factory activity shrank in September to its weakest in over a decade, ratcheting up fears that the U.S.-China trade war is hobbling the world's largest economy.

Investors moved to the safety of U.S. Treasuries after the ISM report showed its manufacturing activity index at 47.8, falling further from August's sharp contraction and below economists' expectations of 50.1. A reading below 50 indicates contraction.

With lingering trade tensions weighing on exports, the U.S. data mirrored similar patterns in the euro zone, Japan, the United Kingdom and China.

The S&P industrials index (SPLRCI) dropped 2.4%, the most among the 11 major S&P sectors. The materials <.SPLRC> and energy (SPNY) indexes both fell 2.3%. All 11 sectors lost ground.

A jobs report on Friday is expected to shed further light on U.S. economic strength.

"This is a bad number, fitting in with the world’s manufacturing recession," Jim Bianco, head of Bianco Research in Chicago, said 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 prolonged U.S.-China trade war that has hammered global growth, confidence in the domestic economy has helped the benchmark S&P 500 (SPX) climb about 17% this year.

Thomas Simons, a Jefferies economist, said the manufacturing contraction does not underpin a wider softening in the U.S. economy, as it was the result of several factors, including Boeing Co's (N:BA) production issues relating 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 end at 26,573.04, while the S&P 500 (SPX) lost 1.23% to 2,940.25. Both indexes had their biggest one-day dip since Aug. 23, when U.S. President Donald Trump demanded that American companies seek alternatives to doing business with China.

The Nasdaq Composite (IXIC) dropped 1.13% to end at 7,908.69.

The Cboe Volatility Index, or VIX (VIX), an options-based gauge of investor anxiety, rose 2.3 points to 18.56, its highest close in about a month.

Shares of online brokerage E*Trade Financial (O:ETFC) tumbled 16.4%, the most on the S&P 500, after rival Charles Schwab Corp (N:SCHW) said it would remove commissions for online trading of stocks, ETFs and options listed on U.S. or Canadian exchanges. Charles Schwab's shares slumped 9.7%.

McDonald's Corp (N:MCD) dropped 2.7% after JP Morgan said the fast food chain's third-quarter same-store sales would be softer than analysts' estimates.

Shares of chipmaker Xilinx Inc (O:XLNX) declined 4.1% after KeyBanc lowered its rating to "sector weight."

In one of the few bright spots, Ulta Beauty Inc (O:ULTA) advanced 6.1% after an independent director bought shares.

Stitch Fix (O:SFIX) rose 1% in extended trade after the apparel seller's quarterly earnings per share beat analysts' estimates.

As the final quarter of 2019 kicks off, investors will be focusing on a range of factors, beginning with the high-stakes Sino-U.S. trade talks in early October, corporate earnings and the Fed's next policy meeting.

Declining issues 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 7.3 billion shares, compared with the 7.2 billion average for the full session over the last 20 trading days.

Wall Street tumbles as factory activity hits 10-year low
 

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Comments (14)
Seth Thomas
Seth Thomas Oct 01, 2019 7:23PM ET
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Raise your hand if you're "sick of winning."
Klaus Weyers
Klaus Weyers Oct 01, 2019 6:03PM ET
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i said last 4 days to sell any rally.. worked like a charm.. going to add to my shorts on every bounce tomorrow.. target 25000 in Dow, stop.. 26716
Timothy Yap
Timothy Yap Oct 01, 2019 4:13PM ET
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Economic adviser Peter Navarro causing this mess!!!
Herra Peruna
Herra Peruna Oct 01, 2019 2:09PM ET
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when there is blood in the streets its time to buy!
Ivan Couto Jr
Ivan Couto Jr Oct 01, 2019 1:32PM ET
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all this environment is caused by american socialists that are not buying equities anymore. Stop traveling, stop drinking, stop everything, bet all in in stocks. This is the solution
Duane Lee
Duane Lee Oct 01, 2019 1:32PM ET
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I'm not a socialist but I'm not buying at ATH prices in the face of debt bubbling.
Adrian White
Adrian White Oct 01, 2019 1:32PM ET
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It has nothing to do with "Socialists" lol. It's more related to the stupid Trump trade wars, and the fact that the market is reaching the peak of an exeptionally long bull run.
Al Vlaj
alvlaj Oct 01, 2019 1:32PM ET
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That’s what everyone was saying in 2007. Think about this. From Bear Stearns to Lehman, the S&P 500 rallied. Why? Complacency similar to yours.
Neetesh Jain
Neetesh Jain Oct 01, 2019 1:15PM ET
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Deal or no deal with US- China is important, but hangover is causing a pause in markets.No clear direction for market's.
Brad Dover
Brad Dover Oct 01, 2019 1:08PM ET
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trump is just the greatest. the biggest . the best. . . I cannot believe all this MAGA his is doing
Mike Roland
Mike Roland Oct 01, 2019 1:08PM ET
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you mean CACA
Jack AAA
Jack_A Oct 01, 2019 12:35PM ET
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"this is fake news. we have the best economy ever"
Delonte Crosby
Delonte Crosby Oct 01, 2019 12:25PM ET
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If one thing messes up people from buying then let it get low enough then buy back at a cheaper price rather then let the whole market fall cause of one reported. Let it slip a little but get it back for a cheaper price then watch it go up.Get afraid over what a statement says every time and stuff falls apart in this market.
Rico Su
Rico Su Oct 01, 2019 12:15PM ET
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Trump, keep doing the trade war and see what the data looks like in October
 
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