Benchmarks closed in the red on Wednesday due to slower-than-expected private job creation report, decline in factory output and an intensifying U.S.-EU trade war.
The Dow Jones Industrial Average (DJI) fell 1.9% or 494.42 points to close at 26,078.62. The S&P 500 dropped 1.8% to close at 2,887.61. The Nasdaq Composite Index closed at 7,785.24, sliding 1.6%. The fear-gauge CBOE Volatility Index (VIX) increased 9.7% to close at 20.56. Decliners outnumbered advancers on the NYSE by a 4.61-to-1 ratio. On Nasdaq, a 3.22-to-1 ratio favored decliners issues.
How Did the Benchmarks Perform?
The S&P 500 and the Dow fell below their 100-day moving averages for the first time in a month on Wednesday, owing to the losses in the technology and manufacturing sectors.
All the 11 sectors of the S&P 500 were in the negative territory and the technology sector which was impacted the most had shed 2.4%. The industrial, materials, energy and financial sectors also dropped more than 2%.
The major indexes mostly fell due to rising concerns about job creation and manufacturing data.
Private Job Creation Slowed Down
On October 2, the ADP National Employment report stated that private sector employment rose by 135,000 jobs in September from August. The economist’s estimate that was collected by Reuters forecasted a rise by 140,000 jobs in September. The slower growth was a result of the rising concern regarding the trade war, making businesses stern and cautions in hiring. The August job additions were revised down from 195,000 to 157,000.
The manufacturing which has been deeply impacted by the trade war has added only 2,000 jobs. With the situation on trade war remaining unchanged, employers seems to be “especially hesitant” in hiring new staffs. Investors now wait anxiously for the U.S. Labor Department’s job report which will be released on Friday.
Decline in U.S. Manufacturing Activity Dampens Sentiments
The Institute for Supply Management's manufacturing index slipped to 47.8% in September compared to August’s 49.1%. This is the lowest reading since June 2009. The slowdown in global economy dampened the demand for manufactured goods both in the domestic and international market, while the trade war has disturbed the supply chain even more.
The measure of export orders dropped to 41%, this is considered a proxy for overseas demand and is at the lowest level since March 2009.
U.S.- European Union Trade War Intensifies
The trade tension between the U.S. and European Union intensifies on Wednesday as the World Trade Organization (WTO) backs the former country. Trump administration will now slap higher tariffs on the EU for allowing illegal subsidies to Airbus SE . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
As per the plan, 10% tariffs will be imposed on Airbus planes and 25% duties on European agricultural products. The list includes French wine and olives, Scotch and Irish whiskies, British woolen jumpers and pullovers, pork sausage and other pork products except ham produced by EU, Italian cheese and German Coffee and tools. The tariffs will be imposed Oct 18 onwards.
Stocks That Made Headline
Delta Tapers Q3 EPS View, Stock Down on Bleak Cost Outlook
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