Sector Investing

[ReturntoSender]

Stocks lose ground to begin September, manufacturing data disappoints
03-Sep-19 16:20 ET

Dow -285.26 at 26118.00, Nasdaq -88.72 at 7874.19, S&P -20.19 at 2906.27

https://www.briefing.com/stock-market-update

[BRIEFING.COM] The stock market finished lower on Tuesday to begin the shortened trading week and the month of September. The S&P 500 declined 0.7%, while the Dow Jones Industrial Average (-1.1%), Nasdaq Composite (-1.1%), and Russell 2000 (-1.5%) fell more than 1.0%.

The session began on a lower note as the market digested several global events. Additional tariffs imposed by the U.S. and China on each other went into effect on Sunday, much to the dismay of those hoping for a reprieve. Separately, protests escalated in Hong Kong, and UK Prime Minister Boris Johnson threatened to call a snap election if rebel lawmakers vote to block a no-deal Brexit. Mr. Johnson lost his party's parliamentary majority today.

An early comeback effort was thwarted upon the release of the ISM Manufacturing Index for August, which declined to 49.1% (Briefing.com consensus 51.3%) from a 51.2% reading in July. This denoted the first contraction (a reading below 50.0%) since 2016. The broader market quickly fell to session lows and traded below its opening levels for the rest of the session.

Relative weakness came from many of the S&P 500 cyclical sectors, including industrials (-1.4%), information technology (-1.3%), and financials (-1.1%). It wasn't entirely risk-off, though, as some investors sought safety in the defensive-oriented utilities (+1.8%), real estate (+1.3%), and consumer staples (+0.5%) sectors.

In corporate news, Boeing (BA 354.42, -9.67, -2.7%) fell on a report from The Wall Street Journal indicating its 737 MAX could be grounded through the holiday season. Uber (UBER 30.70, -1.87, -5.7%) and Lyft (LYFT 45.42, -3.55, -7.3%) hit new all-time lows as California moved closer to classify drivers as employees instead of contractors.

Amazon (AMZN 1789.84, +13.55, +0.8%) outperformed after RBC Capital Mkts raised its AMZN price target to $2600 from $2250.

U.S. Treasury yields fell to session lows soon after the release of the ISM Manufacturing Index but steadily came off those lows as the session progressed. The 2-yr yield finished three basis points lower at 1.47%, and the 10-yr yield finished four basis points lower at 1.47%. The U.S. Dollar Index increased 0.1% to 99.01. WTI crude lost 2.1%, or $1.15, to $53.91/bbl.

Reviewing Tuesday's economic data, which included the ISM Manufacturing Index for August and Construction Spending for July:

The ISM Manufacturing Index for August registered 49.1% (Briefing.com consensus 51.3%) following a 51.2% reading for July. The dividing line between expansion and contraction is 50.0%. The reading for August is the first sub-50% reading in three years and the lowest since January 2016.
The key takeaway from the report is that it will foment economic slowdown concerns, as well as worries about the deleterious impact of tariff actions on business investment. According to ISM, the past relationship between the PMI and the overall economy indicates the PMI for August corresponds to a 1.8% increase in real GDP on an annualized basis.
Total construction spending increased 0.1% m/m in July (Briefing.com consensus +0.3%) following an upwardly revised 0.7% decline (from -1.3%) in June.
The key takeaway from the report is the recognition that total construction spending declined 2.7% yr/yr. That was the ninth straight yr/yr decline -- a streak that hasn't been seen since 2011.

Looking ahead, investors will receive the weekly MBA Mortgage Applications Index, the Trade Balance report for July, and the Fed's Beige Book for September on Wednesday.

Nasdaq Composite +18.7% YTD
S&P 500 +15.9% YTD
Dow Jones Industrial Average +12.0% YTD
Russell 2000 +9.2% YTD