Stocks opened trading for the month of October with a 343 point dive to close at 26,573 on heavy trading volume. IBD has markets listed as “rally under pressure” and today’s action might tip that into “correction mode”. Please remember that these readings from IBD can change quickly. BTS still has markets in rally mode but that too could change as they are pending a trade out of HY should weakness continue. Stay tuned.
The reason for today’s selloff was mostly due to the latest US ISM manufacturing survey data which showed a surprise drop to 47.8. The gurus had been looking for a reading of 50.1 but today’s reading was the worst result since 2009. First Trust economist Brian “Mr. Sunshine” Wesbury noted that while the data was ugly it does not square with recent consumer data showing the biggest increase in consumption since 2009. He asks the question that if manufacturers are slowing down, but consumers are speeding up and with no reportable increase in layoffs at this time then something must give. Either the ISM manufacturing data will pop back up or the US consumer will suddenly close the pocketbook and turn off the Venmo.
The US and Japan signed a trade deal which reduces and, in some cases, eliminates Japanese tariffs on US agriculture products like wheat, soy and sweet corn. On our side of the pond, tariffs on certain Japanese industrial products like bikes, machine tools and steam turbines are reduced or eliminated as well as some agriculture products like green tea and soy sauce.
China had a huge parade to mark its 70th anniversary. Markets were closed and everyone took the day off to watch floats, tanks and goose stepping soldiers march through the smog while fighter jets flew overhead. The military formations were a thing to behold and more precise than a Swiss watch. They made the formations I was in with the Washington Army National Guard look shaggy. Meanwhile over in Hong Kong, protests continued and someone got shot as tensions are high.