U.S. Stocks Slide Amid Weak Factory Data, Declines in Crude Oilby and
U.S. stocks fell amid tumbling crude prices and sluggish manufacturing data, spooking investors before key payrolls data that may provide an indication on the trajectory of interest rates.
The S&P 500 Index fell 0.5 percent to 2,159.35 at 10:41 a.m. in New York, with declines accelerating after a reading showed manufacturing activity contracted last month. The data sent the dollar lower and raised concern about the strength of the world’s largest economy, pushing down the odds for higher interest rates. Oil tumbled through $44 a barrel.
The Institute for Supply Management’s index dropped to 49.4, weaker than the most pessimistic estimate in a Bloomberg survey, from 52.6 in July, figures from the Tempe, Arizona-based group showed. Slumping orders and production raised concern of renewed industrial weakness.
“The economic data out today, it’s not great and the ISM shows contraction -- that’s a pretty well-regarded measure,” said Timothy Ghriskey, who helps manage $1.5 billion as chief investment officer at Solaris Asset Management LLC in New York. “Oil is also sinking a bit today, and I’d tie that to the strength we’ve seen recently in the dollar and the perceived negative economic impact from a Fed rate hike.”
Other data Thursday showed fewer Americans than forecast filed applications for unemployment benefits last week, further evidence of a healthy labor market. Another report showed labor costs in the second quarter increased a revised 4.3 percent, as worker pay and benefits increased rather than declined as first estimated.
Odds of an increase in borrowing costs this month stand at 32 percent, from 38 percent before the manufacturing data, according to Fed fund futures tracked by Bloomberg. The chance of a hike in December is 58 percent, down from 62 percent.
“Unless something comes out to dramatically throw things off track, I think sideways with a little bit of positive energy seems to be where things are going” said Ben Kumar, investment manager at Seven Investment Management LLP in London. His firm manages 10 billion pounds ($13.2 billion). “Every day that goes by that China doesn’t blow up is a neutral day and every day it looks a little bit better is a good day. If you’re in the market, you’re probably happy just to sit here and wait.”
The S&P 500 finished August 0.1 percent lower, snapping a monthly winning streak at five, the longest in two years. The index has gone 38 days without a 1 percent move in either direction, a period of relative calm not seen since 2014. There are signs that may not last, however, with the CBOE Volatility Index surging in eight of nine sessions to its biggest monthly jump in a year. Still, the measure of market turbulence known as the VIX remains more than 30 percent below its 10-year average.