Stock Market Overview – Stocks Slide and the VIX Surges as Manufacturing Eases

Construction spending also fell more than expected
David Becker
Decision Making Process, Risk Management

Stock prices moved lower on Monday, following a softer than expected US ISM manufacturing report. The decline in shares buoys the VIX volatility index which surged more than 15% closing above 14.5% to a 6-week high. Most sectors were lower, led down by technology, consumer staples bucked the trend. While the ISM manufacturing report was unexpectedly disappointing the Markit version actually came out better than expected. US Construction spending for October was also weaker than expected.

ISM Manufacturing Report Disappoints

According to the Institute of Supply Management, the index showed a decline to 48.1 versus an expectation of 49.4 and the previous month’s reading of 48.3. November was the fourth straight month below the expansion level. The subcomponents were also weaker than expected. New orders slumped to 47.2, down 1.9% from October’s 49.1. Inventories came in at 45.5, down 3.4 points from the previous month. Employment was at 46.6, down 1.1 points for the month, while export orders fell 2.5 points to 47.9. Supplier deliveries were one of the few metrics in expansion, rising 2.5 points to 52.

Separately, the Markit manufacturing reading, which is known as the PMI index, showed an unexpected gain indicated expansion, coming in at 52.6, just above expectations and rise from the 51.3 October reading.

Construction Spending Decline in October

The Commerce Department reported that US construction spending dropped by  0.8% in October, driven down by declines in apartment and multi-family homebuilding. Private construction spending declined 1% in October. Spending on single-family home construction increased 1.6%. Spending on government construction projects fell 0.2%, with state and local projects declining 0.3% and federal building increasing 0.6%. October’s overall decline follows a downward revision of September’s number from a 0.5% increase to a 0.3% decline.

Black Friday and Thanksgiving Sales Soar

Consumer spending is robust and could continue to buoy US economic growth. This year’s Black Friday shaped up to be the biggest yet. Americans spent $7.4 billion online on Black Friday and $4.2 billion on Thanksgiving Day.

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