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U.S. Stocks Drift Lower as Investors Digest Fresh Manufacturing PMI Data

By:
James Hyerczyk
Updated: Oct 3, 2016, 14:26 UTC

U.S. equity indices were down on Monday shortly after the cash market opening. The Dow Jones Industrial Average weakened over 100 points early while the

U.S. Stocks Drift Lower as Investors Digest Fresh Manufacturing PMI Data

U.S. equity indices were down on Monday shortly after the cash market opening. The Dow Jones Industrial Average weakened over 100 points early while the S&P traded down about 0.5 percent and the NASDAQ Composite fell about 0.3 percent, before prices started to recover. Traders blamed technical overbought conditions after last Friday’s steep run-up and general nervousness ahead of this Friday’s U.S. Non-Farm Payrolls report.

Traders were reacting to a volatile crude oil trade. Early in the session, oil was supported by a planned production cut by OPEC. Although the deal is not expected to be executed until late November and details are still sketchy, speculators still thought it was prudent to get in on the long side ahead of the release of any fresh news.

Shortly after the New York opening, however, profit-takers came in to pressure the market as it neared the psychological $50.00 level. At this time, the market is pricing in a 700,000 to 750,000 production cut by OPEC. However, the difficult part for the cartel will be figuring out which member is subject to a cut in output and by how much. This will require delicate negotiations that have killed previous deals.

In U.S. economic news, the September Markit Manufacturing PMI came in at 51.5, a new three month low. This means that the industry has been losing growth momentum since July although there has been increases in both production volumes and incoming new work.

The ISM Manufacturing Index for September improved to 51.5, up from 49.4 in the previous report. This put it above 50, which means it is back in expansion mode.

Construction spending disappointed with a 0.7 percent decline in August. Investors were looking for a 0.2 percent increase.

U.S. auto sales were mixed with Nisan rising 4.9 percent and Toyota 1.5 percent. Ford sales were down 8 percent and General Motors fell 0.6 percent.

The British Pound was hit hard on Monday after a March deadline was set for the start of the formal process that will split Britain from the European Union. The Sterling lost about 1 percent against the Euro, its lowest level since August 2013.

Gold futures inched a little higher as investors reacted from Britain’s decision to set a March deadline to start exit proceedings from the EU.

Platinum futures fell after South Africa’s biggest platinum mine-workers’ union signed a two-year wage agreement with Impala Platinum.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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