Markets decline as key data shows continued economic weakening

Dow dropped 448, decliners over advancers better than 2-1 & NAZ retreated 408.  The MLP index declined 5+ to 281 & the REIT index was up about 1 to the 428s.  Junk bond funds were sold  & Treasuries saw buying which lowered yields (more below).  Oil dropped 2+ to go under 71 (more below) & gold was off 12 to 2515.

Dow Jones Industrials

US factories remained in slowdown mode in Aug, fueling fears about where the economy is headed, according to separate manufacturing gauges.  The Institute for Supply Management (ISM) monthly survey of purchasing managers showed that just 47.2% reported expansion during the month, below the 50% breakeven point for activity.  Though that was slightly above the 46.8% recorded for Jul, it was below the for 47.9%.  “While still in contraction territory, U.S. manufacturing activity contracted slower compared to last month. Demand continues to be weak, output declined, and inputs stayed accommodative,” said Timothy Fiore, chair of the ISM Manufacturing Business Survey Committee.  “Demand remains subdued, as companies show an unwillingness to invest in capital and inventory due to current federal monetary policy and election uncertainty,” he added.  While the index level suggests contraction in the manufacturing sector, Fiore pointed out that any reading above 42.5% generally points to expansion across the broader economy.  It was a weaker-than-expected reading last month that sent markets further into a tailspin.  Another weak economic reading raises the probability the Federal Reserve will be cutting interest rates by at least a qtr percentage point later this month.  Following the ISM report, traders raised the odds of a more aggressive ½-point reduction to 39%, according to the CME Group's FedWatch measure.  The ISM results were backed up by another PMI reading from S&P, which showed a decrease to 47.9 in Aug from 49.6 in Jul.  The S&P employment index showed a decrease for the first time this year, while the input cost measure climbed to a 16-month high, another sign that inflation remains present if well off its mid-2022 highs.  “A further downward lurch in the PMI points to the manufacturing sector acting as an increased drag on the economy midway through the third quarter. Forward-looking indicators suggest this drag could intensify in the coming months,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Weak manufacturing measures raise specter of U.S. economic slowdown

Weak manufacturing measures raise specter of US economic slowdown.  Crude oil futures fell more than 3%, erasing all gains for the year, as OPEC+ is poised to increase production in the coming weeks & China's economy remains soft.  OPEC+ delegates have indicated that the group is still planning to increase oil production in Oct.  Manufacturing in China, meanwhile, fell to a 6-month low in Aug, according to data released over the weekend.  China is the world's largest importer of crude oil.  West Texas Intermediate Oct contract was $70.97 per barrel, down $2.58 (3.5%) & YTD US crude oil has fallen 1%.  Brent Nov contract was $74.42 per barrel, down $3.10 (4%) & YTD, the global benchmark has dropped 3.47%.  OPEC+, however, made clear in Jun that it could reverse the planned production increase based on market conditions.  The prospect of increased oil output from OPEC & a weak economy in China are overshadowing major production disruptions in Libya.  Libya's eastern gov in Benghazi has sought to shut down production & exports, amid a dispute with the UN-backed gov in Tripoli over who should lead the country's central bank. Libya's National Oil declared a force majeure at the El-Feel oil field.

U.S. crude oil falls more than 3%, erases 2024 gains as China demand, OPEC output hike loom

Treasury yields slid as markets reopened after the Labor Day holiday & investors evaluated economic data.  The yield on the 10-year Treasury yield was last trading at 3.833% after dropping close to 8 basis points & the 2-year Treasury yield was last down more than 6 basis points at 3.863%.  Yields & prices moonomive in opposite directions & 1 basis point equals 0.01%.  Investors weighed the state of the economy & considered the outlook for interest rates as they looked to key labor market data due this week.  2 readings of manufacturing production showed signs of weakness, bolstering concerns around slowing growth within the US economy.  S&P Global’s showed a decline from Jul to Aug, while the Institute for Supply Management's came in below the estimate.  Investors will be watching the data closely for fresh signals about the economic outlook.  Last month, the Jul jobs report raised fears about a recession & questions about whether the Federal Reserve should have already cut interest rates, sparking market volatility.  Recession concerns have eased since then, with the 2nd-qtr GDP last week being revised higher from the initial 2.8% reading to 3% growth.

Treasury yields slide as investors weigh slowing growth fears

Today's economic data is making investors nervous.  Of course, overbought conditions in the stock market are not helping matters.