Today was the first day that a much more concrete report came our way supporting possible recession with the ISM manufacturing data showing factory activity contracting for the first time.  It was significant since it follows in the same trendline as Europe, Japan, the UK and China.  It was more than enough to send the Dow tumbling 343 points, its biggest drawdown since August 23^rd when Trump demanded that U.S. companies stop investing in China.  And though the ISM was a bad number, the good news is that as expressed by today’s expert, “Manufacturing itself is in a recession, but it does not mean that the overall economy is in a recession.”  Indeed, the general consensus seems to be that it is not.  But Friday’s jobs report will shed more light on this and investors eagerly await it.  Other good news is that, despite the yearlong hammering of global growth, confidence in the U.S. economy remains high and has helped bolster the S&P 17% this year.  Other big news is that Schwab has started a brokerage price war by eliminating online transaction fees sending the industry into a panic. E*Trade tumbled 16.4%.  Oddly, Schwab tumbled 9.7 percent.  Volume was right in line with the 4-week average at 7.3 billion. 

tue  OCTOBER 1, 2019 / 6:12 pm 

Wall Street tumbles as factory activity hits 10-year low

Noel Randewich

DJ:  26,916.83  +96.58        NAS:  7,999.34  +59.71          S&P:  2,976.74  +14.95     9/30

DJ:  26,573.04  -343.79       NAS:  7,908.69  -90.65           S&P:  2,940.25  -36.49      10/1

(Reuters) - The S&P 500 and Dow suffered their worst tumbles in over a month on Tuesday after data showed U.S. factory activity shrank in September to its weakest in over a decade, ratcheting up fears that the U.S.-China trade war is hobbling the world’s largest economy.  Investors moved to the safety of U.S. Treasuries after the ISM report showed its manufacturing activity index at 47.8, falling further from August’s sharp contraction and below economists’ expectations of 50.1. A reading below 50 indicates contraction.

With lingering trade tensions weighing on exports, the U.S. data mirrored similar patterns in the euro zone, Japan, the United Kingdom and China.  The S&P industrials index .SPLRCI dropped 2.4%, the most among the 11 major S&P sectors. The materials .SPLRC and energy .SPNY indexes both fell 2.3%. All 11 sectors lost ground.

A jobs report on Friday is expected to shed further light on U.S. economic strength.  “This is a bad number, fitting in with the world’s manufacturing recession,” Jim Bianco, head of Bianco Research in Chicago, said of the ISM report. “I think the market is right to be concerned, but we will have to see whether other manufacturing numbers in the U.S. bear that out, not the least of which being the manufacturing payroll numbers on Friday.”  Despite a prolonged U.S.-China trade war that has hammered global growth, confidence in the domestic economy has helped the benchmark S&P 500 .SPX climb about 17% this year.

Thomas Simons, a Jefferies economist, said the manufacturing contraction does not underpin a wider softening in the U.S. economy, as it was the result of several factors, including Boeing Co’s (BA.N) production issues relating to its best-selling jets.  “Manufacturing itself is in a recession, but it does not mean that the overall economy is in a recession.” 

The Dow Jones Industrial Average .DJI fell 1.28% to end at 26,573.04, while the S&P 500 .SPX lost 1.23% to 2,940.25. Both indexes had their biggest one-day dip since Aug. 23, when U.S. President Donald Trump demanded that American companies seek alternatives to doing business with China.  The Nasdaq Composite .IXIC dropped 1.13% to end at 7,908.69.

The Cboe Volatility Index, or VIX .VIX, an options-based gauge of investor anxiety, rose 2.3 points to 18.56, its highest close in about a month.

Shares of online brokerage E*Trade Financial (ETFC.O) tumbled 16.4%, the most on the S&P 500, after rival Charles Schwab Corp (SCHW.N) said it would remove commissions for online trading of stocks, ETFs and options listed on U.S. or Canadian exchanges. Charles Schwab’s shares slumped 9.7%.  McDonald’s Corp (MCD.N) dropped 2.7% after JP Morgan said the fast food chain’s third-quarter same-store sales would be softer than analysts’ estimates.

Shares of chipmaker Xilinx Inc (XLNX.O) declined 4.1% after KeyBanc lowered its rating to “sector weight.”  In one of the few bright spots, Ulta Beauty Inc (ULTA.O) advanced 6.1% after an independent director bought shares.  Stitch Fix (SFIX.O) rose 1% in extended trade after the apparel seller’s quarterly earnings per share beat analysts’ estimates.

As the final quarter of 2019 kicks off, investors will be focusing on a range of factors, beginning with the high-stakes Sino-U.S. trade talks in early October, corporate earnings and the Fed’s next policy meeting.

Declining issues outnumbered advancing ones on the NYSE by a 2.76-to-1 ratio; on Nasdaq, a 3.29-to-1 ratio favored decliners.  The S&P 500 posted 12 new 52-week highs and 9 new lows; the Nasdaq Composite recorded 28 new highs and 131 new lows.

Volume on U.S. exchanges was 7.3 billion shares, compared with the 7.2 billion average for the full session over the last 20 trading days.