Wall Street just started the year on a low note thanks to concerns over Chinese growth that have continued to slam global markets. The Dow Jones Industrial Average dropped some 467 points, or 2.83%. The S&P 500 dropped 58 points, or 2.94%, while the Nasdaq Composite declined 138 points (2.92%). All ten S&P sectors were in negative territory. Dropping 3.14% in recent action, energy was hit hardest, followed by financials, which declined about 3.53%.
Manufacturing data continued to rule the day, serving as a sort of déja vu for global financial markets. In the US, a gauge on factory activity from the Institute for Supply Management saw a bigger-than-expected drop in August to 51.1 from 52.7 in July. Wall Street anticipated a shallower drop to 52.6. Although it’s still in expansion territory, this was the lowest since May 2013. The picture wasn’t much better from a global perspective, which helped drive the selloff in world markets. Overnight, data from China revealed the nation’s manufacturing sector slipped to a three-year low and back into contraction territory for the first time in six months, although it was mostly in-line with expectations. The services sector also showed some weakness.
As tolHS US Economist Michael Montgomery noted, this data hints at either moderate gains or declines across the board. He says that almost all of the world manufacturing powerhouses are somewhere between 47 and 53, with the eurozone being the best example of strength and China an example of manufacturing struggling. US manufacturing is somewhere in the upper third of that range. He added that the rest of 2015 is likely to be characterized by rough times, and it’s unlikely that US factory activity will experience any sort of revival.
This data has rattled Asia markets, where stocks finished the session in deeply negative territory. The weakness continued in Europe, where equity markets opened sharply lower after data revealed that manufacturing expansion in the UK eased this past month. The Euro Stoxx 50, which tracks large-cap companies in the eurozone, slid 2.47%. The German Dax declined 2.38%, the French VAV 40 dropped 2.40% and the UK’s FTSE 100 slid 3.03%. Meanwhile, as the US enters a month that many on Wall Street anticipated as the first interest-rate hike from the Federal Reserve, attention will be focused on any central bank speakers who might give insight into when the Fed will most likely move.
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