Markets Selloff As China Devalues Currency…..
U.S. equities plunged in today’s session, marking the worst day for stocks this year, as the heightened trade anxiety that ratcheted higher last week after the U.S. surprised the markets with a threat of additional tariffs intensified further as China allowed its currency to fall below a key level for the first time in over a decade. Treasury yields and the U.S. dollar tumbled amid the disquiet and as key reads on July services sector output came in mixed, while crude oil prices also saw pressure and gold rallied. News on the equity front was light, with Tyson Foods posting an upbeat quarterly report and guidance, and Allakos surged on positive study results of a rare disease treatment.
The Dow Jones Industrial Average (DJIA) plunged 767 points (2.9%) to 25,718, the S&P 500 Index tumbled 87 points (3.0%) to 2,845 and the NASDAQ Composite sank 278 points (3.5%) to 7,726. In heavy volume, 1.1 billion shares were traded on the NYSE and 2.6 billion shares changed hands on the NASDAQ. WTI crude oil moved $0.97 lower to $54.69 per barrel and wholesale gasoline was down $0.06 at $1.72 per gallon. Elsewhere, the Bloomberg gold spot price jumped $19.89 to $1,460.72 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—declined 0.5% to 97.58.
The July Institute for Supply Management (ISM) non-Manufacturing Index declined to 53.7 from June’s 55.1, and versus the Bloomberg forecast of a rise to 55.5. The index hit the lowest level since August 2016 but remained in expansion territory as depicted by a reading above 50. New orders, business activity and prices all declined but continued to expand, and employment rose to 56.2. Non-manufacturing activity accounts for a large majority of U.S. economic output. The ISM said comments from respondents remained mixed about business conditions and the overall economy, while indicating ongoing concerns related to tariffs and employment resources.
The final Markit U.S. Services PMI Index was revised higher to 53.0 from the preliminary estimate of 52.2 for July, where it was expected to remain, and was north of June’s 51.5 level. A reading above 50 denotes expansion. The release is independent and differs from ISM’s report, as it has less historic value and Markit weights its index components differently.
This week is poised to be relatively less robust, but trade uneasiness is lingering, earnings season continues down the home stretch, and today’s reads on the services sector will be followed by the JOLTS Job Openings report and the Producer Price Index.
Treasuries finished higher, extending a recent rally, as the yield on the 2-year note tumbled 11 basis points (bps) to 1.60%, the yield on the 10-year note fell 12 bps to 1.74%, and the 30-year bond dropped 10 bps to 2.29%. With bond yields hitting lows not seen since late 2016, the U.S. dollar and crude oil prices also saw solid pressure, and gold prices jumped. The global markets appeared unnerved by the escalating trade tensions between the U.S. and China, with the latter’s currency weakening past a key psychologically important level not seen in over a decade. Moreover, global growth concerns continued to fester to add to the uneasy market sentiment.
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