U.S. stocks were down on the day after the ISM manufacturing report showed that U.S. manufacturing activity contracted further in November. The pace of contraction picked up a bit and this marks four straight months of contraction. The selloff was exacerbated by trade concerns after President Trump said that he will restore tariffs on steel from Brazil and Argentina. The bifurcation between the consumer and manufacturing continues as the weak ISM numbers stood in contrast to early indications of strong retail sales from over the holiday weekend. Data overseas was generally good, highlighted by manufacturing data from the Eurozone and China. However, international markets were mixed on the day. The dollar was lower as the Treasury curve steepened with rates on the front of the curve modestly falling and longer rates up substantially. Oil was higher and gold was mostly flat. The Dow Jones Industrial Average (DJIA) fell 268 points (1.0%) to 27,783, the S&P 500 Index shed 27 points (0.9%) to 3,114, and the Nasdaq Composite dropped 97 points (1.1%) to 8,568. In moderate volume, 617 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq. WTI crude oil increased $0.78 to $55.95 per barrel and wholesale gasoline was off $0.02 at $1.57 per gallon. Elsewhere, the Bloomberg gold spot price was $3.80 lower at $1,468.90 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.5% lower to 97.82. The health of the consumer remains in focus after the Thanksgiving holiday shopping weekend. Preliminary data from Adobe Analytics is suggesting Black Friday sales were solid and showed online activity continued to gain share from physical store traffic. Online sales over the weekend are projected to have reached $7.4 billion, the second largest online sales amount ever behind last year’s Cyber Monday total of $7.9 billion. Although today, Adobe is estimating a record $9.4 billion in sales, which would be up over 18% year-over-year (y/y). If expectations hold, online holiday spending (Nov-Dec) will surpass $140 billion, representing nearly 14% y/y growth. Consumer spending is the biggest contributor to U.S. economic output and has remained healthy throughout the year to counter the global manufacturing slowdown and keep recession concerns in check.
The November Institute for Supply Management (ISM) Manufacturing Index (chart) dipped to 48.1 from October’s 48.3 level, below the Bloomberg forecast of an increase to 49.2. This was the fourth month in a row the index remained in contraction territory (a reading below 50), as the drop in new orders accelerated, along with employment, and new export orders fell back below the key 50 mark. However, production improved 2.9 points to 49.1, and inventories fell 3.4 points to 45.5. The depletion in inventories could be a positive sign going forward as replenishment may lead to increased demand for manufacturing activity. The ISM said comments from the survey reflected an improvement in sentiment from the prior month, but it remained more cautious than optimistic. The final Markit U.S. Manufacturing PMI Index was revised higher to 52.6 for November, versus expectations to be unchanged at the preliminary estimate of 52.2, and was slightly above October’s 51.3 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, while it surveys a wider range of companies that may give a slightly more domestic focus. Construction spending (chart) fell 0.8% month-over-month (m/m) in October, versus projections of a 0.4% increase, and following September’s downwardly-revised 0.3% decrease. Residential spending dropped 0.9% m/m and non-residential spending fell 0.7%. Treasuries were mostly lower as the curve steepened. The yield on the 2-year note was a basis point (bp) lower at 1.60%, while the yield on the 10-year note rose 5 basis points (bps) to 1.82% and the 30-year bond rate added 6 bps to 2.27%. U.S. stocks were down on the day after the ISM manufacturing report showed that U.S. manufacturing activity contracted further in November. The pace of contraction picked up a bit and this marks four straight months of contraction. The selloff was exacerbated by trade concerns after President Trump said that he will restore tariffs on steel from Brazil and Argentina. The bifurcation between the consumer and manufacturing continues as the weak ISM numbers stood in contrast to early indications of strong retail sales from over the holiday weekend. Data overseas was generally good, highlighted by manufacturing data from the Eurozone and China. However, international markets were mixed on the day. The dollar was lower as the Treasury curve steepened with rates on the front of the curve modestly falling and longer rates up substantially. Oil was higher and gold was mostly flat. The Dow Jones Industrial Average (DJIA) fell 268 points (1.0%) to 27,783, the S&P 500 Index shed 27 points (0.9%) to 3,114, and the Nasdaq Composite dropped 97 points (1.1%) to 8,568. In moderate volume, 617 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq. WTI crude oil increased $0.78 to $55.95 per barrel and wholesale gasoline was off $0.02 at $1.57 per gallon. Elsewhere, the Bloomberg gold spot price was $3.80 lower at $1,468.90 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.5% lower to 97.82. The health of the consumer remains in focus after the Thanksgiving holiday shopping weekend. Preliminary data from Adobe Analytics is suggesting Black Friday sales were solid and showed online activity continued to gain share from physical store traffic. Online sales over the weekend are projected to have reached $7.4 billion, the second largest online sales amount ever behind last year’s Cyber Monday total of $7.9 billion. Although today, Adobe is estimating a record $9.4 billion in sales, which would be up over 18% year-over-year (y/y). If expectations hold, online holiday spending (Nov-Dec) will surpass $140 billion, representing nearly 14% y/y growth. Consumer spending is the biggest contributor to U.S. economic output and has remained healthy throughout the year to counter the global manufacturing slowdown and keep recession concerns in check.
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