Stock Market Update

[BRIEFING.COM] The stock market started the new month sharply lower. The major indices tumbled out of the gate before briefly plateauing around mid-day. Selling picked up again in the afternoon trade, leading the Dow Jones Industrial Average to settle more than 600 points lower. The Nasdaq Composite closed nearly 600 points lower, the S&P 500 declined more than 100 points, and the Russell 2000 shed 3.1%. 

Volume increased today after running below-average in recent weeks. The downside bias was related to normal consolidation activity, sparked by growth worries after China's Manufacturing PMI for August showed a deepening contraction. This morning's release of the ISM Manufacturing Index for August showed improvement, but not as much as expected, piling onto the emerging concerns. 

Treasury yields settled lower in response to the growth concerns and soft economic data. The 10-yr note yield fell seven basis points to 3.84% and the 2-yr note yield settled four basis points lower at 3.89%. Also, the CBOE Volatility Index was up 37%, or 5.55, to 20.55 with participants hedging for the possibility of further downside.

Just about everything came along for the downside ride. The equal-weighted S&P 500 settled 1.3% lower and nine of the 11 S&P 500 sectors registered losses. The information technology sector (-4.4%) logged the biggest loss due to weakness in its mega cap and semiconductor components.

The PHLX Semiconductor (SOX) sank 7.8%. NVIDIA (NVDA 108.00, -11.37, -9.5%) was an influential loser in the space, falling under profit-taking interest. 

The energy sector (-2.4%) was another laggard, dropping alongside oil prices in another manifestation of growth worries. WTI crude oil futures fell 4.3% to $70.37/bbl.

• S&P 500: +15.9% YTD
• Nasdaq Composite: +14.2% YTD
• Dow Jones Industrial Average: +8.6% YTD
• S&P Midcap 400: +8.3% YTD
• Russell 2000: +6.0% YTD

Reviewing today's economic data:

• August S&P Global US Manufacturing PMI - Final 47.9; Prior 48.0
• August ISM Manufacturing Index 47.2% (Briefing.com consensus 47.5%); Prior 46.8%
  • The key takeaway from the report is that it has reinforced the understanding that conditions in the U.S. manufacturing sector are weak.
• July Construction Spending -0.3% (Briefing.com consensus 0.2%); Prior was revised to 0.0% from -0.3%
  • The key takeaway from the report is that new single-family construction was weak in July.

Wednesday's economic lineup features:

• 7:00 ET: Weekly MBA Mortgage Index (prior 0.5%)
• 8:30 ET: July Trade Balance (Briefing.com consensus -$78.5 bln; prior -$73.1 bln)
• 10:00 ET: July Factory Orders (Briefing.com consensus 4.5%; prior -3.3%) and July job openings (prior 8.184 mln)