The latest report on the ISM manufacturing index came in at 46.8 for July, lower than expected and down 1.7 points from the 48.5 recorded in June. (In this index ny reading below 50 indicates contraction in the sector.)
That sign of contraction fueled fears that the Federal Reserve may have waited too long to cut interest rates–a rate cut seems to be in the cards for the central bank’s September meeting–and that the U.S. economy is in danger of slipping into recession.
The stock market tumbled Thursday. The Dow Jones Industrial Average fell almost 500 points, or about 1.2%. The S&P 500 dropped about 75 points, or almost 1.4%, while the tech-heavy Nasdaq composite index was down more than 400 points, or about 2.3%. Money flowed into bonds: The 10-year Treasury yield fell below 4% for the first time since February.
Also Thursday, the Labor Department reported that unemployment insurance claims hit 249,000 for the week that ended Saturday, up 14,000 from the previous week.
I think the u.S. economy is definitely slowing but a recession seems unlikely with technology earnings coming n genrally strong and the Fed ready to cut interest rates.
The market’s strong downward trend recently stems to reflect the conjunction of an economic slowdown and a rotation in stocks away from high-PE technology stocks.
I don’t think the weakness is over but pricing in a recession here would seem to be an over-reaction.
