Last night’s warning from Apple that sales for the December quarter would be well below the company’s earlier guidance bled into a weaker than expected reading this morning  from the Purchasing Managers Index for the Manufacturing sector. The ISM Manufacturing Index fell to 54.1 in December from 59.3 in November. Economists had forecast a reading of 57.8. (At 54.1 the index remains in expansion territory. A drop below 50 on this index would indicate a contraction in the sector.)
The biggest worry in the index came in a huge fall in the New Orders subindex, which dropped to 51.1 (barely in expansion territory) from 62.1 in November.
The combination of an Apple warning and this disappointing manufacturing report–on top of yesterday’s drop in China’s manufacturing PMI to contraction territory–has been more than enough to push U.S. indexes in to the red today. As of 2:20 p.m. the Standard & Poor’s 500 stock index was off 1.89% and the Dow Jones Industrial Average was lower by 2.32% or 541 points.
The technology sector led the parade downward with the Technology Select Sector SPDR ETF (XLK) down 4.24%. The financials, the largest or next to largest sector in the S&P 500 depending on the day, were helping with the Financial Select Sector SPDR ETF (XLF) lower by 1.46%.
Understandably, then, the technology and financials heavy NASDAQ Composite index was down 2.38%. The small company Russell 2000 slipped 0.51%.
The CBOE S&P 500 Volatility Index (VIX) climbed 5.90% to 24.59.
At 2462.77 at 2:20 p.m. New York time the S&P 500 was down 38.80 points. The index remains above the next major support at the 200-day moving average of 2350.80, but that level is only 100 points or so below the current trade.
The market is, in my opinion, hanging remarkably tough given the onslaught of big negative news in the last two days. On the one hand that’s good since it holds out the possibility that traders and investors see the current levels as something like a bottom and that they think stocks are a bargain here. On the other hand, this hanging tough indicates that the market retains some hope of an upward near-term catalyst such as better than expected fourth quarter earnings. (Earnings season kicks off with the big banks reporting on Monday, January 14 and Tuesday, January 15.) I don’t yet see the selling capitulation that would be one signal of a bottom.
The next big report comes tomorrow with the December jobs numbers. Economists surveyed by Briefing.com are projecting that the economy added 180,000 jobs in December after tacking on 155,000 in November.
