US ISM's first contraction in nearly three years takes the Dow and Nasdaq lower
Equities finish in the red as recessionary fears spread to the US, yields continue to plummet as investors seek safety.
DOW: Equities in slight decline as short-term resistance level holds
The index’s short-term resistance level has managed to hold thus far after getting briefly breached last Friday, though that is thanks to weakness in the US manufacturing sector as per ISM’s latest reading. Manufacturing prices failed to live up to expectations, and construction spending was below estimates for its fifth consecutive month. That has kept the Dow finishing in the red and recessionary worries spread to the US, and with US yields dropping to fresh lows as investors flee to safety. There’s Fed speak tonight, but the real focus will be on Friday’s combo of NFP and Fed Chair Powell’s speech, the latter to set the tone as to whether the current market’s pricing of a rate cut this month and another before the end of the year is within reason.
NASDAQ: Finishing lower but avoiding the Dow’s heavier losses
While it was a slight risk-off play yesterday on US manufacturing worries, the pain was felt more in the Dow than the tech Nasdaq. But the fall has aided retail traders in this index, with slight profit-taking occurring in indices with the majority short figures dropping slightly, in this case (and the Dow) down 2% to a majority short 62%. From a technical standpoint, it remains consolidatory with most of its indicators neutral, but showing more short-term negative bias. In other news, Alphabet’s (Google) shares could be under pressure on news that the US government may investigate the tech giant on antitrust violations.
DAX: Retracing off recent fresh highs as European investors await ECB easing next week
For European equities (and bonds), investors are awaiting next week’s ECB decision. The next item out of Germany will be its service PMI figure today, factory orders tomorrow, and industrial production the day after. Slight profit-taking for all indices amongst retail traders who hold majority short bias, with the bias dropping 3% here to 61%. As for today’s Asian session, Chinese shares are higher this morning as Caixin's service PMI figure improves. From a technical standpoint, the moves have been mostly consolidatory and in line with its current technical overview, with significant movement only occurring on major risk-off/on events.
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