uploads///SPDR Barclays High Yield Bond ETF JNK

China’s PMI and US Job Additions Push US Stocks Down


Dec. 4 2020, Updated 10:52 a.m. ET

US stock indices slump

All three US equity indices that we review in this weekly series slumped in the week ended September 4, 2015, after rising the previous week. The S&P 500 index, tracked by the SPDR S&P 500 ETF (SPY) and the iShares Core S&P 500 ETF (IVV), fell 3.4%. The Dow Jones Industrial Average (DJIA), tracked by the SPDR Dow Jones Industrial Average ETF (DIA), fell 3.2% week-over-week. Among the three, the NASDAQ fell the least, down by 3.0% last week.

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China drives down US stocks

US stocks didn’t have a great start to the week ended September 4. Reports emanating from China drove US markets down sharply. A fall in China’s manufacturing PMI (Purchasing Managers’ Index) led to renewed concerns about a slowdown in economic activity in the country. All indices under review responded by falling ~3.0% on the day of the release.

However, they rebounded the next day with technology shares like Microsoft (MSFT) helping them bounce back.

Domestic economic data

The market had been looking forward to jobs data, the last major data point before the Federal Reserve convenes on September 16–17 to decide whether to increase the federal funds rate or maintain status quo. The ADP National Employment Report showed that the private sector added 190,000 jobs in August, below the psychologically important 200,000.

There were expectations that nonfarm payrolls will report higher additions. But the nonfarm payrolls report showed that 173,000 jobs were added in August, far below market expectations. The report was bittersweet, though. The unemployment rate, which is arrived at by a survey of households, fell to 5.1% in August, the lowest in more than seven years. The report also showed that wages rose at a sharper-than-expected pace in the month. This report adds to the confusion regarding the timing of a rate hike, thus hitting both bonds and stocks.

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Company news

Netflix (NFLX) fell amid increasing competition from rival companies. Meanwhile, falling copper prices continued to hurt shares of Freeport-McMoRan (FCX).

Junk bonds

Junk bond yields fell week-over-week. With this fall, ETFs investing in junk bonds like the SPDR Barclays High Yield Bond ETF (JNK) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) rose in the week ended September 4.

This series will cover the developments in the primary and secondary markets for high-yield debt and leveraged loans. We’ll start with developments in the high-yield primary market issuance.


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