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Sell-Off Worsens on Drop in US Manufacturing Index

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ISM manufacturing index plunges

The ISM (Institute of Supply Management) released its manufacturing index data today. The index fell to 54.1 in December compared to an estimate of 57.9 as compiled by Refinitiv. The index also reached the lowest level since November 2016. Moreover, it was the worst monthly drop for the index since October 2008. The index plunged 5.2 points sequentially.

All the major components of the index declined, indicating a broad-based weakness. The new orders index registered the biggest drop for production since 2012. The sub-indexes for employment, inventory, and delivery also fell.

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Slowdown concerns

The US stock markets were already trading in the red led by Apple (AAPL). Yesterday, Apple warned that its first-quarter sales could be less than previously expected. The company blamed the slowing Chinese economy (FXI) for the reduced guidance. The economic indicators out of China had no good news. China’s Caixin/Markit manufacturing PMI contracted for the first time in 19 months in December.

Sell-off intensifies

The slowdown in US manufacturing along with concerns of China’s weakness intensified the market concerns. After the release of the ISM data, the markets fell further. At 10:50 AM EST, the S&P 500 (SPY), the Dow Jones Industrial Average Index (DIA), and the NASDAQ Composite (QQQ) were trading down by 2.25%, 2.74%, and 2.52%, respectively. The SPDR Gold Shares (GLD), on the other hand, was up 0.50% on weaker risk appetite.

You can read How to Profit from the Current Market Uncertainty for more on how to navigate these markets.

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