After investors’ unease on the trade war front on Thursday, the Dow Jones Index (DIA) might have another weak day today. The ISM manufacturing PMI and employment data will weigh on the markets. Chevron (CVX) and ExxonMobil (XOM) will release their third-quarter earnings before the market opens. Interestingly, Dow Jones Futures are hinting at a positive opening as Wall Street waits for the economic data.
Manufacturing PMI to weigh on the Dow Jones
So far, the Dow Jones Industrial Average has rallied more than 16% this year, while the S&P 500 has risen almost 22%. The broad market indexes fell on Thursday. Bloomberg reported that Chinese officials doubt a long-term trade deal with the US. While the two economic giants seem to be working on “Phase 1” of the trade deal, a permanent solution looks far away.
The bigger indicator for today will be the factory activity for October. The ISM manufacturing PMI fell in August and September. The PMI fell to 47.8 in September from 49.1 in August.
According to MarketWatch, analysts expect the reading to be around 49 for October. A contraction for the third consecutive month would trigger recession fears.
As a precursor, the Chicago PMI fell to 43.2 in October, which hints at contracting factory activity. A reading below 50 implies a contraction, while a reading above 50 implies expansion. The manufacturing activity will likely be slow in October. However, investors should watch the severity of the slowdown. The manufacturing PMI can act as an important recession indicator. Trade war tensions and global slowdown fears are denting corporate investments.
While the factory output data continues to show incessant weakness, Fed Chair Jerome Powell thinks that the US economy is growing moderately. The Fed cut the benchmark interest rates by a quarter basis point this week but hinted at a pause. The Fed cut the rate for the third time this year. As a result, markets kept holding on to the gains.
Currently, the Dow Jones Index is trading just a percent away from its all-time high. The S&P 500 (SPY) fell from its record high on Thursday.
The Bureau of Labor Statistics will release the unemployment data and non-farm payrolls data for October today. The unemployment rate fell to 3.5% in September—the lowest level in the last 50 years. However, estimates show that the unemployment rate will increase to 3.6% in October due to United Auto Workers’ strike at General Motors (GM). The job growth fell compared to last year but has stayed strong recently. However, downbeat employment data could hamper the Dow Jones’ run to record highs.
Not all of the data show a gloomy picture. The US GDP grew 1.9% in the third quarter, which beat analysts’ expectations of 1.6%. So far, the corporate quarterly earnings have also been a mixed bag. Apple and Facebook beat the consensus estimates this week and sounded optimistic about the future.
Dow Jones Index: Top energy earnings today
ExxonMobil and Chevron will release their third-quarter earnings before the market opens today. Analysts expect around a 50% and 30% decline in their earnings, respectively. However, better-than-expected bottom-line figures would make investors happy. Together, they form approximately 4.5% in the Dow Jones Index. Volatile oil prices have weighed on these integrated energy giants this year. Chevron stock has risen more than 10%, while ExxonMobil has fallen marginally. Read ExxonMobil and Chevron: Who Will Post Better Results? to learn more.
Interestingly, being one of the top constituents of the Dow Jones, Apple’s solid quarterly earnings didn’t support the index on Thursday. Better-than-expected GDP data also didn’t do much. The Dow Jones Index has cold feet as it stares at the all-time high.