uploads/2020/04/DO-Jones-ISM-PMI-data.jpeg

Why Is the Dow Jones Falling Today despite PMI Beat?

By

Updated

  • The Dow Jones Index has fallen 2.8% as of 10:30 AM ET. The index closed with losses on Tuesday and wrapped up its worst first quarter ever.
  • Rising coronavirus cases globally, President Trump’s comments on the virus yesterday, a fall in the global market, and dismal economic data added to investors’ worries.
Article continues below advertisement

Dow Jones Index today

The Dow Jones Index (NYSEARCA:DIA) continued its poor run from the first quarter into the second quarter. Today, the index has fallen 2.8% as of 10:30 AM ET. The Dow Jones futures are also trading in the negative territory today. So, the fall in US stock markets isn’t surprising. Major Asian markets closed with losses today. Meanwhile, European stock markets are also deep in the red. The coronavirus pandemic is far from over. Currently, Europe and the US are the new hotspots.

On Tuesday, President Trump also warned that the US will experience a “very, very painful two weeks.” Notably, the coronavirus has also created a financial crisis that is equally if not more concerning than the health crisis. Despite the $2 trillion stimulus package, it will take a long time for the economic pain to subside.

Article continues below advertisement

Economic data

The economic data has started to reflect the impact of the coronavirus. Last week, unemployment claims rose sharply amid coronavirus-led layoffs. The ADP jobs report released today showed that US companies cut 27,000 jobs in early March. Notably, the data pertains to the period before coronavirus cases started to spike in the US. Dismal economic data pressured the Dow Jones Index and the S&P 500 today. We’ll get the non-farm payroll data tomorrow, which would offer more clues into the US job market amid the coronavirus pandemic.

Dow Jones and IHS/Markit PMI data

The IHS/Markit PMI showed the US manufacturing PMI at 48.5 in March. The amount was revised down from the 49.2 flash reading. The reading is the worst since August 2009. Chris Williamson, the chief business economist at IHS Markit said that “worse is likely to come as consumer spending falls further in coming months as lockdowns intensify and unemployment spikes higher.” Meanwhile, the ISM US manufacturing was 49.1, which was better than expected. Median forecasts suggested that the reading would come in at 44. However, the better-than-expected ISM PMI didn’t calm investors’ nerves. So far, the Dow Jones Index has fallen sharply today.

ISM PMI data

Meanwhile, ISM added a note of caution about the reading. The Supplier Delivery Index, a sub-index contributing 20% to the reading, jumped in March. Typically, a rise in this subindex is associated with slower deliveries amid higher customer demand. According to ISM, “the high index reading in March was primarily a product of coronavirus-related supply problems.” Readings below 50 indicate a contraction in manufacturing activity. Boeing (NYSE:BA), the biggest constituent of the Dow Jones, has fallen more than 5%, which puts pressure on the index. After the sharp fall in Boeing stock, some observers speculated that Warren Buffett might take a stake in the company. Read Are Berkshire and Buffett Interested in Boeing Stock? to learn more.

Advertisement

More From Market Realist