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Dow Sinks 110 Points as U.S. Manufacturing Teeters at Crisis Levels

Last Updated September 23, 2020 12:51 PM
Sam Bourgi
Last Updated September 23, 2020 12:51 PM

The Dow lagged behind the broader U.S. stock market Wednesday after Boeing (NYSE:BA) reported its biggest-ever quarterly loss and investors caught wind of some truly dismal manufacturing data. The news didn’t seem to affect the other two indexes nearly as much, and upbeat tech earnings catapulted the Nasdaq Composite Index to record territory.

Dow Drops; Nasdaq Hits Record High

The Dow Jones Industrial Average declined as much as 158 points in afternoon trading, mirroring a dismal pre-market for Dow futures. As of 3:19 p.m. ET, the blue-chip index was down 110.14 points, or 0.4%, to 27,239.05.

Dow Jones
Dow Jones Industrial Average falls triple digits as Boeing, Caterpillar weigh. | Source: Yahoo Finance.

Upbeat earnings from Texas Instruments (NASDAQ:TXN), a Dallas-based semiconductor giant, drove the Nasdaq Composite Index to new record highs. At last check, the benchmark gauge was up 0.75% at 8,313.17.

The broad S&P 500 Index of large-cap stocks gained 0.35% to 3,015.86, with most sectors reporting gains.

Manufacturing Downturn Hits Crisis Levels

nafta manufacturing impact on dow
U.S. manufacturing output is approaching crisis levels, according to IHS Markit’s latest PMI report. | Source: Shutterstock

The U.S. manufacturing sector slowed to a crawl in July, as output, employment, and new orders plunged more than expected.

IHS Markit’s manufacturing purchasing managers’ index (PMI) declined to 50.0 in July from 50.6 in June, narrowly avoiding contraction for the first time since the 2009 financial crisis. It was the worst reading in 118 months and well below forecasts calling for a modest improvement.

Markit’s index of manufacturing output actually contracted in July. At 48.9, the manufacturing output index plunged to the lowest level in 119 months.

Taken at face value, Markit’s data suggest the U.S. manufacturing sector is approaching crisis levels.

The only saving grace was a much stronger services sector, which outperformed expectations at the start of the third quarter. Markit’s flash U.S. services PMI improved to 52.2 in July from 51.5 the month before.

“The overall picture of modest growth conceals a two-speed economy, with steady service sector growth masking a deepening downturn in the manufacturing sector,” Chris Williamson, Markit’s chief business economist, said in a news release. “The survey’s gauge of factory production has slumped to its lowest since August 2009, and indicates that manufacturing output is falling at a quarterly rate of over 1%, led by an increasing rate of loss of export sales.”

Based on Markit’s latest estimates, the U.S. economy is on pace to expand just 1.6% annually in the third quarter.

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