The Dow Jones took a mammoth beating on Wednesday, plunging as much as 550 points as investors endured a miserable ADP nonfarm private sector employment report.
Tuesday’s ISM manufacturing reading had the stock market on edge, and today’s jobs numbers confirmed evident weakness in a previously strong US labor market.
Despite Donald Trump’s impeachment odds falling and October rate-cut expectations rising, nervous retail investors dumped the Dow aggressively ahead of the more comprehensive US jobs report on Friday.
Dow Jones Shakes as Data Betrays Weakening Job Market
Heading toward the closing bell, the Dow Jones Industrial Average had lost 468.88 points or 1.76%. The DJIA last traded at 26,104.16 after dipping below 26,000 earlier in the session.
The risk-off moves were evident on Wednesday, as major US stock indices fell in unison. The S&P 500 and Nasdaq were also down more than 1.5%.
Commodity prices were mixed, as a more substantial than expected rise in crude oil inventories further added to growth concerns. US consumption was weaker than anticipated with a 3.1 million barrel build, more than double the 1.5 million expected. Gold and silver prices continued to move higher as investors sought refuge from stock market turmoil.
Confirming the move from risk, the Japanese yen soared against the US dollar, which also weakened against the euro. USD/CNH continues to rise, as China ratchets up the pressure in the trade war with its weaponized yuan.
Nordea Asset Management: China Woes & Retail Panic Crush Stock Market
While President Trump was quick to blame the impeachment circus for the weakness in US stocks, the odds of his ultimate removal from office remain very low. Investors are worried about the economy, and they found no comfort in expectations of more easing from the Federal Reserve this month.
Sebastien Galy, senior macro strategist at Nordea Asset Management, provided CCN.com with the following assessment of the precarious state of the market.
“We expect the Dow Jones to drop by another 2.5% this week [from Tuesday’s close] as the market belatedly recognizes the very extensive nature of the Chinese slowdown, far beyond what official data states. It is impacting manufacturing industries but also eventually US consumers as the theme of a global slowdown impacts behavior. The reality is that the US economy is doing quite decently and it is time to change this tune before it does more damage.”
Galy believes that the weakness in US stocks may come from retail investors losing their nerve at the dramatic weakness in the macro data.
“The conclusion is that retail investors are reducing risks overall from fixed income to equities as they are surprised by the intensity of the slowdown, something that surprises far less professional investors. Such a process typically has a persistence of a few days as only the most agile moved, triggering a rapid adjustment in prices.”
Dow Stocks: Carnage in Every Sector
The Dow 30 took a colossal hit on Wednesday, with 2% to 3% losses throughout the index.
Apple slumped 2.45%, bringing its impressive rally to a close. American Express, Chevron, and Walgreens all shed more than 3%.
J.P. Morgan and Goldman Sachs fell in sync with other financials, as Treasury yields tumbled with surging bond markets.
Johnson and Johnson was an oasis of green, up 1.4% after settling opioid cases in Ohio for just $20 million.
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