The Dow Jones headed for its third straight losing session on Thursday following a parade of all-time highs for most of November.
The trade war script flipped to a bullish narrative today, but Wall Street failed to take the bait as new data releases provided a mixed picture of the US economy.
Wall Street’s major indices headed toward minor declines during the week’s penultimate trading session.
The Dow Jones Industrial Average fell 31.53 points or 0.11% to 27,789.56. The index has now shed more than 200 points since Monday’s close.
The S&P 500 recorded a similar pullback, dipping 3.36 points or 0.11% to 3,105.10.
The Nasdaq edged 3.6 points or 0.04% lower to 8,523.13.
The CBOE VIX, which measures stock market volatility, rose more than 4% to 13.3. Even so, investors didn’t rotate into risk-off assets. The gold price fell more than 0.4%, while US Treasury bond yields ticked slightly higher.
The trade war narrative continues to oscillate violently between unabashed optimism and apocalyptic pessimism, making it difficult to discern the true outlook for US-China relations. One day the trade deal lays just over the horizon; the next it may never arrive at all. Thrown to and fro by the cross-currents, investors can only cling to one constant – the trade deal, whatever the day’s narrative, hasn’t arrived.
Against this volatile geopolitical backdrop, economic data releases provide a welcome measure of tangibility. Even if the data are marred by trade war concerns, that impact can’t be completely upended by one anonymous source in a news article.
Earlier this morning, the Philadelphia Fed manufacturing index printed a 10.6 for November , handily beating economist estimates and suggesting that the sector may be recovering. Readings above 0 indicate that manufacturers believe business conditions are improving. This particular survey only measures sentiment in the Philadelphia area, but it’s still a leading – if volatile – indicator of overall economic health.
Also on Thursday, the Labor Department revealed that jobless claims had unexpectedly held firm at a five-month high of 227,000 for a second straight week. The number of Americans collecting unemployment benefits also ticked higher to 1.69 million, but this figure still rests near a five-decade low.
Friday’s data dump will provide greater insight into the state of the overall US economy. IHS Markit’s flash manufacturing PMI and flash services PMI releases will be published at 9:45 am ET.
The manufacturing PMI release will confirm whether the overall sector is improving or today’s bullish regional release was just a fluke. The trade war has battered US manufacturing throughout the year, but recent data releases have hinted at an underlying resilience. Since narrowly contracting in August for the first time in a decade, manufacturing PMI has registered slight growth for two consecutive months.
Services PMI measures sentiment in a much larger swath of the economy and thus has a profound influence on Dow Jones and S&P 500 stocks. This index’s recent prints haven’t been spectacular. Nevertheless, they’ve indicated that US businesses remain generally healthy, which bodes well for employment and consumer statistics.
There aren’t any major consumer data releases on tap for Friday, though the University of Michigan will publish its revised consumer sentiment index statistics at 10 am ET. This release should only affect markets if there is an unexpected divergence from the preliminary statistics published two weeks earlier, on Nov. 8.