Stocks On Wall Street Trading With A Retreat From All Time Highs
Stocks on Wall Street have begun a trading week shortened by the Labor Day holiday with a retreat from all-time highs. The S&P 500 reached a new intraday best of 2006.12 earlier in the session, but by the afternoon prices were falling, led lower by oil producers dragged down with the plunging price of oil.
By Peter Martin
Tuesday, September 2, 2014
With the tense situations in Ukraine and the Middle East, the prospect of markets being closed for the long weekend had prompted some precautionary buying in the oil markets, but with nothing negative emerging over the holiday weekend in terms of disruption to oil supplies, that risk premium has disappeared. Data released yesterday showing disappointing manufacturing growth in the eurozone has also dampened expectations for global demand.
Brent crude oil futures are down more than 2% today, while US light crude oil futures have lost more than 3%. The oil companies in the Dow Jones Industrial Average were among the biggest losers in the index, with Exxon Mobil ($XOM) shedding 1.54% of its value and Chevron ($CVX) sliding 1.77%.
By mid-afternoon in New York, the leading stock index benchmarks were in the red, despite encouraging economic data on the domestic front. The Dow Jones Industrial Average was off by 69 points or 0.41%, while the broader-based S&P 500 index fell 0.38% to 1995.7, unable to hold the ground above the key 2000 mark.
Today saw the release of the two most widely-followed gauges of the manufacturing sector, Markit’s Manufacturing PMI and the Institute of Supply Management’s Manufacturing Index. The Manufacturing PMI came in at 57.0 in the final reading for August, little-changed from the mid-month ‘flash’ release and up from July’s final level of 55.8. There was notable strength in the new orders, the most forward looking part of the survey, which should serve to encourage expectations for continued activity in the sector.
Markit’s positive findings were backed up by an upbeat result also from the ISM manufacturing Index, which advanced to 59.0 in August from July’s already-strong reading of 57.1. New orders at 66.7 led the improvements and production at 64.5 was also very high. Judging by these two manufacturing indicators, the sector, which has been boosting the economy for some time now, continues to accelerate.
Also contributing to hopes for third-quarter GDP was news that construction spending grew 1.8% in July, while June was upwardly-revised to a 0.9% contraction (originally reported as a 1.8% fall in spending). Year-on-year, spending was up 8.2% compared with a yearly-change of 7.0% in June (previously reported as 5.5%).
These signs that the US economy may be gaining momentum in the second half of the year lend weight to scenarios in which the Fed might decide to tighten monetary policy sooner rather later, and this has knocked demand for precious metals such as gold and silver, both of which plunged 1.6% by the afternoon in New York.
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