The first day of trading in October on Wall Street was one of the worst in a few weeks. Dow Jones lost 344 points, or 1.3 percent, S&P 500 fell by 37 points, or 1.2 percent, and Nasdaq lost 91 points or 1.1 percent. The drop could have been a consequence of previously released data from the US manufacturing sector.
It has been widely known for several months that the manufacturing sector in the world has entered a slowdown phase. In many European countries, even in Germany, the data clearly showed this. The last bastion remained the United States, which showed resistance to the effects of trade war ... until the publication of yesterday's ISM data.
The US ISM index for the US manufacturing sector fell to 47.8 in September 2019 from 49.1 in the previous month. It was a publication below market expectations at the level of 50.1 points, as well as the largest decrease in the index in the manufacturing sector since June 2009. The main reason indicated in the report is to be the continuous trade tensions between the US and China.
Out of 18 production sectors, only in 3 there was an increase in activity in September, in 15 a contraction was recorded. Therefore, the data clearly indicate that the US economy is also affected by the trade policy of President Donald Trump, which may affect his further decisions. Earlier, when the economy was not slowing down so much, Trump could have pursued a fairly strict policy towards China. Now, he may have to change his direction a bit so that it does not affect, for example, a significant drop in company profits, a decrease in wages, a decrease in employment, etc.
Dow Jones Industrial Average, daily chart (US30 CFD). Conotoxia trading platform
As mentioned earlier, the ISM publication seemed to lead to a reversal on US indices, including Dow Jones, where from the point of view of technical analysis a double top pattern could appear (similarly on the S&P 500 index). Therefore, if the market does not break the resistance soon, it could be possible to create a correction towards the 200-session average or towards the trend line drawn through the recent bottoms.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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