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After The Close - The stock market started in the green today, as a continuation of yesterday’s action occurred in the early portion of the session. Indeed, the Dow Jones Industrial Average was higher by as many as 129 points, while the other indices were up in tandem. However, news broke that the ISM manufacturing index fell to its lowest level since June 2009. The market quickly gave up all of its gains and moved well into the red. Indeed, the Dow tumbled several hundred points in short order, and the composites continued to move lower throughout the early afternoon. The Dow found itself down 347 points at one time. The final portion of the session could be characterized by sideways action, but the indices did bounce a bit off of their lows. All told, the Dow finished the day lower by 344 points, while the S&P 500 was down 37 points.

Additionally, market breadth was very negative, with decliners outpacing advancers by a 2.7-to-1.0 ratio. Utilities stocks were among the best performers on the day, though only on a relative basis. On the other hand, materials stocks were among the weakest.

In commodity news, oil prices fell, as weak economic data curbed investor sentiment for future demand. Also, Saudi Aramco stated that it was able to restore its oil-production capacity to the same levels from before the attack on its facilities. This suggest that there is ample supply on the market. Meantime, U.S. Treasury bond yields fell across the board, as a rush into the safe-haven asset occurred. Too, a steepening of the yield curve occurred, despite lower rates, as short-term yields fell more than long-term interest rates. This is a positive development for financial companies’ earnings, and marks a reversal compared to other interest-rate declines over the past few months. The VIX Volatility Index ended the day higher, as demand for option protection expanded.

Looking ahead, tomorrow will be full of economic data, including the Energy Information Administration’s weekly report on crude oil inventories. Additionally, a few companies will report quarterly results, including ones that are tied to housing and building supply. Overall, we think that the market will largely trade tomorrow on changes in sentiment concerning the political situation at home and any developments in the U.S. trade negotiations with China. - John E. Seibert III

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

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Before The Bell - The final trading day of September, a month that saw the major equity averages produce modestly positive results (the Dow Jones Industrial Average, the NASDAQ Composite, and  the S&P 500 Index finished the 30-day stretch to the upside), fittingly went to the bulls. Yesterday’s move higher was driven by sentiment about trade. After the U.S. equity market sold off late Friday on a report that the Trump Administration was considering sweeping limits to capital market investments, which investors took as a sign that the relationship between the world’s two-largest economies is very strained and a trade deal could still be a ways off, the major equity averages retraced a good deal of those losses yesterday when a Treasury Department official said over the weekend that the U.S. has no plans “at this time” to stop Chinese companies from listing on American exchanges. Furthermore, the Trump Administration noted that scheduled meetings with China this month to continue trade negotiations were still on, which also provided support for stocks.

At the close of trading yesterday, the Dow 30, the technology-heavy NASDAQ, and the broader S&P 500 Index were 97, 60, and 15 points to the upside, respectively. The big winner was the technology sector, which we noted in yesterday’s commentary is apt to perform the best when the tidings about trade are positive. The major technology companies do a lot of business in China and many of the parts they used are produced in that country, so it stands to reason that when sentiment about trade is positive, the technology stocks are going to provide leadership for the market. Overall, nearly all of the 10 major equity groups, save for the energy and financial stocks, finished in positive territory, and with notable gains recorded by the consumer discretionary and healthcare sectors. Looking ahead to today’s session, investors may want to keep close tabs on the industrial and basic materials sectors, as the performance of these economic sensitive groups may be driven by this morning’s report on manufacturing activity for the month of September. Indeed …

The news from the U.S. business beat heats up at 10:00 A.M. (EDT), when the Institute for Supply Management releases its latest data on manufacturing activity. The reading for August was weaker-than-expected, so this report will be closely monitored to see if the fallout from the ongoing trade dispute with China and the slowing pace of global growth is starting to find its way across the pond to the United States. (Yesterday, the price of oil fell on such concerns and also reports that Saudi Arabia’s crude processing is ramping up after a drone attack by Iran on its oil facilities resulted in lost production the last few weeks.) The manufacturing PMI is the first report in a string of important releases on the U.S. economy this week. In general, the recent data on the domestic economy have been rather mixed.

With less than hour to go before the start of the new trading day stateside, the equity futures are pointing to a modestly higher opening for the U.S. stock market. So far overseas, the trading has been light, as the stock markets in China and Hong Kong Asia were closed for the holidays. Japan’s Nikkei was up overnight, but the major European bourses are slightly lower as trading moves into the back half of the session on the Continent. Investors are hoping that the fourth quarter this year will not be as harsh as a good portion of the final 90 days of 2018 were to traders, when the stock market sold off sharply on worries about rising interest rates and trade uncertainty. The latter event still remains a big issue for the investment community and one that we think will play the biggest role in what direction the major averages head in this year’s final quarter. Stay tuned. – William G. Ferguson

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.