German manufacturing sector hit a ten-year low
U.S. stocks closed mixed, but largely unchanged Monday after investors weighed downbeat data on eurozone manufacturing activity with news that Chinese officials played down the significance of last week’s cancellation of visits to U.S. farm states.
How did markets perform?
The S&P 500 index SPX, -0.01% fell less than point to close at 2,991.77, while the Dow Jones Industrial Average DJIA, +0.06% added 14.92 points, or 0.1%, to 26,949.99. The Nasdaq Composite Index COMP, -0.06% retreated 5.21 points, or 0.1% to 8,112.46.
Stocks remain within striking distance of all-time highs, with the S&P 500 1.1% below its all-time closing high of 3,025.86 set on July 26. After Monday’s close, the Dow was off 1.5% from its record close of 27,359.16 set on July 15, while the Nasdaq remained 2.7% away from its all-time settlement high at 8,330.21 from July 26.
What drove the market?
The market’s modest advance Monday was led by real estate and consumer-staples stocks, defensive sectors that tend to outperform during periods of weaker growth. Consumer staples stocks were the best performing in the S&P 500, rising 0.4%, followed by real estate, up 0.2%.
Helping fuel concerns of an economic slowdown were data that indicated manufacturing activity in the eurozone contracted more sharply in September, posting its worst reading in nearly seven years. The flash eurozone manufacturing purchasing managers index (PMI) fell to an 83-month low of 45.6 in September, down from 47 in August. Economists polled by FactSet had forecast a 47.3 reading — a figure of less than 50 indicates activity declined.
In particular, Germany’s manufacturing PMI gauge fell to 41.4 in September, its worst reading in a decade. The biggest economy in the eurozone has been vulnerable to the deterioration of global conditions, drawing concerns that the export powerhouse will record its second consecutive quarter of negative growth from the June to September period, which would qualify as a technical recession.
“European data is a concern, but investors are more focused on the U.S.,” Randy Frederick, vice president of trading and derivatives at Charles Schwab told MarketWatch. “The market’s been quiet because we’re in sort of a middle ground where second quarter earnings are done and third quarter earnings haven’t started yet . . . investors are left waiting for more clarification on China.”
The cancellation of the visits to farms in Montana and Nebraska rattled stocks on Friday, along with remarks by President Donald Trump, who said he wanted a fully fledged deal with China rather than a limited agreement that addresses particular grievances. But officials said talks would continue, as planned, in October, helping to soothe worries, analysts said.
Bloomberg News reported that Chinese officials had canceled the farm visit at the request of the U.S., and not because of a stalling of trade negotiations.
“At the end of the last week, trade talks were mostly positive with one major exception, the Chinese abrupt cancellation to visit a farm in Montana. While the news pretty much derailed the last attempt for U.S. stocks to hit fresh record highs, we should not see agricultural purchases be a key hurdle for the Chinese,” wrote Edward Moya, senior market analyst at OANDA.
Investors also were interpreting Markit’s take on U.S. activity, with its manufacturing index rising to a five-month high of 51, while the services sector hit a two-month high of 50.9.
The Chicago Fed’s national activity index recorded a positive reading of 0.1 in August, up from negative 0.41 in the previous month.
Which stocks were in focus?
McDonald’s Corp. MCD, +1.03% shares led the Dow higher, up 1%, adding about 15 points to the blue-chip index Monday.
Shares of FedEx Corp. FDX, -2.09% fell 2.1%, putting the stock on pace to close at its lowest level since 2016.
Shares of Amazon.com Inc. AMZN, -0.49% retreated 0.5% after Morgan Stanley analyst Brian Nowak cut his price target on the firm by 4% to $2,200 — even as the new target is 24% above current levels.
Caesars Entertainment Corp. CZR, -0.42% said it reached an agreement to sell the Rio All-Suite Hotel & Casino to a company controlled by a principal of Imperial Companies for $516.3 million. Shares of Caesars declined 0.4%.
California utility PG&E Corp. PCG, -0.60% shares lost 0.6% after the firm said it reached an agreement to resolve claims with entities representing 85% of the insurance claims from the 2017 Northern California wildfires and the 2018 Camp Fire.
Interactive Brokers Group Inc. IBKR, -0.21% fell 0.7% following an announcement by stock-market exchange IEX Group Inc. that it will exit the listings business. The online brokerage will return to the Nasdaq, its original listing venue, next month.
How did other markets trade?
The 10-year Treasury note yield TMUBMUSD10Y, -0.65% fell about 5 basis points to 1.71%.
Gold for December delivery GCZ19, -0.22% on Comex rose $16.40, or 1.1%, to settle at $1,531.50 an ounce, while the greenback, as measured by the ICE U.S. Dollar Index DXY, +0.04%, a gauge of the dollar against other major currencies, ticked up by around 0.1% to $98.61. Against the euro, the dollar strengthened by 0.1% to trade at $1.100.
West Texas Intermediate crude for November delivery CLX19, -0.38% on the New York Mercantile Exchange rose 55 cents, or 1%, to settle at $58.64 a barrel.
In Asia overnight, the China CSI 300 000300, +0.44% fell 1.1% and Hong Kong’s Hang Seng Index HSI, +0.48% fell 0.8%. Japan’s stock market was closed for a holiday. European stocks closed lower, down 0.8%.