Investors are fearful of a significant slowdown.
Just moments ago, we learned U.S. durable goods orders slipped 1.1% in September 2019. In fact, orders fell for the first time in three months thanks to weakness in manufacturing. Economists were looking for a decline of 0.8%.
The decline in orders over the last 12 months has now dropped to 5.4% — the biggest drop since the middle of 2016, as noted by MarketWatch.
Core orders, a key measure of business investment also fell for the second straight month.
Unfortunately, with the trade war raging on, it’s disrupted the global economy and has dampened investments.
“Central banks around the world are cutting interest rates to try to reverse the loss of momentum, but economists say speedier growth probably requires a breakthrough in U.S.-China talks and a smooth U.K. exit from the European Union. Neither outcome appears likely in the near future,” notes MarketWatch.
ISM Showed Contraction at Less than 50
The ISM September survey on manufacturing registered came in at 47.8%, down from 49.1% from July. It’s the worst on record since June 2019, and shows contraction at less than 50.
“The disappointing data is only fanning long-standing fears of slowing global growth,” Alec Young, managing director of global markets research at FTSE Russell said, as quoted by MarketWatch. “And with U.S.-China trade expected to produce little in the way of near-term breakthroughs, investors continue to favor counter-cyclical, defensive stocks with high dividend yields as weak data pushes interest rates ever lower.”
It’s a clear sign the trade war has done a good amount of damage.
Private Payrolls Shows the Pace of Hiring is Slowing
The private sector did create more jobs than expected in September 2019, but the pace of hiring slowed. Companies hired 135,000 workers in September, which was better than the 125,000 expected by analysts. However, that’s down from the 157,000 posted in August, and is also down from initial reports for an addition of 195,000 workers.
In short, markets have plenty to be concerned about at the moment.
However, there may be a pocket of strength near-term if the U.S. and China can resolve their differences in D.C. later this month.