U.S. stocks turned around and fell after a print on domestic manufacturing activity came in at the
weakest level in a decade.
The Institute for Supply Management’s manufacturing purchasing
managers’ index (PMI) pointed to contraction in September for a second straight month. The headline PMI
fell to 47.8, marking the lowest level since mid-2009 and holding below the neutral level of 50. This
fell below consensus expectations for an increase from August’s level of 49.1, according to Bloomberg
data.
>ISM at 47.8 is bad but news export orders at 41 is even >worse. There is no end in sight to
this slowdown, the >recession risk is real.
The decline in the ISM was
particularly striking because it contrasted with what appeared to be more positive indications from other
manufacturing surveys. With regional Fed manufacturing surveys, for example, showing modest upside this
month, on balance, as did the Markit manufacturing PMI. The sharp divergence between the ISM and other
indicators does suggest that one-off factors may have been at play, at least partially. However, what may
be more likely is that the ISM is reflecting negative sentiment from global economic conditions more
substantially than the Markit PMI or regional Fed surveys did. The bottom line is that the weak ISM
manufacturing report for September is an important downside risk to monitor, but it is not on its own the
final judge of the near-term economic outlook.
Warren Buffett(3290)
