3 Reasons Markets Were Down on Weak ISM Despite Stand-Out Retail Sales Report

Markets closed down on Wall Street today: Dow -1.03%, S&P -1.19%, Nasdaq -1.30%, Oil -0.01%, Gold -0.17%.

On the commodities front, Oil (NYSE:USO) was relatively flat, finishing the day at $88.80 a barrel. Precious metals were down, with Gold (NYSE:GLD) falling to $1,828.60 an ounce and Silver (NYSE:SLV) falling 0.31% to $41.64 an ounce.

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Today’s markets were down because:

1) Manufacturing. With disappointing August manufacturing reports coming in today for Asia, Europe, and the U.S., it’s no wonder the markets closed down. While manufacturing continued to grow in the U.S., it slowed to a snail’s pace, while manufacturing contracted in Europe and the U.K. (NYSE:EWU). Even Germany (NYSE:EWG), the euro zone’s strongest economy and the first to pull itself out of the recession reported a decline in manufacturing activity. The same went for Asia, where manufacturing contracted in South Korea and Taiwan, while China’s (NYSE:FXI) purchasing managers index declined to a level similar to that of the U.S.

2) Jobless claims. The U.S. Department of Labor’s weekly report on unemployment insurance claims released this morning showed that initial claims fell to 409,000 in the week ending August 27, from an upwardly revised figure of 421,000 in the previous week. While the rate showed some improvement, the 4-week moving average, which is a more accurate indicator of employment trends, increased by 1,750 to 410,250 last week. New jobless claims have remained above 400,000 each week for 19 consecutive weeks now. If jobless claims fall below 400,000, it indicates that jobs are being created, while anything above that number indicates that jobs are being eliminated from the economy, and that the rate of unemployment may rise.

3) Retail. Though many retail (NYSE:XRT) stocks reported better-than-expected sales for the month of August, there is still a level of uncertainty, evidenced by low consumer confidence readings earlier this week, preventing them from bouncing back. Consumers remain wary of spending, and those who are spending tend to look for deals and buy products that have been marked down, which hurts retailers’ profit margins. BJ’s Wholesale (NYSE:BJ) reported an 11.5% increase in sales last month, beating analysts’ expectations of a 7.8% increase, and yet the stock finished the day flat. The Buckle Inc. (NYSE:BKE), Target (NYSE:TGT), Limited Brands (NYSE:LTD), and Nordstrom (NYSE:JWN) all closed the day down despite reporting better-than-expected sales for August. Still, some stocks managed to end the day higher, though fewer than one would expect given August sale figures, including Macy’s (NYSE:M) and Costco (NASDAQ:COST).

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